September 4th, 2014 at 12:35 am
| Top-producing Long & Foster team facing class-action RESPA suit over alleged kickbacks Court battle highlights potential legal pitfalls in marketing title insurance, settlement services Ken Harney Contributor, February 25, 2013A federal district court’s decision to certify a class-action suit against one of the highest-volume Realtor teams in the country should set off alarms for brokerage firms that have marketing agreements between themselves and settlement service providers, say RESPA legal experts. Not only is the class-action certification ominous in its own right, but it comes on top of indications that the Consumer Financial Protection Bureau is actively probing marketing agreements … Visit this site: ? RESPA Suit for alleged kickbacks and MSAs |
Marketing agreements have become all the rage with mortgage companies and title companies approaching real estate agents with an offer to compensate them if the real estate agent will market their products and services. So, what is a marketing agreement?
A marketing agreement is just what it sounds like. It’s an agreement for the real estate agent (or a team of agents) to market the services of a mortgage company or title company. Typical agent marketing services may include a link to a website from the agent’s website, handing out brochures, joint advertising in newspapers, on billboards, or in trade magazines.
What you need to know about marketing agreements: (1) they are regulated by RESPA (the Real Estate Settlement Procedures Act of 1974), (2) they are complicated to implement and difficult to do in a legally compliant manner, and (3) people will tell you they are legal when they may, in fact, not be.
The headline article above identifies two tremendous risks that accompany marketing agreements: (1) class-action suits and their defense costs, which can bankrupt you; and (2) investigation by the CFPB (the Consumer Financial Protection Bureau) for RESPA violations.
In 2007, a massive investigation into joint venture title companies resulted in the wide-spread shutdown of title companies and the prosecution of real estate agents for violating state real estate license laws when the joint venture title companies turned out to be violations of RESPA—despite assurances from some that they were legal. Marketing agreements are subject to the same pitfalls, only worse. Beginning in 2011, the CFPB has the power to fine violators $25,000 to $1,000,000 per day for violations of RESPA.
RESPA violations are not covered by errors and omissions insurance policies. BHHSCP will not defend or indemnify you if you are accused of violating RESPA because you have entered into a Marketing Agreement. You will be required to defend and Indemnify? BHHSCP for any damage you cause? the Company? by entering into a Marketing Agreement subjecting you and the Company to RESPA scrutiny.
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