The Ninth Circuit affirmed the dismissal of a purported class action under the Real Estate Settlement Procedures Act ("RESPA") because the plain language of RESPA does not apply to the practice of "overcharging," as well as the dismissal of three state law claims that are preempted under the National Bank Act.
The Plaintiffs claimed that they refinanced their home mortgage loan through Wells Fargo, who charged the Plaintiffs an $800 underwriting fee. Plaintiffs alleged that this fee was excessive and violated RESPA and California's Unfair Competition Law because the fee was not reasonably related to the actual costs of underwriting. The district court dismissed all the claims against the Defendants.
The Ninth Circuit affirmed dismissal. First, the court held that the unambiguous language of Section 8(b) of RESPA does not apply to overcharges. Section 8(b) of RESPA states:
"No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed".
Although the Department of Housing and Urban Development, which is authorized to administer RESPA, interprets Section 8(b) to prohibit overcharges, the plain language of the provision states that the prohibition only applies to services that were not actually performed. This holding is in line with the Second, Third, and Eleventh Circuits.
The court also affirmed dismissal of the Plaintiffs state law claims because those claims are preempted by the National Bank Act:
"The Martinezes allege that Wells Fargo: (1) committed “unfair” competition by overcharging underwriting fees and marking up tax service fees; (2) engaged in “fraudulent” practices by failing to disclose actual costs of its underwriting and tax services; and (3) that these actions violated multiple state and federal laws, which predicate violations are independently actionable under the UCL as “unlawful” conduct."
National banks are generally subject to state laws of general application as long as the state laws do not conflict with the general purposes of the National Bank Act. In this case, however, the court found that two regulations of the Office of the Comptroller of Currency ("OCC"), the agency charged with administering the National Bank Act, preempted the state law claims.
First, the court held that OCC Regulation 12 CFR 7.4002(b)(2) preempted any claim for unfair overcharging because that regulation "provided how the fees are to be determined:"
"The establishment of non-interest charges and fees, their amounts, and the method of calculating them are business decisions to be made by each bank, in its discretion, according to sound banking judgment and safe and sound banking principles."
Second, the court held that Plaintiffs' unfair conduct claim as well as the fraudulent conduct claim were preempted by OCC Regulation 12 CFR 34.4(a), which states that a national bank may make real estate loans without regard to state law on:
(9) Disclosure and advertising, including laws requiring specific statements, information, or other content to be included in credit application forms, credit solicitations, billing statements, credit contracts, or other credit-related documents;
(10) Processing, origination, servicing, sale or purchase of, or investment or participation in, mortgages
Because Plaintiffs’ claims were encompassed by this regulation, their state law claims were dismissed.