That's a heavy price for being careless. But your client's sloppiness is no excuse for the vicious trick played on him. Not only does it extract more late fees but it also blackens your client's credit record. The game is motivated by the economics of loan servicing. In recent years, servicing has become an increasingly specialized activity.
Many firms originate few or no loans, but purchase servicing contracts as an investment.
Even among firms that both originate and service loans, servicing is viewed as a profit center that must justify itself by earning a target rate of return. The investment in servicing is what a specialized servicer pays for it, or what an originating firm that retains the servicing could have sold it for. The portfolio has an estimated average life of 7 years. Now add late charges, which by industry practice are retained by the servicing agent. The servicer's interest in late fees doesn't justify playing obscene games with borrowers.