Alert November 03, 2009

Third Circuit Rules Plaintiffs Have Standing to Pursue RESPA Section 8 Case Regardless of Whether Overcharged

The Third Circuit has ruled that consumers have standing to sue under Section 8 of the Real Estate Settlement Procedures Act, regardless of whether they were overcharged for a settlement service. The issue of whether Section 8 requires an overcharge allegation has divided courts across the country and previously had been addressed by only one other circuit. The district court had granted the lender’s motion to dismiss on the grounds that plaintiffs had paid the filed rate for the private mortgage insurance at issue and therefore could not allege an overcharge.

The Third Circuit reversed, holding that consumers have standing to pursue alleged Section 8 violations even if the alleged violation did not result in an “overcharge” for settlement services. Ruling consistently with the Sixth Circuit, the Court looked at the plain language of RESPA, and the damages provision of Section 8(d)(2) in particular. The Court focused on the absence of the word “overcharge” in that section, and the language allowing damages of “three times the amount of any charge paid,” as evidence that there is no overcharge requirement in Section 8. The Court also briefly addressed the filed-rate doctrine, holding that it did not apply because plaintiffs only challenged wrongful conduct and not the reasonableness of the rates paid for private mortgage insurance. The Court did not address the merits of plaintiff’s claims. Click here for Alston v. Countrywide Financial Corp., No. 08-4334 (3rd Cir. Oct. 28, 2009).