Congressional Bank Reaches $2.8 Settlement With Consumers Over Alleged American Bank Kickback Scheme

Congressional Bank has agreed to a $2.8 million settlement with consumers to end a class action lawsuit alleging that American Bank, which it acquired in 2016, ran a kickback scheme with a mortgage servicing company that resulted in higher fees for consumers.

Although the Maryland-based mortgage lender did not have any connection to American Bank at the time of the company’s alleged kickback scheme with mortgage servicer All Star Inc., which the American Bank claim says ran from 2009-2011, it has agreed to the settlement to stop further litigation, Law360 reports.

The American Bank class action lawsuit alleges that as part of the kickback scheme, All Star Inc. paid kickbacks to the bank in exchange for borrower referrals, creating higher title and settlement fees for borrowers.

Plaintiffs Timothy Ekstrom and Davida Carnahan are asking the Maryland Magistrate Judge Beth Gesner to approve the proposed settlement, which would see Class Members get up to $3,000 each.

Congressional Bank General Counsel Anne Balcer told Law360 that Congressional Bank had no knowledge of the kickback scheme alleged in the American Bank class action lawsuit prior to being named as a defendant.

“All of the conduct allegedly undertaken by American Bank occurred between 2009 and 2011. None of the American Bank employees or managers who plaintiffs allege violated [Real Estate Settlement Procedures Act] are employed by Congressional Bank,” Balcer said.

 “Congressional Bank elected to settle this litigation as set forth in the motion to approve settlement.”

Congressional Bank will settle the claim “without any express or implied admission of fact or liability,” the agreement states.

Of the total $2.8 million, $2.6 million will go to the Class and $250,000 will cover attorney fees and other administrative costs.

Currently, 805 potential Class Members have been identified and the borrowers will receive a pro rata share of the fund, which is estimated to be more than $3,000 each, Law360 reports.

“In most instances this award is many times more than the kickbacks paid on the Settlement Class members’ subject transaction, or the increased costs resulting from the conduct alleged in the Complaint,” the motion for approval reads.

Did you have a mortgage serviced by All Star Inc.? Tell us if this kickback scheme settlement affects you in the comments section!

The borrowers are represented by Timothy F. Maloney and Veronica B. Nannis of Joseph Greenwald & Laake PA; and by Michael Paul Smith and Melissa L. English of Smith Gildea & Schmidt LLC.

Congressional Bank is represented by John D. Sadler, Matthew D. Lamb and Jessica H. Sadler of Ballard Spahr LLP; and by general counsel Anne Bacler.

The Congressional Bank Kickback Class Action Lawsuit is Ekstrom et al. v. Congressional Bank, Case No. 1:20-cv-01501, in the U.S. District Court of the District of Maryland, Northern Division.

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