Following a consent order filed by the Consumer Financial Protection Bureau in May over Real Estate Settlement and Procedures Act violations, the agency is not backing down when it comes to third party business arrangements , say K&L gates attorneys in a recent blog post.
Under the consent order, real estate brokerage JRHBW Realty, Inc. — doing business as RealtySouth (RealtySouth) and TitleSouth, LLC (TitleSouth) — was alleged to have failed to provide adequate affiliated business arrangement (AfBA) disclosures to consumers who were purchasing real estate. The CFPB says the firm concealed information from consumers and promoted its own interests by referring consumers to its family of services.
CFPB ordered RealtySouth to pay $500,000 in fines May 28 for disclosure violations.
While RESPA allows real estate companies to refer their customers to affiliated businesses, the law requires them to provide consumers an “Affiliated Business Arrangement” (ABA) disclosure that clearly states their right to shop around for a better price and that they are not required to use the affiliated company.
The CFPB also alleged that the brokerage company improperly required the use of its affiliate title insurance agency.
K&L Gates says the action by CFPB is significant because it “demonstrates that the CFPB intends to focus on all aspects of an affiliated business arrangement for RESPA enforcement, even if those [arrangements] meet the standards for bona fide entities.”
Further, the attorneys write, the agency is going after a different aspect of affiliated business arrangements than it has in the past.
“The CFPB once again has taken aim at affiliated business arrangements (“AfBAs”), only this time, it is targeting AfBA disclosures,” the attorneys write. “In prior enforcement actions, the CFPB focused on the validity of the AfBA, bringing actions against alleged “sham” AfBAs.”
Written by Cassandra DowellPrint Article