The Consumer Financial Protection Bureau (CFPB) is taking action against a New Jersey title company for paying for illegal kickbacks and referrals.
The CFPB ordered Stonebridge Title Services, Inc. to pay a civil penalty of $30,000, charging that Stonebridge paid commissions to more than 20 independent salespeople who referred title insurance business to Stonebridge and offered to pay commissions of up to 40% of the title insurance premiums Stonebridge itself received.
“Kickbacks drive up the costs of getting a mortgage and put law-abiding companies at a disadvantage,” says CFPB Director Richard Cordray in a news release.
These practices violated Section 8 of the Real Estate Settlement Procedures Act (RESPA), which prohibits kickbacks and payment of unearned fees in the context of residential real estate transactions, CFPB says.
While paying commissions for referrals is allowed under RESPA if the recipient is an employee of the company that is paying the referral, and although the individuals received W-2 tax forms, CFPB found these individuals were independent contractors and not bona fide employees.
The case was referred to the CFPB by the Department of Housing and Urban Development.
The latest crack down on RESPA violations follows CFPB’s recent order for real estate brokerage JRHBW Realty, Inc. — doing business as RealtySouth (RealtySouth) and TitleSouth, LLC (TitleSouth) — to pay $500,000 in fines in May for disclosure violations.
“The Bureau will continue to enforce RESPA’s anti-kickback provisions to protect consumers and to deter unlawful activity,” Cordray says.
Written by Cassandra Dowell