MidFirst Bank will pay $2.7 million to settle a class-action lawsuit that claims the bank profited by forcing borrowers to purchase flood insurance they didn’t need on their homes.
A federal judge in New York gave preliminary approval to the settlement on Friday, which covers a class of about 15,000 borrowers. The settlement would allow Oklahoma City-based MidFirst to resolve claims in a consolidated class-action lawsuit against MidFirst and Citigroup Inc. The lawsuit claims the banks made money by forcing borrowers to purchase excessive flood insurance coverage on their mortgaged homes.
MidFirst declined to comment in detail on the lawsuit because of the pending settlement. A hearing is scheduled for Sept. 26 in Utica, N.Y., for the court to give final approval to the settlement and award any attorneys fees and other costs in the case.
“The settlement reached is satisfactory to the parties, and the parties look forward to the court’s approval of the settlement,” MidFirst said in a statement.
The settlement would give borrowers a 20 percent refund from a period between May 2006 and May 2014, during which the bank allegedly overcharged.
The lead plaintiff in the class-action lawsuit, Gordon Casey — a disabled former factory worker in Syracuse, N.Y. — filed the lawsuit in U.S. District Court in the Northern District of New York in 2012. The lawsuit claims the MidFirst subsidiary Midland Mortgage required Casey to carry flood insurance coverage at a rate that was 14 times the outstanding principal balance on his home loan.
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