In our last post we examined what RESPA Section 8(a) considers to be “a thing of value”. Today we discuss what the Consumer Financial Protection Bureau considers to be an “agreement” or “understanding” to pay for referrals or kickbacks.
As discussed, the statute states “a person or entity may not give, accept, or transfer a fee, kickback, payment, commission, gift, tangible item, special privilege, or any other thing of value to any other person in exchange for a referral of business in a real estate settlement transaction.” In order to fully understand how this section applies to the real estate agents and their service providers it is important to understand how broadly the CFPB defines an “agreement” or “understanding” to pay for referrals.
Most would think that in order to violate the statute there would need to be some agreement, understanding or plan for one service provider to pay the other. This agreement would have to be discussed or formalized. However, based on recent rulings from the CFPB it appears that in order for there to be an understanding, agreement or a plan to violate RESPA there does not have to be any writing, a verbal agreement or even an attempt to formalize terms. An agreement, understanding or plan that violates RESPA can be established simply by the conduct, practice or effect that occurs between service providers over a period of time. CFPB regulators only need to show the effect of an agreement and then they may infer the terms to that agreement.
Thus, it is important to understand that you cannot escape RESPA liability because you do not formalize an agreement or plan or that you never discussed this idea verbally or in writing. If the CFPB can show that a thing of value was given between service providers then CFPB can infer the the terms of the plan by the results. Now that is truly scary.
HAPPY VETERANS DAY! Thank you to all of you who proudly served our country. We are truly indebted to you.