In Schmitt v. Security National Servicing Corporation, the plaintiff filed a class action complaint alleging violations of the Fair Debt Collection Practices Act (FDCPA) and Ohio Residential Mortgage Lending Act (RMLA) premised on the assertion that her loan documents did not provide for the imposition of late fees after acceleration of the loan. The court disagreed with the plaintiff’s assertion and granted the defendant’s motion to dismiss.

The case arose out of the plaintiff’s failure to make her required monthly mortgage payments. The loan documents provided that if the plaintiff failed to make her full payment within 15 days of its due date, there would be a 5% late charge on the overdue payment, and she would be in default on her loan. The loan documents also contained an acceleration clause that provided that if the plaintiff defaulted, the note holder could send her a written notice explaining that if she did not pay the overdue amount by a certain date the full amount of principal and interest owed on the loan would immediately become due. In March 2014, the plaintiff failed to make her monthly payment and the note holder accelerated the loan and initiated foreclosure proceedings. A judgment of foreclosure was entered against the plaintiff, but the sale of the property was cancelled due to the plaintiff’s bankruptcy filing. The note holder filed a proof of claim in the plaintiff’s bankruptcy proceeding that included 34 assessed late fees.

After her bankruptcy proceedings were terminated, the plaintiff filed a class action complaint. Neither party disputed the fact that the loan documents imposed a 5% late fee on any overdue amount. The question was whether the loan documents provided for the collection of late fees following acceleration. The plaintiff argued that the acceleration of the loan eliminated all further monthly payments and so she could not have incurred any late fees. The defendant argued that because the plaintiff retained the right to reinstate the loan by paying “all sums which then would be due under [the mortgage] and the [n]ote as if no acceleration had occurred,” the right to assess post-acceleration late fees was authorized. The court held the defendant “had the more convincing argument.” Specifically, the court held that as long as the plaintiff has the right to reinstate the loan, attempts to collect post-acceleration late fees are not unlawful. “Since the [l]oan authorized the imposition of post-acceleration late charges, [the plaintiff’s] FDCPA claim fails.” The court further declined to exercise supplemental jurisdiction over the plaintiff’s RMLA claim.