Lenders can and should take any number of steps to prevent class action law suits. But that still may not keep them from being sued, a team of regulatory attorneys warned at the Real Estate Service Providers Council's annual meeting in Las Vegas.

"Class actions are an unfortunate reality," said Jay Varon, a litigation partner in the Washington, D.C., office of Foley & Lardner. "There must be a dozen going on right now in the broad field of consumer finance."

And more can be expected, Varon and Jennifer Keas, an associate in Varon's firm, told the meeting.

In a class action suit, a plaintiff seeks to represent a group of persons in the same situation as they are, charging that they all suffered the same injury as a result of a common business practice. If a claim is certified as a class action, the risks to the defendant are huge. Besides a large exposure to financial damages, the cost to defend can be expensive and time consuming, and the suit could provoke investigations by state and/or federal authorities.

"This is high stakes litigation," said Varon, who is RESPRO's anti-trust and RESPA counsel.
He told the conference that class actions tend to occur in waves. Typically, the plaintiff bar targets either a subject area or a vulnerable company – or both. And when they go after a weak target, moreover, they frequently pile on.

"We had one client who, within two or three weeks of some adverse publicity, found itself a defendant in 17 separate class actions filed around the country," the attorney said.
Class action lawyers also "know how to play the game," according to Keas. "They can be aggressive, repeat players who are often very familiar with the issues and know how to drag out their cases," she said.

Varon said the best defense is often a good offense. Lenders should keep abreast of legal developments that affect their business in general, but be particularly aware of class action suits brought against their competitors. Lenders also would do well to re-examine their own business practices and pricing, he added, not just to be certain they are compliant but also to they seem fair and sensible.

"It's one thing to say you followed the law," the attorney warned. "But when you explain something, if it doesn't sound right, you could find yourself in trouble."

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