The Consumer Financial Protection Bureau (CFPB) has ordered the largest real estate firm in Alabama to pay $500,000 for practices the CFPB says concealed information from consumers and promoted its own interests.
The CFPB ordered RealtySouth to pay the fines Wednesday.
The bureau’s investigation revealed practices that illegally benefited TitleSouth LLC, an affiliated company owned by the same holding company that owns RealtySouth, the CFPB says in a news release. RealtySouth’s preprinted form purchase contracts, which its agents provided to homebuyers preparing to make an offer on a home, either explicitly directed or suggested that title and closing services be conducted by its affiliate, TitleSouth.
The Bureau charged that RealtySouth violated the Real Estate Settlement and Practices Act (RESPA), which protects consumers during the home-buying process by prohibiting kickbacks for referrals of real estate settlement services.
“Disclosures give consumers the power to make informed financial decisions, and buying a house is among the biggest financial decisions most people ever make,” says CFPB Director Richard Cordray in the same release. “The Consumer Bureau will continue to take action against companies that attempt to modify disclosures and keep consumers in the dark.”
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 disclosure RealtySouth gave consumers did not properly highlight consumers’ rights, and the required language was buried in a section of text that also made marketing claims about the company’s prices, the CFPB says.
In addition to the fine, RealtySouth will have to ensure that its disclosures comply with RESPA and its training materials emphasize that its agents cannot require the use of affiliates.
Written by Cassandra Dowell