Can Your Clients Trust First American Title?

Did you – like many Americans – buy, sell or refinance a home between June 2003 and October 2007? If so, you may be one of the 70,000 First American Title customers who were overcharged for escrow services during that time.

In the largest class action lawsuit ever filed against a real estate escrow company, a new ruling is requiring First American Title Company to reimburse over 70,000 customers whom the company had unlawfully overcharged for these escrow services.
lawsuit
Following a two month trial, Judge John J. Kralik ruled that class members who paid First American more than $100 for sub-escrow services were entitled to reimbursement, as were those who paid First American a fee of more than $15 for a single wire transfer.

First American fought the class action lawsuit, filed by homeowner Patrick Kirk, for seven years before it went to trial, and made at least six separate, unsuccessful attempts to convince the court to dismiss the case.

“I would not be surprised if, in light of this verdict, many people decide not to do business with First American in the future, given their track record revealed at trial and in the judge’s decision,” said Attorney Bernheim.

In a related matter, the California Department of Insurance has filed an accusation against First American Title Company and its parent charging that First American violated the law by failing “to correctly charge” for title policies or services. A public hearing is scheduled for early next year.

The Department of Insurance accusation states that if First American’s alleged violation of the law is found to be willful, this would constitute grounds for the Insurance Commissioner to suspend or revoke, in whole or in part, First American’s license to do business in California.

After hearing these allegations would you still refer a client to First American Title Company? What are your thoughts?

Read the full story here:

  • Peter

    This is ridiculous! Here is another case where the judicial system being used to coerce money out of a private business. Nobody forced anyone to use First Am. for escrow services. If they charged more than $15 for wire fees, that’s their business. They can charge $100 if they wanted to.

    When someone chooses to use the services of any business, that person has a right to cancel and go to another competing business if they don’t like the fees, services, or anything else.

    The greedy liers (whoops, sorry, lawyers) are the ones who will get 99% of the class settlement money and the class members will probably get $5. That’s if First Am doesn’t appeal.

    Note that the lawyers pursued this for over 7 years before they finally found a liberal judge who thinks the government has a say as to how much a private business can charge for services.

    • Anonymous

      First American, along with all other Title companies (Chicago Title, Stewart Title, Fidelity National Title, Old Republic Title, etc.) have to file their rates with the Department of Insurance and at the time of filing disclose what these rates include i.e. escrow services, doc drawing, overnight deliveries, loan tie-in fees, etc. If First American, disclosed their escrow fees with the Department of Insurance as including wire fee’s and/or sub-escrow fees and still chose to charge an additional amount for each item on top of their escrow fees, they did in fact break the law. Which is why the Department of Insurance is now following up with the suit for the incorrect charges.

      This is all circumstantial as I do not know what FATCO disclosed upfront to the Department of Insurance. If FATCO did overcharge each of the 70,000 clients with a $15 wire fee that is a total of $1,050,000.00 and the sub-escrow fee which can vary from $100-$400 (we will say $250 as a median) that is an additional $150 multiplied by 70,000 clients for a total of $10,500,000.00 and a grand total of $11.55mil in overcharges.

    • Darrell70

      Sorry Peter, but your conclusions are simply incorrect. First, often time consumers do not have a choice of which escrow company to use. I’m buying a home right now and the company selling it has required that we use their “preferred’ escrow agent. Translation – they have a nice deal going with them to funnel all sale transactions through them, and will not agree to use a different company. And for folks looking to buy a house in a tight market, does it make sense that they would simply not buy because FATIC is the escrow agent? Not likely, they want the home more than they care about the escrow agent. Second, your understanding of the judicial system is seriously lacking. Los Angeles Superior uses single assignment judges that are determined by the court — at the time the matter is filed. If you think that an attorney gets to “select” which judge will ultimately hear their case, you’re simply wrong. It took seven years because FATIC challenged the class at every turn, and certainly sought to have the case tossed through several procedural avenues. As a 17 year practicing attorney, I can assure you that this is common — especially in L.A. Superior where they are backlogged with cases (remember, criminal cases always get preference, so if they are innundated with criminal matters, the civil cases all get delayed). Finally, your comments about the government regulating private businesses is overly simplistic and naive. Oligopolies exist, and rest assured, the title and escrow industry is no different. I’m not a fan of extensive government oversight and regulation, but without some safeguards, private businesses will assuredly screw their captive consumers for the sake of profit every day of the week and twice on Sundays.

  • RE_Insider

    Here is an email comment from one of our readers:
    As a title company they are regulated by the California Department of Insurance (CDI) First American Title (FATCO) is an 800 pound gorilla, and as all 800 lb. gorilla companies, the easiest way to make money is overcharge customers, and refuse to pay when there is a problem. I received a 2nd Trust deed in a real estate transaction as my commission, issued as such through a FATCO Escrow transaction, and insured by FATCO as such. My buyer later decided to refinance prior to maturity, and requested I subordinate to a larger first T.D. I declined, and FATCO went ahead and recorded a new First over my 2nd, and insured the Mortgagor with title insurance defeating my 2nd. I attempted to collect on my Title Policy issued by Fatco, and they of course refused. I tried to file a complaint, with the Insurance Commissioner, and was told they could not help because the defeat took place through an escrow. When I complained to the Corporations Commissioner, who regulates escrow companies, I was told they have no jurisdiction over escrow companies owned by title companies. So you may be surprised to learn that title company escrows are unregulated. So now you see the genius of FATCO Escrow, they can do anything they want, and the only recourse is litigation.
    My 2nd T.D was only $13,000, no attorney would take it on a contingency, and I did not have the funds to prosecute an action. So for the last 20 years or so, I have been vigilant in steering title business away from FATCO, and estimate that business at approximately $100,000,000.
    Best regards,

    Todd A. Key
    Broker
    REALPRO – LANDPRO