Financial institutions and other providers of mortgage-related services routinely enter into marketing agreements with third parties to help promote their business. A recent Consumer Financial Protection Bureau enforcement action demonstrates that care should be taken in documenting how payments are made under such agreements.

The CFPB ordered a title company to pay $200,000 based on allegations that the company, which had entered into marketing agreements with real estate brokers, violated the Real Estate Settlement Procedures Act (“RESPA”) in  connection with payments under such agreements. According to the CFPB, the title company entered into the marketing agreements as a quid pro quo for the referral of settlement service business and paid fees based on the amount of business referred, or anticipated to be referred in the future, in violation of RESPA’s prohibition on kickbacks. The consent order in the case states that the title company believed if it did not enter into the marketing agreements with the real estate brokers, the brokers would refer business to other companies. The real estate brokers who entered into the marketing agreements referred a “statistically significant” higher amount of business than brokers who had not entered into such agreements. Importantly, the CFPB concluded that the parties did not document the fair market value of the services rendered under the marketing agreements, and the title company did not diligently monitor the agreements to ensure it received those services.

The take away from this is that a party entering into such a marketing agreement needs to: (i) document in the agreement the actual services performed; (ii) ensure payments for such services represent fair market value; and (iii) monitor performance under the agreement to ensure compliance with RESPA.