The case of Martinez v. Wells Fargo Bank started in San Francisco over an $800 underwriting fee that the lender charged the borrowers.
The borrowers tried (unsuccessfully) to argue that the fee was an "overcharge" and violated Section 8(b) of RESPA and California's Unfair Competition Law.
The lower court shot it down and yesterday the Ninth Circuit shot it down as well. First, that section of the Real Estate Settlement and Procedures Act prohibits fee splitting or charges for services not actually rendered. It does not restrict how much the bank or title company can charge for that service if it actually rendered.
Secondly, the bank is governed by Federal law, and state law (like California's UCL) would only kick in if there was no conflict or existing federal law that addressed the issue. Apparently the OCC does have regs that address the issue and therefore, no state law interference can disrupt the federal banking system (first year law students here are all nodding because they know where this is coming from!).
What the ruling left open is lenders who are not banks. Ie, private money lenders like your grandparents who make a loan from their pension plan…if they or their agents charge for their services, is there still a potential UCL claim lurking?
Martinez v. Wells Fargo Home Mortgage, Inc., No. 07-17277 (March 9, 2010) 9th Circ.