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Financial Services Law Insights and Observations

Court certifies RESPA class

Courts Mortgages RESPA Class Action Kickback

Courts

On August 28, the U.S. District Court for the District of Maryland certified a class of mortgage borrowers who alleged a national bank (defendant) referred them to a title firm in exchange for free marketing materials pursuant to an undisclosed agreement. In doing so, the court approved a class defined as borrowers who (i) had a loan originated or brokered through the defendant; and (ii) received title and settlement services from the title firm in connection with the closing of their loan. The plaintiffs claimed their payments to the title firm were shared in part with the defendant through their broker, who received free marketing materials in exchange for the referrals in violation of RESPA. Additionally, the plaintiffs alleged that “because of this kickback arrangement, they paid higher costs for their settlement services than they otherwise would have paid.”

The defendant argued, among other things, that the named plaintiffs lacked Article III standing because they did not pay more for settlement services, contending that the title firm’s fees “were based on prevailing market rates in the geographic location and did not depend” on the “alleged kickbacks.” Additionally, the defendant argued that the named plaintiffs are not adequate class representatives because they do not have knowledge sufficient to prove their own claims. The court disagreed, stating the plaintiffs “presented some evidence to corroborate the claim that they were harmed by paying higher fees than they would have absent the alleged RESPA violations,” and that “burdensome individualized scrutiny of each proposed class member’s transaction” was not necessary to establish each violation.

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