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.