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This week the Massachusetts Attorney General announced that the mortgage servicer Fay Servicing LLC will pay $3.2 million to avoid legal proceedings for its questionable debt-collection practices.

The AG’s office alleges

that Fay Servicing, LLC failed to take required steps to help homeowners avoid foreclosure, harassed consumers with excessive debt collection calls, failed to inform borrowers of their right to request verification of the amount of their debt, and in some instances, unfairly charged foreclosure-related fees before obtaining authority to foreclose.

The AG contends that Fay Servicing violated the state’s Act Preventing Unlawful and Unnecessary Foreclosures which requires mortgage servicers to make a good faith attempt to assist borrowers with unfair loan terms avoid foreclosure.

Additionally, Fay Servicing’s practice of making excessive phone calls to borrowers (“calling multiple phone numbers and on multiple days a week,” according to the AG) violated the state’s Debt Collection Regulations which states that creditors cannot call a borrower or debtor more than twice in a seven-day period.

The terms of the settlement require Fay Servicing to pay $2.7 million directly to their aggrieved borrowers in the form of loan forgiveness. An additional $500,000 will be paid to the state.