Chase Faces Late Fee Lawsuit.(Chase Manhattan Corp.)(Brief Article)

In what may signal an emerging litigation threat for mortgage lenders, a consumer-oriented law firm here has filed a class action suit alleging that Chase Manhattan Mortgage improperly charged late fees to some borrowers.

The law firm, Cauley Geller Bowman & Coates, issued a press release in early May announcing that they had filed a complaint against Chase in the Circuit Court of the 15th Judicial Circuit in and for Palm Beach County, Fla., on behalf of borrowers whose loans are serviced by Chase, the nation's second largest mortgage servicer at the end of last year.

The law firm alleges that Chase charged late fees to borrowers whose "mortgage loan payments were timely received." It's not the first time a lender has been sued over late fees, but Chase's predicament does expose a nettlesome liability concern for the nation's mega-servicers.

The complaint alleges that Chase Manhattan "engaged in the common practice of retaining and posting timely submitted mortgage payments to borrower accounts after the due date, thereby permitting defendant to impose a 'late charge' for such 'overdue' payments."

The complaint goes on to allege that Chase's actions constitute a deceptive and unfair trade practice, breach of contract, breach of the implied covenant of good faith and fair dealing and just enrichment under Florida law and similar laws in other states.

The attorneys are seeking damages from the defendant as well as declaratory and injunctive relief to remedy the wrongdoing.

The complaint alleges that "there are at least thousands" of potential members of the class, if the case is certified as a class action.