M.D.N.C.- Custer v. Dovenmuehle Mortgage II: Class Certification Granted in “Pay-to-Pay” Mortgage Fee Case

By Ed Boltz, 7 January, 2026

Summary:

In yet another chapter of what is becoming a running series on pay-to-pay mortgage fees, Chief Judge Catherine Eagles has issued a significant opinion certifying a statewide class of North Carolina homeowners against Dovenmuehle Mortgage, Inc. (DMI). The ruling allows claims under both the North Carolina Debt Collection Act (NCDCA) and the Unfair and Deceptive Trade Practices Act (UDTPA) to proceed on a class-wide basis.

This case ties directly back to earlier discussions here:

Collectively, these cases are forming a fairly coherent message:
Mortgage servicers should not treat borrowers as captive revenue streams for junk fees.

What DMI Was Doing

DMI charged borrowers:

  • $9.50 to pay by automated phone system

  • $11.50 to pay a live representative

Meanwhile, the actual cost of processing these payments was measured in pennies — often less than 50 cents per transaction.

And — critically — the mortgage documents did not authorize these charges.

Worse, DMI appeared to treat the fees not as cost-recovery, but as a profit center.

Judge Eagles noted that the Uniform Mortgage documents routinely used in North Carolina expressly prohibit charging fees that are not permitted by law or contract — which is going to be a recurring issue for servicers who have reflexively adopted the “everybody charges these” mindset.

The Class That Was Certified:

The Court certified a statewide class consisting of:

All North Carolina borrowers whose mortgages were serviced by DMI and who paid a pay-to-pay phone fee between April 10, 2020 and the date notice is issued.

The Court found that:

  • The legal theories are the same for everyone.

  • DMI used standardized practices.

  • Damages are manageable.

  • Individual borrowers are unlikely to litigate $10–$15 fees on their own.

In other words — exactly the type of case Rule 23 exists for.

Key Legal Takeaways

1. NCDCA + UDTPA remain powerful consumer tools

The Court recognized that charging unlawful fees may constitute:

  • unconscionable debt collection (NCDCA), and

  • an unfair or deceptive trade practice (UDTPA).

And importantly — statutory damages may apply, which shifts leverage away from servicers and toward consumers.

2. “Consent” arguments didn’t carry the day

DMI floated arguments that borrowers “agreed” to the fees simply because the automated phone system disclosed them.

But Judge Eagles noted:

  • It isn’t clear DMI is even covered by the “any fee the borrower agrees to pay” statute.

  • The core question — whether DMI could legally charge the fee at all — is still common across all class members.

The Court also gently reminded DMI that it previously resisted producing loan documents — making it difficult to now claim that individual contracts somehow change everything.

3. Courts increasingly reject “junk fee” rationalizations

Echoing the trajectory in Williams and the earlier Custer decisions, the Court showed skepticism toward the idea that “everyone does this” equals legality.

Mortgage servicers cannot tack on charges simply because:

  • payment convenience is nice,

  • servicing platforms allow it, or

  • they think borrowers won’t fight back.

Commentary: Where This Is Headed

We are seeing a pattern emerge — across federal courts and in North Carolina specifically.

Judges are increasingly unwilling to let mortgage servicers:

  • hide behind technicalities,

  • charge fees untethered from cost,

  • or impose “convenience” tolls that borrowers never bargained for.

This opinion matters especially in bankruptcy and consumer practice because:

  • Many Chapter 13 clients were hit with these fees repeatedly.

  • Those charges often compounded delinquency problems.

  • Trustees, courts, and debtors’ counsel can now more confidently challenge them.

And yes — servicers will almost certainly continue to argue:

“But borrowers could have mailed a check instead!”

That’s not likely to carry much weight when the real story is:

“We charged people extra to pay us — and then profited on the difference.”

Final Thought:

Between the earlier Custer rulings, Simmons Bank, Williams, and now this class certification order, mortgage servicers should be getting the message.

North Carolina law does not permit turning payment mechanics into a side-business.

And for once, the small $10 fees that nobody used to fight about may wind up costing a servicer far more than it ever collected.

To read a copy of the transcript, please see:

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