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Attorney General, San Francisco District Attorney and City Attorney, and State Controller Announce $50 Million Settlement in Consumer Protection Lawsuit
(SACRAMENTO) – Attorney General Bill Lockyer, San Francisco District Attorney Terrence Hallinan, San Francisco City Attorney Dennis Herrera and State Controller Kathleen Connell today announced they had reached a $50 million settlement in a consumer protection lawsuit brought against six major title companies and their affiliates. The companies were charged with deceptive advertising and unfair business practices regarding their escrow services.
Under the stipulated judgments, signed by Sacramento Superior Court Judge Loren E. McMaster, the companies will pay more than $40 million in refunds and discounts to eligible customers who purchased, sold or refinanced residential property between May 19, 1995, and October 8, 2002. Notices regarding the distribution of the refunds will be published in newspapers throughout California. How to File a Refund Claim.
"Buying a home is a dream come true for many California families, but negotiating and completing the complex financial transactions can become a nightmare of details," Lockyer said. "These settlements will ensure that potential homeowners won't be taken advantage of by the professionals they rely on to fulfill their dreams."
Agreeing to the settlement were Fidelity National Title Insurance Company, Chicago Title Insurance Company, First American Title Insurance Company, Commonwealth Land Title Insurance Company, Lawyers Title Insurance Corporation, Stewart Title Company of California, Inc. and their various parent, subsidiary and affiliated companies.
It is estimated that distribution of the refunds will begin in six months. Additionally, former customers of some of these companies who use them in future transactions will be eligible to receive discounts from the escrow fees normally charged. The companies also will also pay a total of $4.45 million in civil penalties and $2.35 million to the Consumer Protection Prosecution Trust Fund to assist in future prosecutions of other consumer protection matters. The companies also agreed to pay an additional amount for fees and costs associated with the settlement.
In agreeing to the terms of the settlement, the companies did not admit to any liability or wrongdoing.
"The biggest transaction most consumers make in their lives is purchasing or refinancing their homes," said Hallinan. "Consumers usually expect to pay a lot of fees in the process, but they don't expect to be misled into paying more than they should. These settlements put a halt to an industry-wide practice that has gone on far too long."
Agreed Herrera, "Ensuring redress for victims of corporate misconduct is one of my top priorities. It is gratifying to see that through the cooperative efforts of all of our offices, we will obtain compensation for the victims of wrongdoing and put a stop to the offending practices."
The Attorney General and San Francisco officials had charged the companies with deceiving California consumers with hidden fees and costs while providing routine residential escrow and title services. The companies also were charged with failing to pass on to their customers benefits that were provided by financial institutions based on agreements to deposit consumer escrow funds in their banks. The Controller had alleged that dormant escrow funds were not returned to her office as required by law.
"California's Unclaimed Property Act requires financial institutions, including escrow and title companies, to send to the State all assets that have been dormant for three years," Connell said. "This settlement brings these companies into compliance with the law."
All of the companies will publish a series of notices in major California newspapers describing the claims process eligible customers must follow to obtain restitution. The notices will include a sample claim form, an address to which the claim form should be mailed and a toll-free telephone number for customers with questions about the settlement and restitution. Each company will publish the notice at least three different times.
In addition to the monetary relief, the judgment includes a variety of injunctive provisions prohibiting the companies from continuing to engage in the practices that led to the bringing of the actions. For example, the judgment prohibits the companies from billing escrow and title customers for services provided by third parties without providing adequate disclosures regarding mark-ups the companies charge for those services. Such services include overnight mail, courier and notary fees.
The companies also are prohibited from charging separate fees for preparing, issuing or recording a release of obligation or for tracking records of deeds of reconveyance. Further, in order to protect consumers from paying unnecessary interest on outstanding loans, the companies must follow procedures to ensure they promptly disburse funds following the close of escrow. Finally, the companies are prohibited from obtaining financial benefits from banks unless the full value of the financial benefits is used exclusively to underwrite the cost of escrow services and fully allocated to the companies' escrow division.