I tried to keep you posted on the debate over whether to rewrite (or clarify, depending on whom you ask) rules about mortgage prepayment penalties in Maryland.
It looks like the General Assembly will pass a bill that is could put an end to a class action lawsuit over Provident Bank’s collection of closing costs from borrowers who don’t finish the term of their loan.
The bank had asked state regulators if their system was okay, and got the green light. Provident will pay upfront closing costs for some customers, but sets conditions that a loan has to stay open for a certain period of time or they’ll want their money back.
But the Court of Appeals later decided that this is a prepayment penalty, which is not allowed under Maryland law.
One issue in the Senate was whether lawmakers should pass a bill that could affect an ongoing lawsuit, but some Senators who would have otherwise supported the bill took issue with the fact that the bill would protect banks that get approval from the Commissioner of Financial Regulation or the deputy commissioner.
It was an interesting debate and I wanted to get your thoughts on whether you think regulatory approval is enough to protect a company from future lawsuits. Comments?
