Late Fee Disputes: Complete Guide

Challenging Improper Late Fees

Late fees are governed by the mortgage contract, state usury and consumer protection laws, and the duty of good faith. Most states limit late fees to 4-5% of the payment amount. Common violations: fees exceeding state or contractual limits, pyramiding late fees (charging late fees on previous late fees), late fees during active loss mitigation or trial modification periods, late fees when payment was timely but misapplied, late fees during the 60-day servicing transfer grace period, and fees for payments made within the contractual grace period. Each improper fee inflates the claimed balance — supporting a dispute of the amount owed. FDCPA claims may also apply if the servicer is a debt collector attempting to collect unauthorized amounts. A QWR demanding fee justification is the starting point. See: FDCPA Guide and Payment Errors Guide.