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CFPB Shows No Signs of Forgetting about RESPA

JUN 2, 2014 2:29pm ET
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For those hoping the Consumer Financial Protection Bureau’s focus has turned away from the Real Estate Settlement Procedures Act, last week's RealtySouth consent decree is a reminder the agency is still looking at compliance as it pertains to marketing and disclosures.

This time, the CFPB hit RealtySouth with a $500,000 penalty for inadequate affiliated business disclosures. Specifically, the agency found the company violated RESPA because disclosures did not use capital letters, and disclosures were contained within other marketing materials and information that distracted from the disclosure itself.

Of import, the CFPB noted that in the past RealtySouth had utilized purchase contracts that either required or strongly steered the consumers into using its affiliate title company. The CFPB also noted that RealtySouth had required or strongly encouraged its agents to steer borrowers toward its affiliated title company. Notwithstanding these practices, it failed to use the affiliated business disclosure provided in appendix D to the statute.

One lesson learned from this consent decree is that the degree of technical compliance required rises as the degree of aggressiveness—past and present—of the marketing increases.

In other words, it is clear that part of the CFPB's issue with RealtySouth's disclosure was the company's prior sales contracts which required use of its title company and its subsequent contracts which gave a choice of "other."

In addition, its "strong" encouragement of staff to use the title company no doubt impacted the CFPB's view of the situation. No doubt these practices lead to the extent of the penalty imposed by the agency, even though corrective actions were apparently taken before any enforcement activity was initiated.

Lenders considering marketing services and joint venture arrangements should carefully review this and other recent consent decrees relating to RESPA. In the area of marketing, the CFPB remains focused.

Questionably technical compliance that far misses the mark as to the spirit of the law will likely draw the agency's attention and enforcement authority.

Comments (6)
The silver lining...the Realtor associations will join the struggle to hold CFPB accountable to congressional oversight. Well designed regulation with focused intent applied equally and with the intent to correct unwanted activities or actions with penalty only when egregious and repeated violations occur is consistent with fairness and the American way. Our current government arguably is one of the most unaccountable in recent history but yet this same government has fostered an agency like the CFPB and protected numerous other agencies to include the VA and IRS. Agencies that at best have failed the American people in the spirit of and at worst criminally. As for the author of the article I now comment on and many like him, such actors have a vested interest in such unfair and unrestricted powers of an agency like the CFPB...it's the attorney's stupid, it's the attorney's!!!
Posted by John Deleva | Tuesday, June 03 2014 at 2:27PM ET
As a loan officer in a broker shop, this is one direction the CFPB has taken that is benefitting consumers and enforcing a level playing field as far as I can tell. I am not a big fan of marketing agreements between realtors and lenders as it tends to be a potential road block to encouraging buyers to shop for their better loan options. I strongly feel that the term "preferred" anything will not be part of our vocabulary in a few years. Realtors are traditionally the first stop for home buyers, so realtors take note that the CFPB is coming after you if they feel you are "steering" buyers to your marketing partners. My thoughts are that realtors should have a list of 3 to 4 reliable and reputable lenders that they can recommend to their clients to stay RESPA compliant. If Realtors want to stay above the fray, my advice is for them to ACT consumer centric, not just speak it. Regrettably in the drive to reduce marketing costs, marketing agreements are springing up all over the place, so it appears that those fat cat CFPB salaries will continue to be generously self funded with many penalties being levied against anyone attempting to cut RESPA corners.
Posted by Vance W | Wednesday, June 04 2014 at 2:35PM ET
Unlike several federal government agencies that attempt to avoid accountability to congress, the CFPB is truly an independent agency. CFPB funding and reporting is not subject to congressional approval. Presidential oversight or FED supervision is prohibited. The CFPB is truly unaccountable and has undefined authority. The risk of excessive abuse and power is limitless.
A government of the people, for the people and by the people no longer exists when it comes to the CFPB.
Posted by | Wednesday, June 04 2014 at 3:23PM ET
Was this really about the consumer? Were the title services more or less expensive to the borrower, or wasn't this the issue, just the details of compliance hoop jumping that was 'judged' inadequate? Half a million dollars for letters not being capitalized and 'being with other materials and information that distracted from the disclosure itself', and CORRECTED BEFORE any enforcement activity was even initiated is harsh and unusual punishment indeed! Does every disclosure need to be given individually now? Vance, you may not like the answer because you could be next!
Posted by Brian P | Wednesday, June 04 2014 at 3:36PM ET
This seems to be the only Federal Agency that is actually doing their job and slapping firms who have been ripping off consumers all through the Bush years and after. I hear, Nationstar is under investigation for unfairly denying mortgage modifications and using B of A tactics...we did not get your documents...your documents are not up to day...etc. These CEO's never think...perhaps we should clean up our act or we could be in trouble with this agency. It just does not occur to them...never does.
Posted by phil D | Friday, June 06 2014 at 5:09PM ET
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