Sunday
December 21, 2014

Transaction Fees Challenged

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Transaction Fees Challenged

Suits involving fee payments under RESPA cannot qualify as class action suits because the fees and services are different for each transaction.

The U.S. Court of Appeals for the Eleventh Circuit (Atlanta) has decided that a suit against a brokerage for allegedly charging a buyer a transaction fee when no service was performed (Busby v. JRHBW Realty Inc., 11th Circuit 200) could be certified as a class action suit.

In the case under consideration, a buyer purchased a home using a federally insured loan and was changed a $149 “administrative brokerage commission” in addition to the commission paid to the brokerage by the seller. She filed a lawsuit charging that the brokerage had violated the Real Estate Settlement Procedures Act’s Section 8(b) by not providing any additional services to justify the fee. Charging the consumer when no services are provided violates RESPA.

In general, suits involving fee payments under RESPA cannot qualify as class action suits because the fees and services are different for each transaction. For example, in the 2007 case Grady v. Burnet Realty Inc., a Minnesota court ruled that a suit filed by buyers against a brokerage alleging the company had violated RESPA by referring title business to its affiliate did not qualify as a class action suit because the requirement of commonality among the buyers of title insurance from Burnet did not exist. Instead, said the Minnesota court, each case had to be examined individually.

However, in the Busby case, the federal appeals court stated that the case could qualify as a class action suit because the buyer had charged that no services whatsoever were performed for the fee. When the case is returned to the trial court, the case could proceed as a class action suit if the plaintiffs can demonstrate to that court that no services were ever performed in exchange for the administrative fee.

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