Whether a $275 bank fee assessed in connection with the refinancing of a homeowner's loan constitutes a deceptive business practice under General Business Law § 349.

No. Because plaintiffs failed to show that defendant committed a deceptive act, the assessment of the bank fee did not violate General Business Law § 349.

Plaintiffs borrowed $175,000 from defendant Chemical Bank to finance the purchase of a cooperative apartment. Shares in the co-op secured the loan while the note covering the loan permitted plaintiffs to prepay the principal at any time without incurring any prepayment charge. Plaintiffs sought to refinance their loan with a new loan from Citibank using the same shares of stock as collateral. Chemical would not release the collateral until it received the funds to satisfy the loan while Citibank would not release the funds until it received the collateral. Chemical arranged to simultaneously transfer the necessary documents and funds, charging plaintiffs a $275 attorney's fee.

Plaintiffs alleged, in part, that the fee was a deceptive practice under General Business Law § 349. Defendant moved to dismiss the claim. The Supreme Court declined stating that it was impossible to conclude that the language of the note was not materially misleading. The Appellate Division reversed and dismissed concluding that the plaintiff failed to meet the burden of showing materially deceptive conduct on which they relied to their detriment.

The Court affirmed the Appellate Division's dismissal of plaintiffs' claim on different grounds. Under § 349, plaintiff must prove three elements; that the challenged practice was consumer oriented, that it misled in a material way, and that the plaintiff suffered injury as a result of the deceptive act. Reliance is not an element of a § 349 claim. The Appellate Division's holding, therefore, that the note did not have any effect on plaintiffs' decision to borrow from defendant in the first place, used the wrong standard. Plaintiffs needed only to show that defendant's material deceptive act caused injury.

Plaintiffs claimed the attorney's fee was a disguised prepayment charge and that the note deceived by not revealing that fee. Defendant, however, did not impose a penalty on plaintiffs for early repayment of the loan. Rather, defendant assessed the fee for a special arrangement refinancing the loan. As such, plaintiffs failed to show that defendant committed a deceptive act. Plaintiffs acknowledged this but argued that the attorney's fee was unjustified. Their argument was not that the note was deceptive, but that the $275 fee was unnecessary and therefore excessive. Since they abandoned this claim on appeal, the Court did not address it.