Over five years ago, a lawsuit was filed by three consumers in the state of Missouri. The lawsuit was filed against thirty-three different banks in the state, and it was filed because the three consumers said that all of the banks had violated the Missouri Second Mortgage Loans Act. The act in question allows lenders to charge higher interest rates for second mortgages than the usury rate applicable to most loans, but at the same time places limits on closing costs and fees. During the course of the trial (which was originally filed in Platte County Circuit Court but then moved to federal court), the banks used a 2003 Supreme Court Case holding as their defense. The court agreed with the banks defense and dismissed the case.

However, the three plaintiffs did not give up, and after filing an appeal, a three-judge panel of the 8th U.S. Circuit Court of Appeals reversed the original decision. Although this case started over five years ago, it is a very interesting time for this decision to come down given all of the things that are taking place in terms of our economy (and specifically the mortgage industry).

Although this was a win for the plaintiffs, the lawyer of the plaintiffs said Missouri banks should welcome the decision because it means that banks chartered in other states can no longer enter Missouri and, under the pretense of offering reduced interest rates, charge higher but hidden rates by assessing illegal closing costs.

Like most legal proceedings, this one is not over, and will continue back in Platte County Circuit Court.