Click Fraud Protection Final Approval Secured in Carrington Mortgage Settlement, Ending Pay to Pay Fees for Borrowers - Tycko & Zavareei LLP
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Final Approval Secured in Carrington Mortgage Settlement, Ending Pay to Pay Fees for Borrowers

After facing legal battles in several courts, Carrington Mortgage Services, LLC came to a settlement with borrowers, ending its “pay to pay” practices and agreeing to provide cash payments to members of the class action. Judge Richard D. Bennett of the United States District Court for the District of Maryland granted final approval of the settlement on November 10, 2022.

Plaintiffs in California, New York, Texas, Florida, and Maryland alleged that Carrington’s practice of charging fees for making payments over the phone or online violated consumer protection laws in several states and at the federal level. The mortgage servicer was initially successful in securing a dismissal of the claims in both Maryland and California courts. The plaintiffs in both cases appealed, and in January 2022, the Fourth Circuit Court of Appeals agreed with the plaintiffs’ legal interpretation and reversed the district court, allowing the plaintiffs to continue to seek justice. At the time the settlement was reached, the Ninth Circuit Court of Appeals had not yet issued its ruling, but there, the Consumer Financial Protection Bureau had filed an important amicus brief in support of the plaintiffs’ arguments.

The settlement class is comprised of those who paid a fee to Carrington for paying their mortgage either by telephone, IVR, or online between January 1, 2016 through December 31, 2021 and either: (a) were paying mortgages for residential property in California, Florida, Maryland, New York, or Texas; (b) had residential mortgages for which Carrington acquired the servicing rights when the mortgage loans were 30 days or more delinquent; or (c) had mortgaged properties that were insured by the Federal Housing Administration.

The settlement authorized the creation of a common fund of $18,181,898.95, which represents 35% of the total convenience fees Carrington collected from the settlement class from 2016-2021. Class members do not have to submit a claim form to receive payment but will receive checks automatically. Additionally, Carrington is prohibited from charging these customers any pay to pay fees for a period of three years; the Court observed in the Final Approval Order that Carrington was earning nearly $8 million per year from the fees it was charging to settlement class members.

“We are pleased that after an uphill battle, Carrington agreed to such substantial relief: cash refunds to the settlement class and a commitment to refrain from charging these fees for several years,” Partner Kristen Simplicio stated. “Borrowers do not get to choose their mortgage servicers, and are at risk of being a captive source for unfair markups and charges. The seven plaintiffs who brought these important lawsuits on behalf of Carrington borrowers made a real difference here; because they stepped forward, Carrington borrowers around the country will have now have more free ways to pay their bills, and more money in their pockets every month.”

The case is Alexander v. Carrington Mortgage Services, LLC, Case No.: 1:20-cv-02369-RDB in the United States District Court for the District of Maryland. It consolidates two other cases, Thomas-Lawson v. Carrington Mortgage Services, LLC, Case No. 2:20-cv-7301-ODW in the United States District Court for the Central District of California, and Dawkins v. Carrington Mortgage Services, LLC, Case No.0:20-cv-60998-RAR in the United States District Court for the Southern District of Florida.

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