Lead generation and the Real Estate Settlement Procedures Act (“RESPA”) compliance remain hot topics following the Consumer Financial Protection Bureau’s (“CFPB”) February 2023 advisory opinion regarding digital comparison shopping platforms. In its March 2023 issue of Consumer Compliance Supervisory Highlights, the Federal Deposit Insurance Corporation (“FDIC”) discusses certain examination observations and regulatory developments, including those related to FDIC-insured banks’ payments for leads under Section 8 of RESPA. The Highlights indicate that, while fact specific, indicators of risk under RESPA in connection with lead generation arrangements include third parties that do one or more of the following activities:
- Initiate calls directly to consumers to steer them to a particular lender;
- Offer consumers only one lender or will transfer the consumer to only a single lender;
- Describe the lender in non-neutral terms, such as preferred, skilled or possessing specialized expertise;
- Receive payment from a lender only if a “warm transfer” occurs; or
- On a consumer-facing digital platform that purports to rank settlement service providers based on objective factors, include providers that pay to take turns appearing in the top spot in a round robin format.
Like the CFPB’s recent guidance, the FDIC notes that a lender’s payment for activities that go beyond the simple provision of a “lead” may be improper payments for referral activities when those activities influence the consumer’s selection of a particular provider.
The FDIC goes on to identify certain risk-mitigating activities to assist an FDIC-insured bank in complying with RESPA. While these activities are not necessarily specific to lead generation, the FDIC list should be helpful to any compliance department, even those within companies not regulated by the FDIC These include:
- Training staff on compliance with Section 8 of RESPA, including how to identify the difference between “a permitted lead and a referral (including a warm transfer)”;
- Understanding the programs with which lenders are involved, how the programs function, and how costs are structured;
- Developing policies and procedures that provide guidance to comply with applicable regulatory requirements and the company’s compliance expectations with regard to lead generation activities;
- Requiring loan officers to annually identify and certify to relationships used by loan officers to generate loans to allow for appropriate vetting and controls to be put into place;
- Monitoring lead generation activities regularly to ensure compliance with company policies and procedures and legal requirements.
Given the focus of federal regulators on digital shopping platforms and lead generation, now may be a good time for a check-up to ensure lenders and other settlement service providers are purchasing leads in compliance with Section 8 of RESPA.