Did you know… that YESTERDAY the CFPB published a guidance bulletin concerning its ongoing efforts to crack down on MSAs?
The bulletin is less of a guide and more of a warning about the CFPB’s position concerning Marketing Service Agreements (MSAs); specifically, that it is nearly impossible to have an MSA that complies with the Real Estate Settlement Procedures Act (RESPA). CFPB Director, Richard Cordray, stated that, “companies do not seem to be recognizing the extent of the risks posed by implementing and monitoring these agreements within the bounds of the law.”
The first paragraph of the bulletin asserts that while there have been many whistleblower tips from the industry concerning the harm done to consumers by MSAs there has not been a similar volume of comments suggesting that MSAs benefit consumers or the industry. The bulletin alludes, and in some places forthrightly states, that MSAs are being used to disguise illegal kickback and referral fees. It warns that “any agreement that entails exchanging a thing of value for referrals of settlement service business involving a federally related mortgage loan likely violates RESPA, whether or not a MSA or some related arrangement is part of the transaction.” Further, the CFPB acknowledges that MSAs can be written or oral.
MSAs are portrayed as “necessarily involv[ing] substantial legal and regulatory risk for the parties to the agreement…even where the terms of the MSA have been carefully drafted to be technically compliant with the provisions of RESPA.”
CFPB enforcement actions against industry participants including title companies, lenders and real estate brokerages to date have resulted in $75 million in penalties, bans on entering into MSAs, and bans from working in the mortgage industry (any aspect of the industry in which a federally related mortgage is involved) for periods of up to five years. Penalties have been levied against companies and those working for companies with MSAs.
The bulletin concludes by reminding readers that any industry participant that wishes to self-report their own conduct is encouraged to contact the CFPB; and, provided that the self-reporting and cooperation is consistent with the Responsible Business Conduct Bulletin, CFPB Bulletin 2013-06, such efforts will be taken into account in resolving violations.
Those companies that have MSAs and those working for companies that have MSAs should carefully consider whether the enforcement risks outweigh the benefits of MSAs. If you have concerns regarding an MSA, contact one of the attorneys listed here.