(CN) - British-based Lloyds Bank stands to shell out $1.55 million after a federal judge tentatively approved a settlement of claims that it gouged American borrowers.
John and Aurora Dugan joined Matthew Tapscott as the lead plaintiffs in the 2012 federal class action
concerning "dual currency" loans made by Lloyds TSB, long hailed as one of the "big four" U.K. clearing banks.
Lloyds stated the International Mortgage Service, or IMS, loans in U.S. dollars and offered them to individuals in California, Hawaii, Florida and New York, the class said. They could be redenominated into foreign currency at borrowers' discretion.
Once redenominated, the debts were allegedly subject to a "principal cap" of 120 percent, plus a 1.5 percent variable interest rate above Lloyds' "cost of funds," and secured by real property in the United States.
Lloyds nevertheless ignored the cap provisions while "arbitrarily" increasing borrowers' interest rates on the "highly risky and complex" loans, the class claimed.
When the American dollar depreciated by more than 40 percent against the Japanese yen between 2006 and 2012, loan caps were allegedly exceeded, and "uncapped" balances ballooned to more than 20 percent higher than the negotiated principal cap.
The class said borrowers were exposed to "foreign currency exchange rate risk" when their funds were transferred to Japanse yen.
"Lloyds has foreclosed upon borrowers based on the alleged uncapped loan balances," the 48-page complaint stated. "Lloyds has systematically concealed its disregard of the cap from plaintiffs and the class by failing and refusing to tell class members their loan balances in dollars."
The parties entered settlement talks in 2013 after the Northern District of California certified the class.
U.S. District Judge William Alsup on Tuesday granted
their proposed $1.55 million settlement preliminary approval on Tuesday.
Lloyds estimated a class of 148 borrowers, the six-page order states. These individuals are to receive mail notification by Feb. 7, and $50,000 of the proposed amount will go to a settlement administrator.
Once approved and mailed, class members will have 60 days to cash settlement checks. Uncashed checks are to be paid to EAH Housing, an affordable housing nonprofit in San Rafael, Calif.
Members who wish to be excluded from the settlement must submit written opt-out forms by March 7, Alsup added.
The Steptoe firm, which was previously appointed as class counsel, must move for award of attorney's fees and costs at least 45 days prior to the deadline for settlement class members to object to the proposed settlement.
Their fees will not come from the $1.6 million settlement cash payment, according to the ruling.
A motion for final approval of the proposed settlement is due on March 14, and a final hearing and scheduling conference on the matter is slated
for April 17.
Lloyds has branches in Hong Kong and New York, among other locations.