The Consumer Financial Protection Bureau [1] (CFPB) took action against a Michigan-based title insurance agency earlier this week over allegations the company paid kickbacks for business referrals.
According to an announcement from the bureau, Lighthouse Title [2], which operates in branches throughout the state, entered into marketing services agreements (MSAs) with various companies "with the understanding that the companies would refer mortgage closings and title insurance business to Lighthouse." Such agreements are prohibited under the Real Estate Settlement Procedures Act (RESPA).
While the agreements showed payments from Lighthouse Title would be based on marketing services provided to the company, CFPB said the firm actually set fees according to the number of referrals it received or expected to receive.
"The CFPB's investigation found that the companies on average referred significantly more business to Lighthouse when they had MSAs than when they did not," the agency said.
Under the terms of the bureau's consent order [3], Lighthouse Title will pay a civil penalty of $200,000. The company is also required to immediately terminate any existing services agreements with companies in a position to refer business to it and is prohibited from creating new agreements with such companies.
"Today's action sends a clear and simple message, that quid pro quo agreements for real estate referrals are illegal," said CFPB Director Richard Cordray. "The Consumer Bureau will continue to take action to ensure that the mortgage market is a level playing field where everyone plays by the rules."
For its part, Lighthouse Title maintains its operations have been consistent with HUD guidelines, having taken advice from a compliance consulting firm to be certain. In a statement [4], the company also noted it discontinued its handful of remaining active MSAs more than four months ago, "even as several of [its] competitors in Michigan continue the practice."
"We've moved beyond the MSAs in early summer and Lighthouse remains committed to being an aggressively compliant, ethical settlement services and title provider that always strives to provide outstanding services to our customers and all our consumers," said Lighthouse Title President Bob Wuerfel. "Lighthouse, with knowledge and experience gained through the current settlement by the CFPB, is in a unique advantaged position, as the CFPB has indicated in their correspondence with us that other regulatory actions in the title industry may follow."