Settlement service providers have been begging the Consumer Financial Protection Bureau (“CFPB”) for regulatory guidance regarding marketing services agreements (“MSAs”) under Section 8 of the Real Estate Settlement Procedures Act (“RESPA”). Yesterday, they got it − sort of. After months of the industry deciphering enforcement actions in an attempt to gauge whether the CFPB believes MSAs between settlement service providers are legal under RESPA, the CFPB issued Compliance Bulletin 2015-05 (“Bulletin”) regarding “RESPA Compliance and Marketing Services Agreements.” But, the Bulletin neither answers the legality question nor provides clear guidelines on what can and cannot be done in an MSA. Rather, the Bulletin, as stated by the CFPB, “describe[s] the substantial risks posed by entering into [MSAs].” It is safe to say this is not the kind of guidance the industry was looking for.
The love affair continues between the Consumer Financial Protection Bureau (“CFPB”) and enforcement under Section 8 of the Real Estate Settlement Procedures Act (“RESPA”). On February 10, 2015, the CFPB announced a consent order with NewDay Financial, LLC (“NewDay” or the “Company”) involving alleged violations of the referral fee prohibitions under Section 8 of RESPA and deceptive marketing practices. Specifically, the CFPB alleges that NewDay paid “lead generation” fees to an unnamed veterans’ organization and a third-party company for the endorsement of the Company and referral of the organization’s veteran members to NewDay for mortgage financing. While the Company neither admitted nor denied the CFPB’s findings, the CFPB assessed a $2 million civil money penalty under the consent order. The facts as described in the consent order do not involve a typical marketing services agreement or lead generation agreement, but the consent order makes clear that endorsements of a company expressed through direct mail and email advertisements are considered to be referrals by the CFPB.
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