Enforcement Actions Filed Against Real Estate Firms For Alleged RESPA Inadequate Notice and Kickback Violations

Enforcement Actions Filed Against Real Estate Firms For Alleged RESPA Inadequate Notice and Kickback Violations

On May 28th, the CFPB entered into a consent order with the largest real estate firm in Alabama to settle allegations that the real estate firm provided consumers with inadequate notices. The CFPB alleged that the real estate firm violated the Real Estate Settlement and Practices Act (RESPA) by failing to inform consumers of their right to choose service providers during the home-buying process and of the real estate firm’s affiliate relationships. RESPA provides home buyers with various protections, including prohibiting kickbacks for referrals of real estate settlement services. The CFPB alleged that the real estate firm’s purchase contracts either explicitly directed or suggested that title and closing services would be provided by an affiliate of the real estate firm. RESPA does allow real estate companies to refer consumers to their affiliates, but it requires that firms provide consumers with a disclosure clearly explaining a consumer’s right to shop for services and that the consumer is not required to use the services of the firm’s affiliate.

Upon being informed of the potential violation by the CFPB, the real estate firm immediately revised its disclosures. Under the consent order, the real estate firm must pay a civil penalty of $500,000, maintain its disclosures in compliance with RESPA, and also ensure that its training materials emphasize that it cannot require the use of its affiliates.

See the consent order here.

In addition, on June 12th, the CFPB entered into a consent order with a New Jersey title services company to settle allegations that the company paid illegal kickbacks for referrals. The CFPB alleged that the company violated the Real Estate Settlement and Practices Act (RESPA) by paying commissions to independent salespeople who referred title insurance business to the company. Section 8 of RESPA prohibits kickbacks and the payment of unearned fees in residential real estate transactions. Under the consent order, the company must pay a civil fine of $30,000.

See the consent order here.

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