Alert June 10, 2014

CFPB Takes Enforcement Action for Alleged RESPA Violations

The CFPB announced that it has entered into a consent order with a real estate brokerage company and its affiliate, which provides title examination, title insurance and real estate closing services, for alleged violations of Section 8 of the Real Estate Settlement Procedures Act and its implementing regulation. Section 8 of RESPA prohibits a person from paying or receiving a “fee, kickback, or thing of value” pursuant to a referral agreement with an affiliate, unless certain conditions are met. Such conditions include that the agreement or arrangement be disclosed to the consumer (and that the disclosure include an estimated charge or range of charges), that the consumer not be required to use the affiliate and that the “thing of value” be limited to a return on an ownership interest. According to the CFPB, the real estate brokerage either required consumers to use the affiliate for title and closing services or influenced the consumers to do so, did not use the form of disclosure appended to the regulation and included marketing statements in its disclosure “touting the benefit and value of the affiliated entities.”

The terms of the consent order require the companies to refrain from violating RESPA, to ensure that the provided disclosure complies with RESPA and in the model format and to ensure that training materials provided to their real estate agents emphasize that agents cannot require the use of an affiliate. The companies were also ordered to pay a civil money penalty of $500,000 to the CFPB. This is the second such enforcement action this year taken by the CFPB related to violations of the anti-kickback provisions of RESPA (see March 4, 2014 Alert).