The Consumer Financial Protection Bureau fined an Indiana title company $1.25 million on Wednesday for steering borrowers to an affiliated title insurer without disclosing that three executives are owners of the insurer.

The CFPB found that Meridian Title in South Bend, Ind., failed to disclose its numerous executive relationships with Arsenal Insurance, a title insurer in Camden, Ind. The companies have offices in Indianapolis that are within five miles of each other.

The bureau found that Meridian routinely selected Arsenal as the title insurance underwriter for its customers and was able to keep extra money beyond the commissions it normally would have been entitled to collect.

“Meridian Title illegally steered consumers into purchasing a product from an affiliated company to add to its bottom line,” CFPB Director Richard Cordray said in a press release. “We’re ordering it to halt this practice and pay up to $1.25 million to consumers who were harmed.”

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“Meridian Title illegally steered consumers into purchasing a product from an affiliated company to add to its bottom line,” said CFPB Director Richard Cordray. Bloomberg News

Meridian's president and CEO, Mark Myers, did not return a phone call and email seeking comment. Arsenal also did not return a call seeking comment.

The CFPB's administrative consent order stated that Meridian has eight individual owners, three of whom are owners and executives at Arsenal as well.

Andrew Drake, Arsenal's president, is a vice president and senior counsel at Meridian. Debbie Collins, a vice president and agency representative at Arsenal, also serves as senior vice president of sales and marketing at Meridian. Myers also has an ownership interest in Arsenal, the CFPB said.

However, Drake and Collins are not listed as executives on Meridian's website, Myers' ownership interest in Arsenal also is not disclosed and any affiliations with Arsenal are not disclosed.

Title companies can make referrals to an affiliated business but are required to disclose those relationships to consumers in order to avoid violating the Real Estate Settlement Procedures Act. RESPA prohibits any person from receiving a kickback, fee or anything of value as part of a real estate settlement service.

The CFPB said Meridian failed to make necessary disclosures to more than 7,000 consumers when it selected Arsenal to provide their title insurance.

The company made no disclosures to borrowers from 2014 to 2016, the consent order said. It also did not satisfy other conditions for avoiding a violation of the law, the consumer bureau said.

Meridian was able to keep money beyond the commission allowance outlined in its agency contract when issuing title insurance policies from Arsenal, according to the consent order.

The additional amounts "were not reasonable compensation for services actually performed in the issuance of Arsenal's title insurance policies, nor were they a return on an ownership interest or franchise relationship," the CFPB said.

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