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Facebook Page Follow Up RESPA Note

MAY 14, 2014 10:41am ET
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After I posted this follow up to my business Facebook page, I received a message from Sonja Grant Wheeler:

Hello, we saw your article on National Mortgage News and have a concern about a potential RESPA violation. The $100.00 gift card giveaway can be construed as a "kickback"
RESPA Section 8prohibits anyone from giving or accepting a fee, kickback, or anything of value for exchange for referrals of settlement service business involving a federally related mortgage loan. We would hate to see you have a problem with the CFPB. We recommend an attorney's opinion on your referrals.

I felt that the giveaway was not a violation but after receiving this, decided to look into it a bit further. We asked our compliance officer to reviewhow I handled the first giveaway and we were told that it would violate RESPA if I am asking for reviews as this requires you to be a client to qualify for the giveaway.

I promptly saw the light and will be doing future giveaways as a question that anyone can answer to win.It was suggested that Ipreface it with "Take my informational survey to be entered into a ."

Comments (5)
a rose is a rose is a rose, by any other name is still a rose.
Posted by JOHN H | Wednesday, May 14 2014 at 1:37PM ET
You would be giving directly to the consumer, after the fact, not to anyone as an inducement to refer to you. Seems like it should be OK by the definition. But if logic is twisted (as is so popular today) could one say that as a result of the inducement which created positive reviews, which were then used to advertise, unknown new customers who read them were in effect 'referred' to you? What really doesn't sit well in the first place is offering an inducement for a review making one question the validity of the reviews.

Although there is s double standard. Banks and other lenders offer inducements to consumers such as free appraisals, free checking accounts, lower rate loans if you open an account, discounted closing costs and other things of value, but brokers cannot, thanks to LO Comp. Not a level playing field, nor fair to consumers.
Posted by Brian P | Wednesday, May 14 2014 at 2:19PM ET
This is a terrific point! "Although there is s double standard. Banks and other lenders offer inducements to consumers such as free appraisals, free checking accounts, lower rate loans if you open an account, discounted closing costs and other things of value, but brokers cannot, thanks to LO Comp. Not a level playing field, nor fair to consumers."
Posted by Brent E | Thursday, May 15 2014 at 2:50PM ET
Unless your so called "give away contest" is totally unbiased and you award the "gift" to only those selected by an independent method or company, regardless as to whether or not the winner referred anyone to you.... you will be found in violation of RESPA. If the CFPB were to discover that only those who made referrals to you won the contest or drawing, .... You're toast.
Posted by MICHAEL G | Thursday, May 15 2014 at 3:10PM ET
Unfortunately, the CFPB was poorly conceived and implemented by people who do not understand the business. Much earlier than that was RESPA which established the no-referral proposal. Again, badly conceived. In much of American business referrals are given with no implication that you are charging more because of paying a referral fee or taking them to dinner, or...

If you give the gift card to people for whom you have provided a loan it could be construed as a undisclosed change to the HUD-1, triggering a violation of not only RESPA but also TILA. That could result in a buy-back of the loan.

Here in Texas it could also trigger a violation of the Texas lottery regulations which require three elements. 1. There was consideration paid--they paid closing costs for the loan including your fee. 2. Chance--only one winner out of a number of respondents. 3. Giving something of value--the gift card.

But, there is something you can do. Invite a friend, say a Realtor, and go get a margarita.
Posted by Frank P | Friday, May 16 2014 at 6:54AM ET
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