A class-action lawsuit against Provident Bank?s alleged charging of prepayment fees on mortgages will go forward after the state Court of Appeals on Thursday overturned a lower court?s decision in favor of the bank.
The Court of Appeals ruled 7-0 that the Circuit Court of Baltimore City erred in ruling against Andrew Bednar, who filed suit in 2005 against Provident alleging that the bank charged him a penalty in violation of state law after he paid off a second mortgage within three years of taking out the loan.
In an opinion, retired Judge John C. Eldridge wrote that state law “unambiguously and flatly” forbids a prepayment charge, and to find an exception to the law “would be to violate the most basic principle of statutory construction.”
John A. Pica Jr., a lawyer with the offices of Peter Angelos representing Bednar, said the scope of the case, including the potential number of people affected and the amount of money involved, would now be determined as the case moves forward.
Provident Bank spokeswoman Vicki Cox said the bank sought and received an opinion from the state commissioner of financial regulation that she said confirmed the legality of the practice.
“Provident and other state-chartered banks have been offering home equity loans, where we pay the closing costs up front, for years,” Cox said.
Bednar claims he was charged $681 by Provident when he refinanced with another lender and paid off a $17,000 second mortgage two years after taking it out with the bank. According to court documents, in taking out the loan, the bank waived closing costs on the condition that Bednar not close the account for a minimum of three years. At the settlement of his refinanced loan, Bednar said the bank collected $681 in a variety of fees from his original closing cost.
Provident argued, and the lower court maintained, that the charge was imposed not at the time of Bednar?s refinancing but when he closed the second mortgage in 2003. The Court of Appeals disagreed.
“Neither the Circuit Court?s nor Provident?s theory, that the $681.00 charge was imposed ?at the time of loan closing,? is sound or justifies the collection of the $681.00 charge upon Bednar?s prepayment,” Eldridge wrote in his opinion.
