Risk Assessment for real estate service providers: MSA's and RESPA

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

This is part 6 of a SeriesThis 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. 

This is to date, the most comprehensive profile of the Bureau interpretation of RESPA compliance for real estate service providers.  Because, it is a lengthy document and contains a lot of important information, I have broken up this blog post into several 'bite sized' pieces.

 

NON-COMPLIANCE RISKS

According to the bulletin issued by the Consumer Financial Protection Bureau (CFPB), non-compliance involving illegal kickbacks and referral fees, including those which are deemed to be disguised as MSA's create exposure to liability for not just the particular individuals involved in the impermissible conduct but ALSO for the companies that employ them.

This is consistent with other rulings available in the Consent Decree section of the CFPB website in which cases are sited where fines have been levied against corporate entities and individuals including at least one case where a former owner was also included.

 

THIRD PARTY CONSULTANTS:

Third party consultants are service providers used to assist in setting/determining pricing at a fair market rate for Marketing Service Agreements (MSA's).  The bulletin is very clear in a statement that seems to indicate that simply having an independent assessment/verification of a fair market rate for services provided through an MSA does NOT guarantee the legality of the MSA.

At issue according to the Bureau, is the payment of improper kickbacks and referral fees.  It is on the basis of this assessment that most enforcement actions have been made.

 

PERSONAL LIABILITY FOR BROKERS AND SUPERVISORS:

According to the bulletin, 'In addition to corporate liability, some of the enforcement actions have required individuals in charge of companies that committed the violations to pay significant monetary penalties.'  To date, RESPA violations have cost industry participants over $75 Million in penalties so far according to this release.

 

Future blog posts will cover the following:

 

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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