Confusion Over RESPA Standing Requirements Continues as Sixth Circuit Holds That Section 8 Plaintiffs Need Not Allege They Were Overcharged

Earlier this year, the United States Court of Appeals for the Sixth Circuit in became the first federal appellate court to squarely address the question of whether a plaintiff has standing to sue a settlement service provider under Section 8 of the Real Estate Settlement Procedures Act (“RESPA”) even if he or she was not, in fact, “overcharged” for settlement services. In re Carter, 553 F.3d 979 (6th Cir. 2009). RESPA generally prohibits, among other things, kickbacks and improper referral fees in the settlement closing industry. The Sixth Circuit acknowledged a widespread split in the district courts over whether a plaintiff has standing if they were not in fact overcharged for the settlement service in question. The plaintiffs in Carter did not allege in their complaint that they were overcharged in any way, but rather merely alleged a RESPA violation based solely on allegations that a portion of the fees they were charged for title insurance and settlement services was improperly used to pay a kickback to a third party in exchange for a referral of business. The Sixth Circuit held the plaintiffs had standing because they alleged they suffered an “individual, rather than collective harm” for the purposes of the standing requirement because “they themselves were given referrals sullied by kickbacks in violation of RESPA.” Id. At 989. With the other United States Courts of Appeals yet to weigh in on the issue, the Carter decision and the split in the lower courts demonstrates that, at least for now, a settlement service provider’s potential exposure to private claims under RESPA depends not only on its actions, but on where in the country it operates.

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