Court Won’t Kick Out Class Action Kickback Claims Against HSBC

Moriba Ba v. HSBC USA, Inc. United States District Court for the Eastern District of Pennsylvania June 26, 2013

The plaintiffs, Moriba Ba, Donald Chipp, Sherrica Chipp, Shawn Hunt, Eugene Murano, and Yolanda Wiggins filed a class action complaint, alleging that HSBC USA Inc. received kickbacks from private mortgage insurers, in violation of the Real Estate Settlement Procedures Act of 1974 (RESPA) and common law unjust enrichment by the defendants. The plaintiffs allege that they obtained home mortgage loans from the HSBC defendants. However, because the put less than 20 percent down, they were required to obtain private mortgage insurance from a company selected by HSBC. Those policies were then reinsured by an HSBC subsidiary. The plaintiffs claim that the reinsurance services were illusory and created a pretext for the insurers to pay kickbacks to HSBC in exchange for HSBC referring its clients to them. The HSBC defendants moved to dismiss the class action, arguing that the claims were time barred by the one year statue of limitations period governing RESPA. However, U.S. District Judge Paul S. Diamond denied the defendants’ motions, finding that the plaintiffs’ claims were not time-barred because they could not have discovered the alleged scheme until after the statute of limitations expired, despite diligently reviewing documents involved in the loan process. Furthermore, Judge Diamond found that the plaintiffs sufficiently pled the principle of equitable tolling. “Plaintiffs further allege that defendants’ actions made it virtually impossible to uncover the true nature of the reinsurance arrangements.” Using the same reasoning, the judge likewise declined to dismiss the plaintiffs unjust enrichment claims as time-barred.

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