Mortgage Servicer Agrees to $9 Million Settlement in NC Pay-By-Phone Fee Class Action

The parties in a North Carolina class action challenging a mortgage servicer’s pay-by-phone fees moved for preliminary approval of a proposed settlement.

In 2024, the named plaintiff filed the class action suit in the U.S. District Court for the Middle District of North Carolina.  The complaint alleged that the mortgage servicer charged fees of up to $15 for borrowers to make their monthly mortgage payments by phone, but that the cost for the servicer to process these phone payments was less than $0.50 per transaction.  The plaintiff alleged that these servicing-related fees were not permitted under the terms of his mortgage agreement, and that to the extent any fees to pay by phone may have been permitted, they were limited to the servicer’s actual costs to process the transaction without any markup.  The complaint included claims for violations of the North Carolina Debt Collection Act (NCDCA) and the North Carolina Unfair and Deceptive Trade Practices Act.

In late-2024, the court denied a motion to dismiss filed by the servicer, and the court granted class certification in late-2025.  After mediation, the parties came to terms on a settlement covering borrowers in North Carolina who paid pay-by-phone fees to the servicer.  The parties moved for preliminary approval of the settlement in May 2026.

The settlement agreement provides for creation of an “all-in” $9 million fund which will cover: payments to class members; an award of attorney’s fees and expenses to class counsel for up to 35% of the fund amount; a $25,000 service award for the named plaintiff; and all other costs of administering the settlement.  The servicer also agreed to injunctive relief whereby it would no longer collect pay-by-phone fees from borrowers in North Carolina for a period of at least five years.

The NCDCA provides for statutory damages of $500 per violation.  Plaintiff’s counsel estimated that each class member would receive approximately $425 for each pay-by-phone fee they paid to the servicer.  The settlement value thus appears to have been significantly influenced by this minimum statutory damages provision and not just the specific pay-by-phone fee amounts paid by borrowers (up to $15 per transaction).

The motion for preliminary approval of the settlement awaits a ruling by the court.