Internet broker faces suit

Date: 10/21/2008
LendingTree has violated S.C. law, solicitor claims
BY John P. McDermott
The Post and Courier

Ninth Circuit Solicitor Scarlett A. Wilson

Ninth Circuit Solicitor Scarlett A. Wilson is suing online loan broker LendingTree LLC, saying the company violated state law by not telling borrowers about the fees it receives from lenders.

Wilson's complaint was filed in Charleston County Court of Common Pleas on Sept. 24. It is one of at least nine civil lawsuits that prosecutors around the state have brought against the Internet company since August.

LendingTree has not formally responded to Wilson's complaint, and the company's spokeswoman could not be reached for comment Monday. Last month, it said that an Upstate lawsuit that raised the same allegations was without merit.

Wilson is seeking penalties of up to $7,500 for each violation of the Registration of Mortgage Loan Brokers Act that occurred in Charleston and Berkeley counties. She also wants LendingTree to forfeit any fees from those transactions.

The number of loans involved is not known, the solicitor's office said in a statement.

LendingTree, which is licensed as mortgage broker in South Carolina, solicits online loan requests from borrowers and circulates them among multiple financiers that compete for the business.

The Charlotte-based company describes itself as the "nation's leading online loan destination." It estimated that has handled 23 million requests resulting in $185 billion in closed transactions over the past decade.

Wilson alleged that LendingTree has violated and continues to violate state law by failing to tell borrowers about payments it receives from lenders. South Carolina-licensed mortgage brokers are required to provide a "good faith estimate" of any fees, "whether paid by the borrower, the institutional lender, or both," according to a legal statute cited in the lawsuit.

Another issue is a notice on LendingTree's Web site that the company "is not an agent" of the borrower. State law requires that every "loan agreement with a mortgage broker or originator must contain an explicit statement that the mortgage broker or originator is acting as the agent of the borrower in providing brokerage services to the borrower," according to the lawsuit.

The eight other South Carolina counties that have filed similar complaints against Lending Tree are Aiken, Anderson, Beaufort, Chesterfield, Florence, Greenville, Horry and York. All of those cases have been transferred to U.S. District Court.

Individual borrowers of LendingTree are not directly represented in Wilson's case so any penalties collected would go to the state. No trial date has been set.