Wells Fargo and JPMorgan Chase have been hit with a class action lawsuit alleging that the two lending giants cheated hundreds of thousands of borrowers who were late on mortgage payments by charging excessive and abusive default fees.

The class action lawsuit claims Wells Fargo and Chase charged homeowners over-inflated fees once they began to fall behind in their mortgage payments, sometimes by as much as 300 percent. Together, the two lenders service approximately 25 percent of all U.S. mortgages, which means they may have potentially defaulted borrowers out of a billion dollars or more, attorneys for the Class estimate.

"Loan agreements require that default-related services must be reasonable and appropriate," said an attorney representing the Class. "Banks are not allowed to mark up the charges so they can make a profit, but that is exactly what they have done."

The amount of the inflated or unnecessary charges the banks charge can very, running as low as $20 to as much as $135, the class action lawsuit says. The fees are charged when a borrower is late on a payment, and the bank’s computer programs begin the default process by levying fees against the borrower.

In addition to charging unnecessary and marked-up fees, the class action lawsuit says the banks concealed the fees through “cryptic wording." These fees are typically listed on a borrower’s monthly statement as “other charges,” “miscellaneous charges” or “corporate advances” in an attempt to hide the true nature of the charges, the class action lawsuit says.

According to the class action lawsuit, one of these fees the banks charge is used to hire a real estate broker to assess the value of the home based on similar properties. The real estate agent’s assessment is called the broker’s price opinion (BPO) and is used to help the lender price the property for foreclosure.

Federal law allows lenders to charge these BPO fees, but they are not allowed to mark up the charges or perform unnecessary services and make a profit, which is what Wells Fargo and Chase have done, according to the suit.

“Our investigation has revealed that as a result of these practices, banks often make more money from loans that are in default than loans that are current," a Class attorney said. “Loan agreements require that default-related services must be reasonable and appropriate.”

The Wells Fargo and Chase RICO class action lawsuit is brought on behalf of all U.S. residents who had a loan serviced by Wells Fargo or Chase and whose accounts were assessed fees for default-related services, including Broker’s Price Opinions, and inspection fees, at any time, continuing through the date of final disposition of this action.

The case is Latara Bias, et al., v. Wells Fargo & Company, JPMorgan Chase & Co., et al., Case No. 12-cv-0664, U.S. District Court, Northern District of California.