The Consumer Financial Protection Bureau (CFPB) has ordered Lighthouse Title, a Michigan title insurance agency, to pay $200,000 for illegal quid pro quo referral agreements.
“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.”
The Bureau found that Lighthouse Title violated the Real Estate Settlement Procedures Act (RESPA), which prohibits, among other things, providing something of value to any person with an agreement or understanding that the person will refer real estate settlement services.
The CFPB said Lighthouse Title entered into marketing services agreements (MSAs) with various companies, including, for example, real estate brokers, with the understanding that the companies would refer mortgage closings and title insurance business to Lighthouse.
The agreements made it appear as if the payments would be based on marketing services the companies were supposed to provide to Lighthouse. However, Lighthouse actually set the fees it would pay under the MSAs, in part, by considering the number of referrals it received or expected to receive from each company.
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.