Magazine article American Banker

Suits Accuse California Banks of Pocketing Title Fees

Magazine article American Banker

Suits Accuse California Banks of Pocketing Title Fees

Article excerpt

California's largest banks have been accused of illegally keeping more than $270 million in title transfer fees for papers that were never filed.

Two lawsuits, filed in May and June under California's False Claims Act, allege that Bank of America Corp., Norwest Bank, NationsBanc, World Bank, California Federal Bank, and others charged homeowners a title fee of $65 to $200 when selling or refinancing their home, then failed to transfer the ownership deed when the mortgage was paid off.

The complaint alleges that the financial institutions kept and profited from the fees and submitted false forms to the state rather than pay the unused fees to the state, as required by state law.

The so-called "qui tam" lawsuits were filed in Los Angeles Superior Court by Burbank, Calif., resident William Bowen, who could not be reached for comment.

Using a "qui tam" lawsuit, an individual may file on behalf of a group of people or the state, according to a spokeswoman for the Los Angeles attorney general's office, who added that it is up to the court to determine how any damages would be distributed.

Mr. Bowen's lawsuits reportedly claim that the defendants have defrauded the state of more than $10 million per year since 1972.

The lawsuits are under seal, and neither lawyers for the plaintiff nor the attorney general's office would comment on the particulars.

However, a copy of one of the lawsuits was obtained by American Banker. It seeks more than $130 million in damages and says in part:

"The defendants failed to report and escheat to the state the monies that defendants had improperly demanded and obtained from homeowners throughout California for the reconveyance of deeds of trust. …

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