CFPB backs off Mr. Cooper 'junk fee' lawsuit

The Trump administration wants to back off yet another mortgage-related lawsuit, aiming to exit a dispute between borrowers and Mr. Cooper over alleged servicing junk fees. 

The Consumer Financial Protection Bureau asked a judge to withdraw its amicus brief supporting plaintiffs challenging Mr. Cooper's $25 expedited payoff quote statements. In that brief filed last August, the regulator argued the charge violated the Fair Debt Collection Practices Act. 

In a two-page filing Friday, counsel for the bureau said the amicus brief was no longer valid as it conflicted with its recently withdrawn guidance. The rescinded guidance included an advisory opinion regarding pay-to-pay fees published in 2022 during the Biden administration. 

The CFPB said it's not looking to participate in the case any further and claimed attorneys for Mr. Cooper already consented to its motion. Plaintiffs did not consent, according to the filing, and reserve the right to respond. 

Attorneys for plaintiffs and Mr. Cooper didn't respond to immediate requests for comment Tuesday morning, while a spokesperson for Mr. Cooper cited a policy not to comment on ongoing litigation. 

The year-old "pay-to-pay" complaint, which refers to Mr. Cooper under its former Nationstar Mortgage brand, remains pending in a Washington federal court.

What borrowers and Mr. Cooper are arguing about

Three borrowers are suing the megaservicer for unjust enrichment and violation of state consumer laws over the $25 charges they incurred in 2022 and 2023. Mr. Cooper, which discloses the charge on its website, has contended throughout the case that the fee is lawful. 

The company in an April motion for summary judgment asked for an oral argument, and claimed plaintiffs have not identified any applicable laws barring Mr. Cooper from implementing the fee. The Truth in Lending Act only requires servicers to send a payoff statement within seven days of receiving a written request, and the expedited service option provides a value to consumers, counsel for the servicer said. 

"The fee isn't governed by Fair Debt Collection Practices Act or state analogues because delivering a payoff statement at a consumer's request is neither an attempt to collect a debt, nor must a consumer tender the payoff amount," attorneys wrote. 

Plaintiffs have characterized the charge as a "junk fee" and the case as a "pay-to-pay" dispute, an accusation that other consumers have levied against other home loan servicers. In a filing earlier this month, plaintiffs say the charge violates both the Real Estate Settlement Procedures Act and Maryland and Washington state laws that bar the fee not authorized by statute or the original mortgage contract. 

Counsel for plaintiffs also wrote that other servicers don't charge similar fees. The case is assigned to U.S. District Judge Barbara Jacobs Rothstein, who was appointed to the federal bench by former President Jimmy Carter and weeks ago ruled against the Trump administration in a separate housing-related case.

How has the CFPB backed off on enforcement with mortgage lenders?

The bureau under Acting Director Russell Vought has dismissed dozens of pending enforcement actions, including lawsuits against real estate players. The new-look CFPB has also terminated existing consent orders with financial institutions such as Wells Fargo, and recently a redlining consent order with Trustmark National Bank. 

Additionally, the regulator is seeking an unusual reversal of a past redlining settlement with Chicago-area brokerage Townstone Financial. A federal judge is currently weighing that proposal, which has been opposed by consumer groups. 

Friday's motion regarding Mr. Cooper was signed by CFPB attorneys including Chief Legal Officer Mark Paoletta. The bureau's legal head is a central player in the Trump administration's push to defang the agency via mass firings and an overall reduction in enforcement activity.