CFPB Cites Real Estate Settlement Agent for Unlawful Referrals
10/06/17 – The Consumer Financial Protection Bureau (CFPB) took action against a real estate settlement services provider for referrals to an affiliated title insurer without making disclosures about the businesses’ affiliation.
According to the CFPB, the company acted illegally when it both failed to disclose a connection between the company and a title insurer to consumers and then benefitted from steering consumers to use the title insurer. A disclosure of an affiliation between a real estate settlement services provider and a title insurer is usually required in real estate purchases involving a mortgage loan.
The company is a real estate settlement agent and title insurance agency headquartered in Indiana. When mortgage lenders required consumers to have title insurance as a condition of a mortgage loan, the CFPB found that the company routinely selected a title insurance company for consumers that was owned in part by three of the real estate settlement company’s executives. Further, the CFPB found that when it selected the title insurance company, the real estate settlement company was able to keep extra money beyond the commission it would normally have been entitled to collect, based on an understanding that the real estate settlement company would use the title insurance company.
Under the Real Estate Settlement Procedures Act, a company that receives anything of value pursuant to an agreement or understanding that business will be referred to an affiliated business must generally disclose its relationship to consumers. In its investigation, the CFPB found that real estate settlement company failed to make the necessary disclosures to consumers when it selected the title insurance company to provide title insurance.
Under the consent order, the CFPB is ordering the real estate settlement company to pay up to $1.25 million in redress to consumers.