Rescission: Must a financial institution refund "non-refundable" fees?
by Andy Zavoina, BOL Guru BIO AND CONTACT INFO
Question: If, when doing a mortgage refinance, the bank has collected fees for appraisal, credit, flood, and rate lock, and indicated that these fees are non-refundable, but the borrower rescinds--do the fees have to be refunded, if the costs were actually incurred on the borrower's behalf?
Answer: Generally, yes. The commentary provides good explanation on this.
1. Refunds to consumer. The consumer cannot be required to pay any amount in the form of money or property either to the creditor or to a third party as part of the credit transaction. Any amounts of this nature already paid by the consumer must be refunded. “Any amount” includes finance charges already accrued, as well as other charges, such as broker fees, application and commitment fees, or fees for a title search or appraisal, whether paid to the creditor, paid directly to a third party, or passed on from the creditor to the third party. It is irrelevant that these amounts may not represent profit to the creditor.
2. Amounts not refundable to consumer. Creditors need not return any money given by the consumer to a third party outside the credit transaction, such as costs incurred for a building permit or for a zoning variance. Similarly, the term “any amount” does not apply to any money or property given by the creditor to the consumer; those amounts must be tendered by the consumer to the creditor under §226.23(d)(3).
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