Class Action

TILA Class Action Defense Cases–Frazier v. Accredited Home Lenders: Alabama Federal Court Grants Lender’s Summary Judgment Motion In TILA Class Action

By Michael J. Hassen

Lender Motion for Summary Judgment as to Class Action Claims Alleging Lender Violated TILA and HOEPA Properly Granted because Disclosed Finance Charges Fell within TILA’s Tolerance for Accuracy and because HOEPA did not Apply as Transaction was not High-Cost Loan Alabama Federal Court Holds

Plaintiff filed a class action against Accredited Home Lenders, dba Home Funds Direct, alleging violations of the federal Truth in Lending Act (TILA) and Home Ownership and Equity Protection Act (HOEPA), which requires additional disclosures be made in connection with “high cost” loans; the class action complaint asserted that her lender “improperly understated the finance charge on credit it extended to her” and “failed t comply with the additional disclosure requirements” of HOEPA. Frazier v. Accredited Home Lenders, Inc., ___ F.Supp.2d ___, 2009 WL 931167, *1 (M.D.Ala. April 6, 2009). According to the allegations underlying the class action, the lender improperly excluded several charges from its calculation of the finance charge – a claim the lender denied. Id., at *2. The class action sought rescission and damages, id., at *1. Defense attorneys moved summary judgment, id.; the lender argued that its disclosures were “accurate, complete, and in compliance with both TILA and HOEPA.” Id., at *2. The class action complaint alleged that the lender charged an “endorsement fee” for a service that was never provided, and that it charged an excessive fee for “a title search, a title examination, recording, and title insurance,” each of which allegedly should have been included in the finance charge. Id. Defense attorneys countered that the fees in question were “imposed by a third party” and that they were not excessive; further, the lender argued that the finance charge disclosed “falls within TILA’s tolerance for accuracy” (that is, one half of one percent of the loan amount). Id. Alternatively, defense attorneys argued that any errors fell within the safe harbor provision of TILA and fell outside the scope of HOEPA. Id. The district court granted the motion and entered judgment in favor of the lender on the class action complaint.

The federal court observed that the “dispositive question” was “how to calculate properly the finance charge” for the loan extended to plaintiff. Frazier, at *2. The court observed that this task was complicated by “the imprecise language of TILA itself and the maze of federal regulations interpreting the statute.” Id. Turning to the merits, the district court rejected the lender’s claim that it was not responsible for charges imposed by third parties, observing that the relevant inquiry is whether it required the services in question. Id., at *3. But the court agreed with defense attorneys that the lender did not “require” the “endorsement fee” charged by the third party, particularly as no service was ever provided in connection with that third party charge, id. Accordingly, the federal court held that “the endorsement fee must be excluded from the finance charge.” Id. The question then, was whether the remaining fees were “excessive” and whether the lender understated that amount of the finance charge, id.

Full post as published by Class Action Defense Blog on May 18, 2009 (boomark / email).