A U.S. appeals court in San Francisco ruled that California may force Quicken Loans Inc. to provide refunds to customers it allegedly overcharged on mortgage interest, media reports said Wednesday.

Monday’s decision by a three-judge panel of the Ninth Circuit Court of Appeals may cost Livonia, Mich.-based Quicken, the largest Web-based direct mortgage lender, millions of dollars, reports said.

The outcome differs from a decision by another Ninth Circuit panel last August involving Wells Fargo, the No. 5 U.S. bank, media reports said.

That panel ruled that weaker federal laws applied to Wells Fargo because states could not regulate operating units of nationally chartered banks, according to reports.

A call to a Quicken representative was not returned by press time.

Quicken Chairman Dan Gilbert told the Los Angeles Times that Quicken may appeal to the U.S. Supreme Court, or lobby California Gov. Arnold Schwarzenegger and lawmakers to change state lending law retroactively, Reuters reported.

California law used to bar lenders from charging interest more than one day before mortgages were recorded in county offices, a process that could take weeks, media reports said.

The law was changed in 2003 to let interest accrue one day before a lender disburses loan proceeds, according to reports.

California, however, argued that Quicken had received interest payments that violated the earlier law, and sought refunds as far back as Oct. 14, 1999, according to reports.

The appeals court panel rejected Quicken’s argument that the state statutes were pre-empted by federal law, and amounted to an unlawful taking that violated the U.S. Constitution, reports said.

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