CFPB Rescinds RESPA Section 8 Compliance Bulletin

In another victory for Mortgage Bankers Association member advocacy, the Consumer Financial Protection Bureau on Oct. 7 rescinded a controversial Compliance Bulletin on prohibition of kickbacks and referral fees under the Real Estate Settlement Procedures Act.

Compliance Bulletin 2015-05, RESPA Compliance and Marketing Services Agreements, was intended to spell out to participants in the mortgage industry of prohibition on kickbacks and referral fees under RESPA (12 U.S.C. 2601, et seq.) and describe substantial risks posed by entering into marketing services agreements (MSAs).

“Consistent with the rescission, the Bulletin has no force or effect,” The Bureau said. “RESPA is unchanged and remains in force and effect.”

The Bureau determined that Compliance Bulletin 2015-05, RESPA Compliance and Marketing Services Agreements, “does not provide the regulatory clarity needed on how to comply with RESPA and Regulation X and therefore is rescinding it. The Bureau’s rescission of the Bulletin does not mean that MSAs are per se or presumptively legal. Whether a particular MSA violates RESPA Section 8 will depend on specific facts and circumstances, including the details of how the MSA is structured and implemented. MSAs remain subject to scrutiny, and we remain committed to vigorous enforcement of RESPA Section 8.”

Section 8 of RESPA imposed two basic prohibitions: Section 8(a) prohibits the giving or acceptance of “any fee, kickback, or thing of value” for the referral of settlement service business in any RESPA-covered transaction; and Section 8(b) approaches the issue in a slightly different way. Section 8(b) prohibits the giving or acceptance of any portion of a fee or price paid by the purchaser of a settlement service other than for services actually performed in a RESPA-covered transaction.

On Sept. 11, MBA and a number of industry trade groups asked the CFPB to withdraw the Bulleting and replace it, for the time being, with a reassertion that the real estate industry should follow long established best practices under RESPA and associated case law.

“The Bulletin is strikingly inconsistent with the position recently articulated in the Bureau’s Compliance Aids policy statement that ‘providing clear and useful guidance to regulated entities is an important aspect of facilitating markets that serve consumers,’” the letter said. “The Bulletin doesn’t clarify how entities can structure an MSA that complies with RESPA’s requirements. Instead, the Bulletin focuses on the difficulty of creating a compliant MSA and the risk associated with non-compliance, describing both in such a way as to create significant confusion among entities on how to structure MSAs. Thus, rather than ‘facilitating markets that serve consumers[,]’ the Bulletin achieved the opposite. Finally, while the Bureau may or may not have the present intention to interpret RESPA in this fashion, this Bulletin remains the Bureau’s statement on the matter—and is viewed as such by some state regulators in their examinations of their regulated entities.”