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RESPA claims required showing fee split, rules US Supreme Court

RESPA claims required showing fee split, rules US Supreme Court

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Home borrowers suing Quicken Loans for violating the Real Estate Settlement Procedures Act were required to show that the lender split an allegedly unearned fee with another party, the U.S. Supreme Court has ruled in a unanimous decision.

The ruling affirms a decision from the 5th Circuit.

The plaintiffs obtained mortgages from Quicken Loans. They filed a class action against the lender for violating RESPA §2607(b). The statute prohibits lenders from charging “unearned, undivided” fees to borrowers at the closing of a mortgage transaction.

Quicken argued that §2607(b), which is designed to bar arrangements whereby mortgage lenders charge undisclosed referral fees and other kickbacks that increase the cost borne by consumers, only applies where the lender received a “portion, split or percentage” of fees. The company contended that the provision didn’t apply in this case because 100 percent of the challenged fee went to the lender. (See “US Supreme Court justices ponder if RESPA bars non-kickback fee,” Wisconsin Law Journal, Feb. 29.)

The court agreed that, in order to establish a violation of §2607(b), a plaintiff must demonstrate that a charge for settlement services was divided between two or more persons.

“Because §2607(b) manifestly cannot be understood to prohibit unreasonably high fees, a service provider could avoid liability by providing just a dollar’s worth of services in exchange for the $1,000 fee.

“Acknowledging that §2607(b)’s coverage is limited to fee-splitting transactions at least has the virtue of making it a coherent response to that particular prob­lem, rather than an incoherent response to the broader problem of unreasonably high fees,” the court explained.

Justice Antonin Scalia delivered the opinion of the court.

U.S. Supreme Court. Freeman v. Quicken Loans, No. 10-1042.

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