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On October 8, 2015 the CFPB issued its Compliance Bulletin 2015-05 addressing RESPA Compliance and Marketing Services. By its terms the bulletin “provides an overview of RESPA’s prohibitions against kickback and unearned fees and general information on MSAs, describes examples of market behavior gleaned from CFPB’s enforcement experience in this area, and describes the legal and compliance risks (it has) observed from such arrangements.”
The Bulletin offers little additional guidance from the CFPB'S previous enforcement actions, and is as notable for what it does not say as for what it does. It describes arrangements that violate Section 8(a) of RESPA because compensation for referrals is paid to or from a settlement service provider under the guise of payment for marketing services where the compensation is closely and directly dependent on referrals made.
The CFPB also contends that “independently established market-rate compensation for marketing services, alone, does not suffice to ensure the legality of an MSA,” [which is the position taken in the recent CFPB enforcement action against PHH]. Notably, the CFPB does not hold explicitly that MSAs may not be established and conducted lawfully under RESPA, nor does it broadly condemn such agreements, as some in the industry urge. With the PHH matter on appeal, the Bulletin, unsurprisingly, does not offer any guidance regarding the facts and circumstances of a lawful arrangement nor describe expressly those factors that would distinguish a lawful MSA from one that is unlawful. The final word on whether the CFPB’s position that market-rate service agreements are lawful without more, or if other factors apply, and if so what those factors might be, is presently in the hands of the appeals court addressing the PHH matter.
Simply put, the Bulletin merely offers the unremarkable perspective that given the uncertainties about the contours of lawful MSAs, concerns remain about whether MSAs can be used in ways that would “evade” the requirements of RESPA, and simply recommends that parties carefully consider the legal and compliance risks, and weigh those against the benefits, arising from MSAs.
Next Steps:
CFPB will file its reply brief in the PHH matter, responding to PHH’s arguments and presumably those offered by numerous amici who have filed briefs opposing the CFPB’s position. After that the Court will rule, likely to be sometime in 2016.