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Appellate Win Allows Suit Against Carrington Mortgage Services, LLC’s Pay-to-Pay Fees to Proceed

Ashly Alexander, et al. v. Carrington Mortgage Services, LLC, No. 20-2359 in the U.S. Court of Appeals for the Fourth Circuit

In a significant ruling on January 19, 2022, the Fourth Circuit breathed fresh life into a class action lawsuit against Carrington Mortgage Services, LLC. The lower court’s decision to dismiss the borrowers’ claims was overturned, paving the way for a legal battle.

The plaintiffs, who obtained mortgage loans from Carrington, accused the company of violating debt collection and consumer protection statutes. Specifically, they alleged that Carrington imposed unjust “pay-to-pay fees” on borrowers for making mortgage payments online or via phone. Intriguingly, these fees were not part of the borrowers’ mortgage agreements.

Under the guidance of Judge J. Harvie Wilkinson, a unanimous three-judge panel in the Fourth Circuit concluded that Carrington likely violated the Maryland Consumer Debt Collection Act. This law strictly prohibits any conduct that runs afoul of the federal Fair Debt Collection Practices Act’s sections 804 to 812. A pivotal provision in dispute was the prohibition against collecting any amount, including fees, charges, or expenses, unless explicitly authorized by the debt agreement or allowed by law.

The panel further ruled that Carrington’s fees were indeed an “amount” that required explicit authorization from the debt agreement or legal permission. In direct contradiction to Carrington’s argument, the judges held that borrowers consenting to online or phone payments did not permit such fees. The court elucidated the necessity of protecting consumers from unexpected fees, emphasizing that debt collectors should not unilaterally modify contract terms. After all, consumers have no say in selecting debt collectors and may find themselves at their mercy down the line.

Finally, Carrington’s claim that these fees ultimately benefited consumers who would otherwise be forced to mail checks faced stern scrutiny. The court presented data indicating that accepting checks by mail cost debt collectors between $1 to $4, while online and phone transactions typically incurred a meager 50 cents.

This ruling by the Fourth Circuit signals a potentially pivotal moment in the ongoing legal battle against Carrington Mortgage Services, LLC.

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