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Supreme Court to look at RESPA case
WASHINGTON (6/27/11)--Credit unions will want to be aware of last weeks U.S. Supreme Court decision to hear a Real Estate Settlement Procedures Act--or RESPA--class action case that involves title insurance. The case is known as First American Financial Corp. v. Edwards.

Broadly, the case revolves around whether a consumer, who based a purchase of title insurance on a referral by a real estate settlement agency--under conditiions the consumer claims violated RESPA's anti-kickback provisions, can sue in federal court if there is no evidence of actual injury.

Credit Union National Association Deputy General Counsel Mary Dunn said Friday that the case has significant implications for credit unions.

Credit unions work very hard to comply with all consumer protection laws they are subject to, such as RESPA for mortgage lenders. Also, they generally support reasonable legal protection for consumers.

However, awarding damages when a consumer is not harmed raises serious concerns and this issue deserves judicial review, she said.

To have standing to sue, the class representative, plaintiff Denise P. Edwards, had to meet three requirements, according to court documents: injury, causation, and redressability.

The defendants, First American Corp. and First American Title Insurance, argue that Edwards has not suffered a concrete injury and has not alleged that the charge for title insurance was higher than it would have been without the exclusivity agreement. In fact, the defendants have noted, the plaintiff cannot make that allegation because Ohio law mandates that all title insurers charge the same price.

If the Supreme Court rules against Edwards, CUNA's Dunn noted, it could help credit unions battle against unjustified, gotcha-types of lawsuits that are sometimes filed against lenders under RESPA.

A question raised but not answered so far in the case--and not likely to be addressed by the Supreme Court justices--is whether the title insurance company's tie-in arrangement with the title insurance company is, in itself, an improper arrangement.

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