The Supreme Court asked the Obama administration for its views Monday on a case that examines when a mortgage lender can be sued for charging borrowers a fee when it offers no service in return.
The case centers on a group of suits in Louisiana alleging Quicken Loans Inc. charged loan-discount fees to borrowers but did not cut the interest rates on their loans. Quicken Loans said the fees were legal and disputed the plaintiffs' claim that the fees were unearned. The high court asked the solicitor general, the administration's top lawyer at the court, whether the court should hear the case.
The plaintiffs argue the Real Estate Settlement Procedures Act was meant to forbid both kickbacks and unearned fees, and say the Department of Housing and Urban Development has consistently interpreted the 1974 law this way. But a federal appeals court in New Orleans ruled for Quicken Loans in November, narrowly interpreting the law to apply only to kickbacks. The appeals court said an alleged unearned fee must be shared with a third party to be illegal.
