One of the main laws governing home sales is the Real Estate Settlement Procedures Act (RESPA), which prohibits kickbacks and referral arrangements. Plaintiffs’ lawyers love the statute because, if a violation occurs, an aggrieved consumer can recover attorneys’ fees and three times the amount of the underlying service fee. As a result, RESPA class actions abound. But what if Congress never intended to allow the vast majority of those lawsuits in the first place? RESPA’s text contains strong support for that argument.
Specifically, the portion of the statute that deals with kickbacks and referral arrangements is Section 8 (12 U.S.C. § 2607). That section says nothing about potential class liability. Compare that to RESPA Section 6 (12 U.S.C. § 2605), which deals with loan-servicing requirements. Unlike Section 8, Section 6 expressly allows for class actions in certain circumstances. Section 6 also caps class liability at $1 million or 1% of the servicer’s net worth, whichever is less. It also gives servicers a 60-day grace period to correct violations.
If RESPA Section 8 class actions are prohibited, then why are there so many of them? Because almost no one has ever bothered to advance this argument.
This means that, if Congress had intended to allow for class actions under RESPA Section 8—the most litigated portion and the one with the most teeth—then the legislature certainly knew how to write that intent into the statute. Under long-established rules for construing laws, the allowance of class actions for some RESPA violations compels the conclusion that Congress did not intend them for others, and specifically those under RESPA Section 8. Courts have made similar findings in the context of the Truth-in-Lending Act (TILA). See Andrews v. Chevy Chase Bank, 545 F.3d 570, 575 (7th Cir. 2008).
In defending various real estate companies in RESPA class actions, I have made this argument. But I’m not aware of any court that has ever ruled on it. I keep trying to sell other lawyers on the idea—to no avail. Why the resistance? The most frequent explanation I hear is, “If RESPA Section 8 class actions are prohibited, then why are there so many of them?” Because almost no one has ever bothered to advance this argument, I retort.
If the law is otherwise and courts rule in favor of consumers, are real estate companies any worse off than they are now? No, they’d be in the same position.