A California federal judge granted preliminary approval last month to a class action settlement between U.S. Bank NA, American Security Insurance Co. and plaintiffs who claim the bank charged homeowners lender-placed flood insurance rates inflated by kickbacks and policy backdating. U.S. Magistrate Judge Laurel Beeler said in her order that the 2,859 class members will be refunded 12.5 percent of the amount they were charged for flood insurance U.S. Bank placed on properties whose policies had lapsed. Given the approximately $4.1 million in unrefunded charges made during the class period, the total refund is about $507,000.
Class members who were charged for coverage backdated 120 days or more will receive between $50 and $100 in additional compensation based on how far back the date was pushed back. The order says that if checks are not cashed within 180 days, the money will go to other class members or to Habitat for Humanity. Judge Beeler says that U.S. Bank and ASIC will pay the class counsel’s attorneys’ fees up to $625,000 and the class representatives will receive an additional payment of $2,500, money that’s not included in the total class refund amount.
According to the settlement, for three years, U.S. Bank, ASIC and their affiliates will not accept payment related to lender-placed flood insurance on property owned by class members, not including payment on damage claims, and ASIC will not give U.S. Bank below-cost or free outsourced services in connection with lender-placed flood insurance on property owned by class members. In return, the class members release U.S. Bank and ASIC from all claims that were or could’ve been asserted in the class action.
The plaintiffs accused U.S. Bank of providing ASIC, a unit of Assurant Inc., with underwriting business in return for kickbacks of part of the premium payments it reaped. These kickbacks were paid to U.S. Bank under the guise of commissions and reimbursements, the complaint said. U.S. Bank allegedly failed to deduct these charges from the premiums it passed on to homeowners and also charged for needless retroactive coverage that was backdated to include periods for which the property was already insured. The loans were originally issued by Fannie Mae or Freddie Mac and serviced by U.S. Bank.
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