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In a class action filed on behalf of more than 8,000 real estate loan borrowers, the Michigan Court of Appeals ruled on Aug. 7 that AmeriBank had engaged in the unauthorized practice of law by charging borrowers $400 for the preparation of standard loan documents it had filled out without an attorney’s help. Dressel v. AmeriBank, No. 222447. If the decision is affirmed on appeal, the bank will have to disgorge the illegal fees. AmeriBank had given its borrowers a government brochure, entitled “Buying Your Own Home” (U.S. Department of Housing and Urban Development, 1997), that explained some lenders would charge a separate fee “to cover their costs of preparation of final legal papers, such as a mortgage, deed of trust, note or deed” (Section 1105). Instead of hiring counsel to draft the legal documents, the bank prepared them itself. The court rejected AmeriBank’s contention that it was preparing the papers for its own benefit and, therefore, was covered by a pro se exception. “If the preparation of the mortgage documents … was not a service, but rather incidental to its business … then there would be no basis for the separate charge to defendant’s customers.” The court concluded that it “agrees with the majority opinion of the states that charging a fee can take an otherwise incidental act into the realm of the unauthorized practice of law.” AmeriBank was represented by Ronald Vander Veen, a partner at Cunningham Dalman in Holland, Mich. Asked how the bank planned to change its practices in the future, Vander Veen responded, “I don’t think the bank will change anything. We plan to pursue appellate remedies. This decision is not correct.” However, when asked if the bank would continue to charge the same loan preparation fee, he said, “No. The bank hasn’t charged that fee since 1997 or 1998. I don’t know why they stopped. I don’t know what other fees they charge.” John Anding, the partner in the Grand Rapids, Mich., firm Drew, Cooper & Anding who represented the class, speculates that the bank stopped charging the $400 fee “because we filed charges. It may be just a coincidence, but I filed lawsuits against seven banks in Michigan alone (the other cases are still pending), and shortly after that, all the banks started changing their practices.” “There is another element to this case,” said Anding. “Not only were the banks engaging in the unauthorized practice of law, but they were also being deceptive.” He pointed out a different section of the HUD brochure mentioned earlier. Section 801 explains that a loan origination fee, “sometimes called a ‘point’ … covers the lender’s administrative costs in processing the loan.” “A lot of banks, including AmeriBank, were advertising their loans as ‘no-point mortgages,’ implying that there are no origination points,” Anding said. “They charged a ‘document preparation’ fee instead, presumably to cover their internal processing costs. With this decision, they have to either be open about the points, or just eat the cost. Now consumers can compare their options, head to head.” Vander Veen could not be reached to respond to Anding’s comments.

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