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Maryland Financial Commissioner Issues Advisory on Convenience Fees

The alert directs lenders and servicers to review their practices in charging consumer borrowers loan payment fees.

The advisory follows a recent court decision that held that mortgage services are debt collectors under the Maryland Consumer Debt Collection Act (MCDCA).

The U.S. Court of Appeals for the Fourth Circuit Court ruled that collecting fees on any form of loan payment violates the MCDCA if the fees are not set forth in the loan documents. As a result, any fee charged, whether for convenience or to recoup actual costs incurred by lenders and servicers for loan payments made through credit cards, debit cards, the automated clearing house (ACH), etc., must be specifically authorized by the applicable loan documents. If such a fee is not provided for in the applicable loan documents, it would be deemed illegal.

The Office of the Commissioner of Financial Regulation is issuing a consumer advisory and encourages lenders and servicers to ensure staff members are aware of the implications of the court decision. The impact on lender and servicer fee practices will be monitored by the Commissioner’s Office, with a follow up expected in the coming months.

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