The Consumer Financial Protection Bureau (CFPB) has requested a Washington federal court to permit it to file an amicus curiae brief in a class action lawsuit against Nationstar Mortgage LLC. The suit accuses Nationstar of unlawfully charging fees for payoff statements.

CFPB Pushes Back Against Nationstar’s Claims

In a motion filed Monday, the CFPB indicated that the proposed class does not oppose the federal agency’s involvement. Nationstar, however, did not respond to the CFPB's request to file its brief.

The CFPB’s brief challenges Nationstar’s arguments made in a judgment on the pleadings motion filed earlier this year. Nationstar had claimed that a notice-and-cure provision in the deed of trust for named plaintiff Peter Hackinen barred his Fair Debt Collection Practices Act (FDCPA) claim, as well as those of other plaintiffs with similar provisions.

Nationstar Mortgage Fee Suit : Notice-and-Cure Provision Under Fire

Nationstar contends that the notice-and-cure provision requires borrowers to inform them of any breach, such as the fees for payoff statements, allowing them to rectify the issue before legal action is taken. However, the CFPB disputes this interpretation, asserting that the provision does not apply to FDCPA claims.

“The notice-and-cure provision by its terms does not cover FDCPA claims,” the CFPB argued. “Moreover, such a provision cannot restrict consumers' rights under the FDCPA.”

According to the CFPB, Hackinen’s claim centers on the legality of the payoff statement fees under FDCPA, not a breach of contract. The agency criticized Nationstar for suggesting that these fees were covered by the deed of trust, emphasizing that the document does not address such charges.

Legal Precedents and CFPB’s Critique

The CFPB highlighted past court rulings, such as Gerber v. First Horizon Home Loans Corp., which have found similar unauthorized fees not subject to notice-and-cure provisions. They argue that applying such provisions to FDCPA claims would effectively create an “unenforceable” waiver of consumers' rights.

Additionally, the CFPB criticized Nationstar's reliance on the Ninth Circuit's Giotta v. Ocwen Loan Servicing LLC ruling, which allowed a notice-and-cure provision for an FDCPA claim. The CFPB described this ruling as “unpublished” and criticized the Ninth Circuit for not addressing the impact on consumers’ statutory remedies.

Nationstar Mortgage Fee Suit : Implications for FDCPA Rights

The CFPB argued that enforcing the notice-and-cure provision would obstruct consumers' rights to sue under the FDCPA. It claimed that such a provision would limit the statute’s one-year limitation period and potentially negate the ability to seek statutory damages.

Nationstar allegedly collected fees for payoff statements not authorized by the agreement or law, constituting an FDCPA violation, according to the CFPB.

Ongoing Legal Battle

The proposed class initiated the lawsuit in Washington state court in February, but Nationstar removed it to federal court in April. The mortgage servicer has sought to have the class action dismissed.

The CFPB declined to comment, and representatives for both the proposed class and Nationstar did not respond to requests for comment.

Christina L. Henry of Seattle Consumer Justice PS and Phillip R. Robinson of Consumer Law Center LLC represent the proposed class. Nationstar is defended by Emily J. Harris of Corr Cronin LLP, along with Jason E. Manning, John C. Lynch, Thomas N. Abbott, and Justin D. Balser of Troutman Pepper Hamilton Sanders LLP. The CFPB’s legal team includes Lauren Gorodetsky.