Fees For PAYOFF Statements

Answer by Mary Beth Guard:
It's doubtful you could get away with imposing a charge for merely providing a payoff statement unless your contract with your customer (the promissory note) contractually gave you the authority to do so.

There was a court decision in Alabama last year where the debtors filed a class action suit against a lender because the lender was imposing a $15 fee for faxing payoff statements. In the case, a loan broker representing a borrower had contacted the existing mortgage lender to obtain a payoff balance and he specifically requested the information be faxed to him. The lender faxed it, then included a $15 fax fee as part of the total balance of the mortgage.

The borrowers sued, arguing the creditor violated the terms of their note by wrongfully including the fax fee in the payoff amount.

The lender won. The court held that the lender did not violate the terms of the promissory note by charging the fax fee. And, because the borrowers had voluntarily paid the fee, the claims for breach of contract and unjust enrichment were similarly unsuccessful. The borrowers argued that they had made the payment under duress and mistake of fact. The court didn't buy that either. It said that even if there was duress, the fact that the borrowers waited for nearly three years after the transaction to challenge the payment in effect ratified the payment. The court also said that the borrower's belief that they had to pay the fax fee to get the mortgage released was a mistake of law, not a mistake of fact, and a wrong interpretation of the law doesn't lay the groundwork for a successful claim on the borrower's part.

There are undoubtedly other cases on this same point. Seems to me that the question of whether even a fax fee can be charged is still somewhat up in the air because if the borrower's had refused to pay the fee and had promptly filed suit, the court might have let them proceed on some claims. Also, it's hard to tell what other courts would do with the same facts. PLUS, providing a payoff statement would appear to me to be an essential obligation of the lender or servicer. Perhaps the lender can get away with imposing an extra fee when the lender has to go to extra work or expense, such as by having to fax it or send it by overnight courier, but the mere task of providing the information over the phone or by regular mail is not a service I think you can successfully charge for.

The case, in case you want to read the opinion, is Stone v. Mellon Mortgage Co., 771 So.2d 451 (Ala. 2000)