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Docket No. 83822-Agenda 36-September 1998.

PHYLLIS J. WEATHERMAN et al., Indiv. and on Behalf of all Others Similarly Situated, Appellees, v. GARY-WHEATON BANK OF FOX VALLEY, N.A., n/k/a The First National Bank of Chicago, N.A., Appellant.

Opinion filed June 17, 1999.

JUSTICE BILANDIC delivered the opinion of the court:

The issues presented in this appeal center on whether a lender violated the Illinois Consumer Fraud and Deceptive BusinessPractices Act (hereinafter Consumer Fraud Act) (815 ILCS 505/1 et seq. (West 1992)) by charging loan applicants amortgage assignment recording fee and a tax escrow suspension fee.

BACKGROUND

In October of 1992, plaintiffs, Phyllis J. Weatherman, Ruth A. Russell, and Ronald D. Vega, applied to defendant, Gary-Wheaton Bank of Fox Valley, for a mortgage to refinance residential property.⁽¹⁾ At the time that plaintiffs applied forthe loan, defendant provided them with a document entitled "Good Faith Estimate of Charges." That document disclosedcertain estimated charges relating to closing, including the sum of $80 for recording fees and a real estate tax escrow in theamount of $2,664. Defendant also informed plaintiffs when they applied for their loan that it sells all of its loans into thesecondary mortgage market and that their loan would be sold and transferred at or after closing. Plaintiffs accepted theseterms. Defendant approved a $137,250 loan and issued its loan commitment. Plaintiffs signed the loan commitment andgave defendant approximately $1,400 as a "lock-in fee," which was refundable upon closing of the loan.

Before closing, defendant chose to assign plaintiffs' mortgage to Midwest Mortgage Services, Inc. (Midwest), a wholesalemortgage banking company that buys and then sells mortgage loans into the secondary mortgage market. Defendant andMidwest have had a contract with each other since 1987 regarding the sale and purchase of mortgage loans. Also prior toclosing, plaintiffs requested that defendant suspend the tax escrow. Defendant agreed and informed plaintiffs they would becharged a $343.13 fee to "control their own escrow."

At closing, defendant provided plaintiffs with a "Settlement Statement" containing an itemized breakdown of all closingcosts. That statement indicated that plaintiffs would be charged $77 in recording fees, which included a $15 fee to recordthe assignment of the mortgage to Midwest. Defendant paid that fee to the title company, which was paying for therecording. The "Settlement Statement" further indicated that plaintiffs would be charged a $343.13 escrow suspension fee.Plaintiffs paid these fees at closing, but claim that they did so only to complete the refinancing, control their own escrow bypaying their property taxes themselves, and avoid losing their lock-in fee.

Plaintiffs thereafter filed a class action complaint in the circuit court of Cook County against defendant, the First NationalBank of Chicago, and First Chicago Corporation. Acting on behalf of a putative class comprised of all mortgage borrowersto whom defendant charged either a mortgage assignment recording fee or an escrow suspension fee within the applicablelimitations period, plaintiffs allege that defendant failed to inform them of the mortgage assignment recording fee untilclosing and failed to inform them of the escrow suspension fee until just a few days before closing. Plaintiffs claim that theyreceived no benefit as a result of either the mortgage assignment recording fee or the escrow suspension fee and that, hadthey known before paying their lock-in fee that defendant would charge them these two fees, they "would have pursuedrefinancing with other lenders who did not require payment of these fees." In addition, plaintiffs claim that defendantmisrepresented that the fees were required and necessary charges to close and fund the loan. Plaintiffs further allege thatthey relied on defendant's omissions and misrepresentations. Based on these allegations, plaintiffs claim that defendantviolated the Consumer Fraud Act by engaging in unfair, unauthorized and deceptive lending practices.

Defendant moved to dismiss plaintiffs' complaint, asserting that First Chicago Corporation, as the parent company of theFirst National Bank of Chicago, is a separate entity and therefore should be dismissed. The motion also asserted that thecomplaint failed to state a claim upon which relief may be granted.⁽²⁾ The circuit court initially dismissed First ChicagoCorporation from the case. The court then denied that portion of the motion requesting dismissal of the mortgageassignment recording fee claim. The court, however, dismissed that portion of plaintiffs' complaint charging that theimposition of the escrow suspension fee violated the Consumer Fraud Act. The court ruled that plaintiffs had been notifiedin advance of the escrow suspension fee and agreed to that fee.

Defendant next filed a motion to dismiss the mortgage assignment recording fee claim under section 2-619 of the Code ofCivil Procedure (735 ILCS 5/2-619 (West 1992)), which the court denied. The court also refused plaintiffs' request todecide the issue of class certification at that time. On defendant's request, however, the circuit court certified the followingquestion of law for interlocutory appeal pursuant to Supreme Court Rule 308 (155 Ill. 2d R. 308):

"A. Whether a lender violates the Illinois Consumer Fraud and Deceptive [Business] Practices Act by giving anapplicant for a loan, at the time a loan is applied for, a gross estimate of the recording fees to be paid at closing andnot telling the loan applicant until closing that one of the fees included in the gross estimate was a fee to cover thecost of recording the assignment of the mortgage securing the loan.

B. In this case, the assignee of the assignment is a wholly-owned affiliate of the defendant."

The circuit court also found that, pursuant to Supreme Court Rule 304(a) (155 Ill. 2d R. 304(a)), there was no just reason todelay the appeal of its decision dismissing the escrow suspension fee claim, and stayed further proceedings pendingappellate review.

The appellate court accepted defendant's petition for leave to appeal on the Rule 308 certified question, and consolidatedthat appeal with plaintiffs' Rule 304(a) appeal from the circuit court's dismissal of the escrow suspension fee claim. Theappellate court majority answered the certified question affirmatively on the basis that such conduct amounted to adeceptive and unfair practice. 286 Ill. App. 3d at 59-62. The appellate court rejected defendant's argument that conduct by alender as set forth in the certified question complies with a federal statute such that it constitutes a defense to liability underthe Consumer Fraud Act. 286 Ill. App. 3d at 55-58. The appellate court also held that plaintiffs failed to state a cause ofaction under the Consumer Fraud Act based on the escrow suspension fee. 286 Ill. App. 3d at 63-65. The dissent agreedwith the majority's dismissal of the escrow suspension fee claim, but argued that disclosing the mortgage assignmentrecording fee under the circumstances in the certified question did not violate the Consumer Fraud Act. 286 Ill. App. 3d at66-70 (DiVito, J., concurring in part & dissenting in part).

Both parties filed petitions for leave to appeal to this court. We denied defendant's petition for leave to appeal and entered asupervisory order remanding the cause to the appellate court for reconsideration of its denial of defendant's petition forrehearing regarding the mortgage assignment recording fee. Plaintiffs' petition for leave to appeal, asserting that the circuitand appellate courts erred in dismissing the escrow suspension fee claim, was denied by this court without prejudice, so asto allow plaintiffs the opportunity to refile. On remand, the appellate court denied defendant's petition for rehearing, anddefendant filed a new petition for leave to appeal to this court on the mortgage assignment recording fee issue. This courtallowed defendant's petition for leave to appeal (166 Ill. 2d R. 315). We also allowed the Illinois Bankers Association andthe Illinois Mortgage Bankers Association to submit briefs as amicus curiae in support of defendant. 155 Ill. 2d R. 345.

ANALYSIS

I. Mortgage Assignment Recording Fee

We first review the question of law certified by the circuit court pursuant to Rule 308. As noted, the circuit court certifiedthe question of law concerning the mortgage assignment recording fee following its denial of defendant's section 2-619motion to dismiss plaintiffs' mortgage assignment recording fee claim. The standard of review on appeal is therefore denovo. See In re Chicago Flood Litigation, 176 Ill. 2d 179, 189 (1997).

The Consumer Fraud Act is "a regulatory and remedial statute intended to protect consumers, borrowers and businesspersons against fraud, unfair methods of competition, and other unfair and deceptive business practices." Cripe v. Leiter,184 Ill. 2d 185, 190-91 (1998). The Consumer Fraud Act contains an exemption from liability for conduct authorized byfederal statutes and regulations. Section 10b(1) provides that the Consumer Fraud Act does not apply to "[a]ctions ortransactions specifically authorized by laws administered by any regulatory body or officer acting under statutory authorityof this State or the United States." 815 ILCS 505/10b(1) (West 1992). Defendant argues that a lender that charges amortgage assignment recording fee under the circumstances in the certified question is exempt from liability under section10b(1) of the Consumer Fraud Act because the fee is disclosed in compliance with a federal statute.

The federal statute relied on by defendant is the Real Estate Settlement Procedures Act (RESPA) (12 U.S.C.