This is part 3 of a Series. This past week, (October 5, 2015), the Consumer Financial Protection Bureau (CFPB) issued a Compliance Bulletin with the subject line: RESPA Compliance and Marketing Services Agreements.
RECENT INVESTIGATION OF MSA AGREEMENT:
In the course of recent investigations, the Consumer Financial Protection Bureau has reviewed cases that utilized oral as well as written Marketing Service Agreements (MSA's). It's important to note that MSA's do not have to be written to be considered binding and enforceable. If there is an indication, upon review, that the action appears to use an MSA to disguise a kickback or referral fee, the bulletin indicates that this is deemed to be problematic.
By way of example, the CFPB bulletin referenced an investigation involving a title company which paid fees to a lender for referrals and the amount of revenue generated from the referrals. The investigation revealed that the number of referrals increased significantly once the MSA was in place and this could not be accounted for even when seasonal fluctuations were considered.
STEERING AND FAIR HOUSING - MSA AGREEMENTS EXAMINED:
Another issue for MSA's is one which most real estate professionals usually think of when reference is made to Fair Housing. This is the issue of Steering. The CFPB bulletin references the fact that MSA's tend to limit or undermine the consumer's ability to shop for mortgages - either directly or by being deceptive or evasive about the nature of the relationship between the referring parties thereby increasing the cost for consumers.
A specific example referenced an investigation in which a consumer's ability to shop for services was thwarted because the service provider buried the option informing the consumer about their options to make a choice deep within the disclosure.
It would appear that the moral of the story is that real estate professionals must be very clear about disclosing affiliate arrangements and also making sure clients/consumers know that they are not limited to using any service provider. Consumers have a right to choose.
To read more from this series, visit the URL's below
1. What is a Marketing Service Agreement?
2. Why Might a Marketing Service Agreement (MSA) be against the law?
3. An Example of a RESPA MSA (Marketing Service Agreement) Violation
4. Whistle Blowers, Caveats: MSA's and RESPA
5. Potential Negative Impact of MSA's (Marketing Service Agreements) and RESPA Compliance
6. Risk and Liability Assessment for real estate service providers: MSA's and RESPA
7. Steering as a Violation of RESPA with Regards to MSA's and RESPA
8. Penalties for Violating RESPA Provisions with Regards to Marketing Service Agreements (MSA's)
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