Thomas v. German American Capital Corporation

Since 1979, lenders have been allowed to charge exceptionally high interest rates on residential second mortgage loans secured by Missouri real estate (sometimes called “home equity loans”). In fact, since 1998, the Missouri Second Mortgage Loan Act has allowed unlimited interest rates on those loans. However, in exchange for allowing lenders to charge what would otherwise be a usurious (and therefore illegal) interest rate, the Act places strict limits on settlement charges or fees that can be charged in connection with these loans. And, when lenders violate the Act, Missouri law precludes those lenders—or anyone else—from collecting interest on the illegal loans, and borrowers who have been charged illegal fees can bring an action for both actual and punitive damages.

 

When DeAnthony & Susan Thomas received a loan from a now-defunct sub-prime mortgage lender known as “FirstPlus Bank f/k/a Citizens Thrift & Loan,”  they were charged a host of illegal settlement charges in addition to the high interest rate allowed by the Act.  Thomas vs. U.S. Bank is a class-action lawsuit seeking redress for those violations on behalf of both the Thomases and everyone else who was charged illegal fees in connection with loans made by  FirstPlus Bank. The suit also alleges that the class members’ tainted loans were later transferred or assigned (by way of the secondary mortgage market) to various financial institutions, including U.S. Bank, GACC, Ace Securities, Residential Funding Corporation, and Sovereign Bank.

 

The Thomas suit alleges that those national financial institutions knew or should have known that FirstPlus Bank was charging illegal fees on loans to class members, and that those loans violated Missouri law. Nonetheless, those institutions collected payments of principal and interest on the loans, in violation of Missouri law. The lawsuit seeks redress for those institutions’ own violations of the Act, and also seeks to hold them derivatively liable (as assignees) for the violations committed by FirstPlus Bank, from whom they obtained the class members’ tainted loans. The plaintiffs seek, on behalf of all class members, actual and punitive damages, including repayment of the illegal fees and a return of all interest collected in violation of the Act, along with prejudgment interest, attorney’s fees, costs and expenses.

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