On April 4, the Consumer Financial Protection Bureau announced a $15.4 million
This enforcement action serves as an important lesson to lenders who enter into marketing agreements with builders, title companies and Realtors.
All too often these arrangements start with the premise of simply finding a justification through advertising dollars to pay a fee to encourage the referral of loans. Moreover, lenders often duplicate or replicate other agreements that other lenders have developed. The problem with these practices is that—as exemplified by the above settlement—the CFPB will look beyond the terms to the detailed substance of such an arrangement, and if in the government agency’s opinion the deal is simply a referral fee to a lender, it will consider the arrangement unlawful and issue fines. Moreover, due to the horizontal enforcement agenda often practice by the CFPB, lenders who have adopted analogous arrangements created by others will be likely to face immediate scrutiny and fines.
The bottom line is that the CFPB looked deep enough into a reinsurance arrangement to determine the reinsurance was an improper kickback. Thus, it is unreasonable to believe that CFPB would not do the same thing with less complicated arrangements such as office sharing or shared advertisements, or monthly newsletters.
