« back to results for ""
Below is a cache of http://www.courts.state.md.us/opinions/coa/2007/142a06.pdf. It's a snapshot of the page taken as our search engine crawled the Web.
The web site itself may have changed. You can check the current page or check for previous versions at the Internet Archive. Yahoo! is not affiliated with the authors of this page or responsible for its content.
IN THE COURT OF APPEALS OF MARYLAND No. 142 September Term, 2006 _________________________________________
IN THE COURT OF APPEALS OF MARYLAND
No. 142
September Term, 2006
_________________________________________
ANDREW BEDNAR
v.
PROVIDENT BANK OF MARYLAND, INC.
_________________________________________
Bell, C.J.
Raker
Harrell
Battaglia
Greene
Eldridge, John C. (Retired, Specially

Assigned),
Wilner, Alan M . (Retired, Specially
Assigned),
JJ.
_________________________________________
Opinion by Eldridge, J.
_________________________________________
Filed: December 13, 2007 1
Maryland Code (1975, 2005 Repl. Vol.), § 12-1001(f) of the Commercial Law Article, defines
a consumer borrower as an individual receiving a loan or other extension of credit under this
subtitle for personal, household, or family purposes or an individual receiving a commercial loan or
other extension of credit for any commercial purpose not in excess of $75,000, secured by residential
real property.
The issue in this case is whether the Circuit Court for Baltimore City erred in
granting summary judgment to a bank that collected closing costs from a borrower
solely because the borrower prepaid his loan. The petitioner, Andrew Bednar, was a
consumer borrower who obtained a second mortgage loan from the respondent,
Provident Bank of Maryland, Inc.
1
The Circuit Court granted summary judgment to
Providen t, deciding that the bank did not violate the Credit Grantor Closed End Credit
Provisions of Maryland Code (1975, 2005 Repl. Vol.), § 12-1009(e ) of the
Commercial Law Article, hereafter referred to as CLE C. Section 12-1009(e)
provides that a credit grantor may not impose any prepayment charge . Because the
Circuit Court determined that Provident did not violate CLEC, it also granted summary
judgment in favor of Provident on Bednars second count, alleging that Provident
violated the Maryland Consumer Protection Act, §§ 13-101 et seq. of the Commercial
Law Article. W e shall reverse and hold that the Circuit Court erred in granting
summary judgment in favor of Providen t.
I.
On August 29, 2003, Andrew Bednar obtained a second mortgage from Provident
in the amount of $17,000.00 at an annual interest rate of seven percent. The Loan Note -2-
and Security Agreement signed by Bednar stated that Provident Bank elects to make
this loan under Subtitle 10 of Title 12 of the Commercial Law Article of the Annotated
Code of Maryland and federal law. In addition to signing the Loan Note and Security
Agreement, Bednar also signed a Closing Costs Waiver Certific ate. The Waiver
Certificate provided as follows:
As a condition to receiving a waiver of closing costs, you agree
not to close the account for a minimum period of three years from
the date of settlement. If the account is closed during the first
three year period, the waiver will be rescinded and the closing
costs will be added to the balance of the account and will be due
and payable imm edia tely, without notice or demand, to Provident
Bank .
Bednar did not pay any loan closing costs at the settlement. The Settlement Statement
in connection with Bednars loan indicated that the closing costs were paid by bank,
in other words, paid by Providen t. The closing costs amounted to $681.00 and, as
reported on the Settlement Statemen t, included:
Appraisal Fee
$400.00
Abstract/T itle Search
$115.00
Recordation Fees
$40.00
City/County Stamps
$85.00
Release Fee
$30.00
Flood Certification
$11.00
Two years after the closing date, on July 19, 2005, Bednar refinanced with -3-
another lender and fully prepaid his Provident loan. In addition to the outstanding loan
prin cipal, Provident also collected $681.00 from Bednar at the settlement of his
refinanced loan. At the time of the closing, Provident did not inform Bednar that he
was paying a charge in addition to the remaining principal.
On December 14, 2005, Bednar filed, in the Circuit Court for Baltimore City, a
class action complaint against Providen t, and on M arch 8, 2006, he filed an amended
class action complain t. The amended class action complaint alleged that, in collecting
the additional $681.00, Provident violated the Credit Grantor Closed End Credit
Provisions (CLEC),§§ 12-1001 et seq. of the Commercial Law Article. Section 12-
1009 provides, in pertinent part, as follows:
(a) Consumer borrowers right to prepay. A consumer borrower
may prepay a loan in full at any time.
* * *
(e) Prepayment charges prohibited. In connection with any
prepayment of any loan by a consumer borrower, the credit grantor
may not impose any prepayment charge .
Bednar also claimed that, by violating CLEC, Provident engaged in unfair or
deceptive trade practices and therefore violated the Consumer Protection Act, §§ 13-
301(1), (3), and (9). These sections provide as follows:
§ 13-301. Unfair or deceptive trade practices defined.
Unfair or deceptive trade practices include any: -4-
(1) False, falsely disparaging, or misleading oral or written
statement, visual description, or other representation of any kind
which has the capa city, tendency, or effect of deceiving or
misleading consumers;
* * *
(3) Failure to state a materia l fact if the failure deceives or
tends to deceive;
* * *
(9)
Deception,
fraud,
false
pretense,
false
premise,
misrepresentation, or knowing concealm ent, suppression, or
omission of any material fact with the intent that a consumer rely
on the same in connection with:
(i) The promotion or sale of any consumer goods, consumer
realt y, or consumer service;
(ii) A contract or other agreement for the evaluation, perfection,
marketing, brokering or promotion of an invention; or
(iii) The subsequent performance of a merchant with respect to
an agreement of sale, lease, or rental . . . .
Although not at issue on this appeal, Bednars complaint also alleged that Providents
$681.00 charge violated the Interest and Usury laws, §§ 12-101 et seq. of the
Commercial Law Article, and the Secondary Mortgage Loan Law, §§ 12-401 et seq. of
the Commercial Law Article.
On March 29, 2006, Provident moved to dismiss Bednars amended class action
complain t; the Circuit Court granted the motion in part and denied it in part. The court
dismissed the Interest and Usury l a w s and the Secondary Mortgage Loan Law causes
of action, but denied Providents motion to dismiss the causes of action under CLEC
and the Consumer Protection Act. -5-
Provident subseque ntly filed a motion for summary judgment with respect to the
causes of action under CLEC and the Consumer Protection Act. Bednar filed both an
opposition to Providents motion and a cross-motion for summary judgmen t. In support
of its motion for summary judgmen t, Provident contended that the deferred payment
of closing costs, as in this case, has been approved by the Maryland Commissioner
of Financial Regulation and all other state and federal regulatory agencies that have
addressed this issue. Spe cific ally, Provident relied on three letters from the Office of
the Maryland Commissioner of Financial Regulation which appeared to approve a
charge like the one imposed by Provident in this case. In one letter, the Deputy
Commissioner explained as follows:
W e do not interpret the later assessment of those fees, only if the loan
is paid off before a certain date, as a prepayment pen alty. Rather, we
view the waiver of the fees as more in the nature of a benefit conferred
upon borrowers who have not paid off their loan before the predetermined
period of time.
Provident also relied upon letters from the State of New York Banking Depar