Freeman v. Quicken Loans, Inc.

Summarized by Aaron Kaufman , Gray Reed LLP
15 years 3 months ago

Citation:

(5th Circuit, Dec 31,1969)

Tag(s):

5th Circuit

Ruling:

Undivided unearned fees, in these consolidated cases "loan discount fees" not shared with third party service providers, are not actionable under section 8(b) of the Real Estate Settlement Procedures Act ("RESPA"). Said the Court, "RESPA is an anti-kickback statute, not an anti-price gouging statute. . . . Section 2601's purpose statement does not discuss, mention, or even hint about a general prohibition on overcharges or unearned fees or other forms of price abuse. If Congress meant to ban other forms of price abuse, such as undivided unearned fees or unearned fees generally, then surely it would not have used such limited language. Unearned fees are not kickbacks, and RESPA does not cover them."

Procedural context:

Appeal from summary judgment of the District Court concluding that undivided unearned "loan discount fees" are not actionable under RESPA, and dismissing remaining state law claims, which were contingent on the RESPA claims being actionable. These cases were not bankruptcy cases, but this decision does address an issue raised frequently in consumer cases on claim objections and lender liability actions.

Facts:

Appellants obtained home mortgage loans from Quicken Loans in 2007 and were charged "loan discount fees" or "loan origination fees." Quicken did not dispute that it was the sole service provider or that it did not actually provide the Appellants with a lower interest rate. Appellants filed suit, arguing that the fees were unearned and, thus actionable under RESPA. The District Court granted summary judgment in favor of Quicken, holding that for unearned fees to be actionable, they must be shared with a third party. In a split-panel decision, the Court of Appeals affirmed, with the majority finding the statute to be unambiguous and to prohibit only predatory kick-backs, not potential price-gouging. The panel did unify in holding that HUD's policy statements (which favored the Appellants' interpretation) were not entitled to judicial deference because the policy was not part of a tradtional notice-and-comment rulemaking process.

ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!