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Collins v. U.S. Bank, National Association

United States District Court, C.D. California

February 3, 2015

NOVICE M. COLLINS, individually and on behalf of herself and all others similarly situated, Plaintiff,
U.S. BANK, NATIONAL ASSOCIATION; DOES 1-25, inclusive, Defendants.


OTIS D. WRIGHT, II, District Judge.



Plaintiff Novice M. Collins filed this one-count putative class action Complaint against Defendant U.S. Bank, National Association ("U.S. Bank") alleging a violation of California's unfair competition law, Cal. Bus. & Prof. Code § 17200 ("UCL"). (ECF No. 3 ["Compl."].) Pending before the Court is U.S. Bank's Motion to Dismiss the Complaint. (ECF No. 21.) Collins, a former mortgagor, claims that U.S. Bank's lender-placed insurance ("LPI") is deceptive and unlawful because the LPI premiums charged to her escrow account were more than necessary to insure her property. The Court, having considered the record, applicable law, oral argument, and the parties' briefs, hereby GRANTS U.S. Bank's Motion to Dismiss. (ECF No. 21.)


Collins formerly owned real property in Bakersfield, California encumbered by a mortgage serviced by U.S. Bank. (Compl. ¶ 3.) Collins alleges that U.S. Bank uses a standard deed of trust for all mortgage loan contracts it services and the standard form contains the same or substantially similar provision regarding LPI. (Id. ¶ 8.) The U.S. Code defines LPI as "hazard insurance coverage obtained by a servicer of a federally related mortgage when the borrower has failed to maintain or renew hazard insurance on such property as required of the borrower under the terms of the mortgage." 12 U.S.C. § 2605(k)(2). The LPI provision in Collins' deed of trust reads as follows:

4. Fire, Flood and Other Hazard Insurance. Borrower shall insure all improvements on the Property... against any hazards, casualties, and contingencies, including fire, for which Lender requires insurance[.] Borrower shall also insure all improvements on the Property... against loss by floods[.]
7. If Borrower fails to perform any other covenants and agreements contained in this Security Instrument... then Lender may do and pay whatever is necessary to protect the value of the Property and lender's rights in the Property, including payment of... hazard insurance [.] Any amounts disbursed by lender under this paragraph shall become an additional debt of Borrower and be secured by this Security Instrument.

(Compl. ¶ 8 [emphasis added].) U.S. Bank hires third-party LPI vendors to provide this hazard insurance and then shifts the cost to its customers accordingly. (Id. ¶ 14.) Collins does not identify the third-party vendor that provided her LPI nor does she allege when the LPI was first imposed.

Collins alleges that U.S. Bank's LPI practice violates the UCL for two reasons. The first reason is that "the premium charged by Defendant to Class Members was higher than the amount that was necessary' to protect Defendant's interest in the collateral." (Id. ¶ 10.) The second reason is that U.S. Bank "misrepresented to Plaintiff and other Class Members the true cost of the replacement hazard insurance." (Id. ) According to Collins, the LPI premiums are higher than necessary because: (1) U.S. Bank charges its customers for the LPI vendors' administrative overhead costs even though U.S. Bank's customers already pay U.S. Bank for these exact services and the deed of trust prohibits such fee shifting ( id. ¶¶ 11, 14-15); (2) U.S. Bank allows LPI vendors to charge its customers higher-than-market rates because U.S. Bank receives cash payments and incentives from the LPI vendors ( id. ¶¶ 15-16); and (3) U.S. Bank could continue paying the defaulting customers' existing insurance premium at a fraction of the cost ( id. ¶ 24).

Collins argues that U.S. Bank is not concerned with the lowest cost to its consumers but rather its own financial rewards from LPI vendors in the form of kickbacks. (Id. ¶ 16.) Collins alleges that U.S. Bank required her and other class members to pay for unlawful and deceptive LPI premiums "since 2008, or earlier." (Id. ¶ 9.) Collins specifically alleges that she "paid these charges and thereby suffered a financial injury for which restitution from U.S. Bank is required." (Id. ¶ 3.) U.S. Bank allegedly charged Collins LPI premiums between $967.00 and $1, 440.00 annually while comparable market rates were one-third the cost. (Id. ¶ 23.f.)

Collins seeks to certify a class of "All California mortgage borrowers who paid U.S. Bank for force placed hazard insurance during the four years preceding the filing of the Complaint (the Class ...

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