PNC Financial Services Group has agreed to pay at least $24 million to settle a class action lawsuit in a Pennsylvania federal court. The suit, brought by homeowners, alleged that a bank acquired by PNC overcharged fees and interest for its secondary mortgages and failed to accurately disclose business arrangements or the terms of its loans. It was claimed this violated truth in lending and racketeering laws. The settlement, preliminarily approved in early September, and announced in a notice to potential class members on Sept. 5, will now go before a three-member arbitration panel, which will decide whether to ratify the $24 million figure PNC suggested or the $70 million proposed by the class.
The class consists of the 26,698 homeowners who took out a second mortgage with Community Bank of Northern Virginia (CBNV) on their primary residence between May 1998 and December 2002. The per-Plaintiff payout is estimated to be on average $560 or $1,680, depending on which settlement amount the arbiters choose. All eligible class members will receive compensation, and any money left over in the settlement fund will not be returned to PNC. Class counsel, in an unopposed motion, asked U.S. District Judge Arthur J. Schwab to approve the settlement. It was stated in the motion:
The proposed settlement falls well within the ‘range of possible approval,’ particularly in light of the substantial risks and costs associated with further litigation. The proposed settlement merits preliminary approval and warrants the dissemination of notice apprising class members of their opportunity to participate in the settlement, or to opt-out from or object to the settlement.
CBNV was bought in 2005 by Mercantile Bankshares Inc., which in turn was bought in 2006 by PNC, which inherited liability for the case, which was filed in 2003. CBNV conspired to generate as many high-interest second mortgage loans as possible, according to a joint consolidated amended complaint filed in 2011 that said the bank’s conduct “demonstrates the types of sharp practices that fueled the collapse of the American mortgage market.” The bank was accused of participating in a scheme that ensnared homeowners with a direct mail marketing campaign, charged them high rates and fees, and paid kickbacks to mortgage brokers.
The homeowners are represented by lead counsel R. Frederick Walters, J. Michael Vaughan, David M. Skeens and Garrett M. Hodes of Walters Bender Strohbehn & Vaughan PC. The case is Brian W. and Carla et al. v. Residential Funding Co. LLC et al. in the U.S. District Court for the Western District of Pennsylvania.
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