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Suit says Wells charged illegal tax fees for N.Y. co-op borrowers

NEW YORK (Reuters) – Wells Fargo Bank has been hit with a proposed class action accusing it of improperly charging thousands of New York state borrowers for tax services when the bank extended loans for the purchase of co-op units.

In a filing on Monday in a New York federal court, lawyers for the borrowers said no tax services are provided for co-op borrowers because they do not own their apartment units or directly pay the taxes on them.

Wells Fargo spokeswoman Catherine Pulley said the bank is reviewing the complaint and has no comment.

More common than condominiums in the New York City area, co-ops are residential buildings owned by a corporation, where individual residents own shares in the corporation instead of the apartment units themselves.

The lawsuit was filed on behalf of Samuel and Kathleen Carrion, who said they were told they would have to pay an $80 “tax service fee” when they took out a $202,500 loan from Wells Fargo earlier this month for a co-op unit in Brooklyn.

“There’s no way that a tax service fee could be legitimately charged in the purchase of a co-op,” said Wayne Kreger, a lawyer for the plaintiffs. “It’s a junk fee for a service that they did not provide for this particular borrower.”

The lawsuit seeks triple damages for violations of the U.S. Real Estate Settlement Procedures Act (RESPA), which prohibits lenders from collecting home loan settlement fees except for “services actually performed.”

Under RESPA, lenders typically may charge mortgage borrowers a one-time tax service fee for the costs of contacting tax authorities and creating an escrow account that is used to pay taxes, insurance and other charges.

With a co-op unit, however, the corporation pays the taxes from maintenance fees charged to each resident, the lawsuit said.

“An escrow created by a lender in regard to a loan to a unit purchaser for this purpose would not only be inappropriate but unenforceable,” the lawsuit said.

The lawsuit seeks to represent any New York state borrowers who were charged a tax service fee by Wells Fargo for a coop loan over the past year.

The case is Carrion et al v. Wells Fargo Bank, U.S. District Court, Eastern District of New York, No 15-cv-0132.

For the plaintiffs: Wayne Kreger of Law Offices of Wayne Kreger and Stuart Nahas of Zraick Nahas & Rich

For the defendant: Not immediately available

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