The CFPB has announced that it has entered into a consent order with a Michigan title insurance agency to settle charges that the agency violated the Real Estate Settlement Procedures Act (RESPA) by paying fees to various companies under marketing services agreements (MSA) that were based on the referrals the agency received or expected to receive from such companies. The consent order provides that the agency does not admit or deny any of the CFPB’s findings of fact or conclusions of law except to admit the facts necessary to establish the CFPB’s jurisdiction.
The consent order finds that the agency entered into the MSAs with the understanding that the counterparties (who include real estate brokers according to the CFPB’s press release) would refer mortgage closings and title insurance business to the agency. The order also finds that the agency: (1) did not determine or document how it determined a fair market value for the services it allegedly received under the MSA, (2) set the fees to be paid under the MSAs in part by considering how many referrals it had received from the counterparties and the revenue generated by the referrals and “in some cases” by considering what competing title companies would pay the same counterparties for such services, (3) did not diligently monitor its counterparties to ensure it received the services for which it contracted, and (4) received significantly more referrals from counterparties when they had MSAs with the agency than when they did not. According to the consent order, the differences are “statistically significant and are not explained by seasonal or year-to-year fluctuations.”
The consent order requires the agency to pay a civil money penalty of $200,000. It also requires the agency to terminate any existing MSAs with companies in a position to refer real estate settlement service business to the agency and prohibits the agency from entering into new MSAs with any such companies. (An agreement under which the agency is to pay a person who does not provide settlement services to place advertisements to the public is not deemed an MSA unless such person endorses the agency as part of the advertisement.)
In addition, the consent order requires the agency to document “all exchanges of things of value worth more than $5.00” with companies in a position to refer settlement service business to it, including a description of all things of value exchanged and the reasons for the exchange. Such documentation must be maintained for five years after the exchange. The requirement to document such things of value is a new element for a CFPB RESPA consent order, and may signal an approach that the CFPB will seek to take in future RESPA Section 8 enforcement matters.
This consent order is the latest in a series of CFPB consent orders dealing with RESPA’s referral fee prohibition.