Why Might a Marketing Service Agreement (MSA) be against the law?

Real Estate Broker/Owner with Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate

This is part 2 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.  


Question:  Why Might Marketing Service Agreements (MSA's) be against the law? (Click here for a definition of MSA's)

According to the bulletin, the Bureau has received numerous inquiries  and Whistleblower tips from members of the  real estate community detailing the harm that can do to consumers by increasing the costs associated with obtaining services related to financing.  It should be noted that the bulletin also states that they have NOT received any commentary from the general public or industry stating how these agreements benefit the consumer.

The Consumer Financial Protection Bureau (CFPB) indicates that it's investigation appears to reveal a pattern of actions designed to evade RESPA provisions that prohibit the payment and acceptance of kickbacks and referral fees.

RESPA was enacted by Congress in 1974 in  response to abuse in the real estate settlement process.  It's important to note that violation of the statue can result in criminal as well as civil penalties.  The statue covers a number of services including services by an attorney, document preparation, providing credit reports, appraisals, inspections and other services provided by real estate professionals and lenders in the loan origination, processing and underwriting process.


To Read the series from the Beginning

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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