Recently a reader using the handle “adrep” got in touch with us about a “tell your parents” problem:
“I was approaching 30 days behind on my January 2014 mortgage payment. [The mortgage holder] called my 80 year old father! He is NOT on the account, told them the account was behind and had to be paid by 5 p.m. He offered to pay with his credit card they told him no, they needed a bank routing number, he gave it to them and paid the amount [due] plus they charged him a $12 payment processing fee. I can’t imagine this was legal?”
We asked Lauren Saunders, managing attorney with the National Consumer Law Center, whether a lender can reach out to your family to pay a debt that’s not their own. Surprisingly, the answer isn’t crystal clear. “There are no specific rules on what a creditor like a mortgage company (as opposed to a third-party debt collector) can do to collect a debt,” she said in an email. “If it were a debt collector who had called, it would violate the privacy provisions of the Fair Debt Collection Practices Act. But first-party creditors like mortgage companies are not covered by the FDCPA. They are covered by the general ban on unfair, deceptive or abusive practices.”
Saunders said the Consumer Financial Protection Bureau might well consider contacting a family member not named on the mortgage to be unfair or abusive. But so far, the CFPB has been silent on the issue of contacting family members or other third parties about mortgage debt. (Contacting employers is not permitted, however.)
Saunders said the mortgage company likely refused to take a credit card because it would have had to pay a big interchange fee to the credit card company. She said she knows of no rules against charging a processing fee. So what can our reader do?
Saunders recommends submitting a complaint to the CFPB, which could result in some action against this mortgage company and also in clearer rules. In addition, there may be state laws that apply, so the consumer may want to contact the state attorney general’s office as well. In the meantime, the mortgage company has all the information it needs to withdraw money from the father’s account again.
It may be worthwhile to close that account and open a new one with a different number to prevent this from happening.