Foley & Lardner LLP on RESPA Liability and the Filed Rate Doctrine

Foley & Lardner LLP on RESPA Liability and the Filed Rate Doctrine


Does a provider violate the Real Estate Settlement Procedures Act (RESPA) merely by charging rates that are above the market rate, above the filed rate, or are otherwise excessive? In this commentary, Michael D. Leffel and Matthew R. Lynch of Foley & Lardner LLP examine the decisions in Hazewood v. Foundation Financial Group, LLC, 551 F.3d 1223 (11th Cir. 2008) and Arthur v. Ticor Title Ins. Co., 569 F.3d 154 (4th Cir. Md. 2009), both significant to the debate of this question. The authors write:
 
     Congress enacted the Real Estate Settlement Procedures Act ("RESPA") to "insure that consumers throughout the Nation are protected from unnecessarily high settlement charges caused by certain abusive practices that have developed in some areas of the country." Some, including the Department of Housing and Urban Development ("HUD"), point to this language to argue that RESPA provides broad relief for "overcharges" and that the statute is aimed at reducing the cost of real estate settlement services. RESPA's precise prohibitions, however, are primarily limited to "certain abusive practices," not excessive fees in general. RESPA prohibits real estate settlement service providers from giving kickbacks for referrals and, similarly, from charging or splitting fees for unperformed services. But RESPA is silent on whether a provider violates RESPA merely by charging rates that are above the market rate, above the rate that was filed and approved by a state regulatory authority ("the filed rate"), or otherwise excessive.
 
The Eleventh and Fourth Circuits Hold That Charges In Excess Of A Filed Rate Do Not Violate Section 8(b) Of RESPA, And May Not Violate Section 8(a)
 
     The Eleventh Circuit recently confronted the issue of overcharges and filed rates in Hazewood v. Foundation Financial Group, LLC, 551 F.3d 1223 (11th Cir. 2008) (per curiam). The plaintiff, Hazewood, conceded that the defendants performed some settlement services for her, but alleged that they violated RESPA by charging fees in excess of the rates the defendants had filed with, and were approved by, the Alabama Insurance Commissioner. The court affirmed the district court's dismissal of Hazewood's claim and held that RESPA "does not provide a cause of action for excessive fees--that is, charges where a service was performed, but the plaintiff feels she was overcharged by the service provider." The court also refused Hazewood's invitation to divide the fees into reasonable and "unreasonable" portions by ruling that the amount of any fees in excess of the filed rate (the allegedly "unreasonable" portion) violated RESPA. The court instead held that "where a plaintiff concedes that a service is actually performed in exchange for a settlement fee, she may not avoid dismissal of her RESPA claim by arguing that the 'excessive' portion of the fee was 'unearned.'"
 
(citations omitted)