Supreme Court Agrees to Hear Important RESPA Kick Back Case
On June 20, 2011, the United States Supreme Court agreed to hear a case brought under the Real Estate Settlement Procedures Act (RESPA) that could have widespread implications for consumer claims under RESPA, TILA and similar regulations.
In First American Financial Corp. v. Edwards, the Supreme Court will review whether awarding treble damages to a borrower under RESPA's anti-kickback provisions, without proof of an actual injury (e.g., an overcharge because of the kickback), violates the "injury in fact" requirement included in Article 3 of the constitution. RESPA provides that a person who is charged for a settlement service that violates RESPA's anti-kickback provisions is entitled to three times the amount of any charge paid. There is no requirement that the borrower prove the charge is excessive or injurious to the borrower. The Ninth Circuit decision under review held that Article 3's injury-in-fact requirement is not violated "[b]ecause the statutory text [of RESPA] does not limit liability to instances in which a plaintiff is overcharged..." for services that violate RESPA.
RESPA and TILA claims are a common source of litigation against lenders and servicing companies. If the Supreme Court determines that proof of an actual injury is required, the decision could sharply curtail the number of such claims because of the frequent difficulty borrowers have showing actual damages caused by the purported violations.
