|Bankrate Inc. has agreed to pay $3 million to settle a lawsuit brought by a mortgage lender who claimed that the popular purveyor of consumer interest rate data looked the other way while other lenders used the company's Web site to deceive prospective borrowers.
"While we believe that we have operated our business in an appropriate manner, we made a pragmatic business decision to settle this lawsuit," Thomas R. Evans, president and CEO of Bankrate Inc., said in a statement. "The settlement allows us to contain our exposure and rid ourselves of the distraction and expense of defending the suit," Evans added.
During the third quarter 2006 alone, Bankrate incurred legal expenses of $675,000 to fight the lawsuit.
Bankrate has also agreed, as part of the settlement, to allow American Interbanc Mortgage to once again advertise on Bankrate.com.
The settlement is not an admission of fault or liability on Bankrate Inc.'s part, William Claster, an attorney for American Interbanc, told MortgageDaily.com in a phone interview.
American Interbanc originally sued NovaStar Home Mortgage, Amerisave Mortgage Corp. and Mountain States Mortgage Center Inc. in California state court in 2002. The Irvine, Calif.-based lender claimed the defendants used "bait and switch tactics" in advertising their rates on mortgage directory Web sites Monstermoving.com and Bankrate.com.
Bankrate was added to the litigation several months later. American Interbanc said Bankrate kicked it off the Web site in 2002 because it complained that competitors on the site were stealing customers by advertising prices they did not back up.
Pretrial testimony produced evidence of hundreds of complaints that mortgage lenders failed to honor the rates they advertised, Claster said, adding he could not comment further as part of the settlement.
Bankrate strongly denied American Interbanc's allegations and said its quality-control program ensured consumers were treated honestly.
American Interbanc alleged the defendants banned together after the lawsuit was filed and conspired to "pressure" both Monstermoving.com and Bankrate.com to remove the lender from their directory list or else, as a group, they would terminate their contracts with the directory companies.
American Interbanc claimed the move was an effort to get the company to drop its false advertising lawsuit.
Bankrate e-mail and phone messages, referring to American Interbanc executive Mike Dannelly as "the lawsuit guy," were also among the evidence submitted in the case. One Bankrate executive reportedly said, "I don't want them back on the site until the lawsuit is dropped or settled."
When American Interbanc's contract was not renewed in September 2002, Dannelly inquired as to why. Subsequently, one of his employees received an e-mail that said Bankrate was not going to do business with them and that, "Apparently ... this has to do with a lawsuit American Interbanc has against some of our other advertisers," as previously reported in MortgageDaily.com.
Bankrate asserted that the relationship with American Interbanc was terminated because it "misused the comment box and behaved antagonistically."
Bankrate was then added as a defendant to the lawsuit.
The company continues to pursue its lawsuit against the other defendants, American Interbanc's attorney said.
Mortgage Cartel Alleged
Bankrate Inc. has joined a host of companies being sued by a mortgage lender that claims the group is deceiving prospective borrowers.