No Division, No Problem, Court Says on Bogus Fees
(CN) - Because it does not share disputed mortgage fees with other entities, Quicken Loans does not have to face claims that the charges are unearned, the U.S. Supreme Court ruled Thursday.
The case, a consolidation of lawsuits filed by three couples who took out mortgages with Quicken in 2007, never got off the ground.
Lead plaintiff Tammy Foret Freeman claimed that she and her husband had been charged loan discount fees of $980, but that Quicken did not give them lower interest rates in return. Another couple, the Bennetts, made the same claims with regard to a $1,100 fee. The third couple, the Smiths, claimed to have incurred a $575 loan "processing fee" and a "loan origination" fee of more than $5,100.
A Louisiana federal judge and the 5th Circuit concluded that Quicken would have needed to split the challenged fees with another party to have violated the Real Estate Settlement Procedures Act, codified at Section 2607(b) of federal law.
The Supreme Court agreed Thursday.
"The phrase 'portion, split, or percentage' reinforces the conclusion that §2607(b) does not cover a situation in which a settlement-service provider retains the entirety of a fee received from a consumer," Justice Antonin Scalia wrote for the unanimous court. "It is certainly true that 'portion' or 'percentage' can be used to include the entirety, or 100 percent. But that is not the normal meaning of 'portion' when one speaks of 'giv[ing]' or 'accept[ing]' a portion of the whole, as dictionary definitions uniformly show. Aesop's fable would be just as wryly humorous if the lion's claim to the entirety of the kill he hunted in partnership with less ferocious animals had been translated into English as the 'lion's portion' instead of the lion's share."
Though the court agreed with the couples that "portion," "split" and "percentage" all mean the same thing, it described the situation as "a perhaps regrettable but not uncommon sort of lawyerly iteration."
The judges also rejected the couples' argument that the natural meaning of the statute "leads to the allegedly absurd result of permitting a provider to charge and keep the entirety of a $1,000 unearned fee, while imposing liability if the provider shares even a nickel of a $10 charge with someone else."
"That result does not strike us as particularly anomalous," Scalia wrote. "Congress may well have concluded that existing remedies, such as state-law fraud actions, were sufficient to deal with the problem of entirely fictitious fees, whereas legislative action was required to deal with the problems posed by kickbacks and fee splitting."
Quicken Loans applauded the court's decision, noting that it "has won this case at every step and in every court."
"Although we always believed that we were on the right side of the law, it is especially gratifying to have the affirmation of the highest court in the country," the company said in a statement.