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CFPB Provides Guidance on RESPA Compliance and Marketing Services Agreements
By Latif Zaman

Mortgage lenders have used marketing services agreements ("MSAs") for years and many industry veterans consider them a fairly standard industry practice. However, the Consumer Financial Protection Bureau has scrutinized MSAs the past few years and charged a number of lenders with violations of the Real Estate Settlement Procedures Act stemming from MSAs. These enforcement actions, in the absence of express guidelines and rules regarding MSAs, have created a great deal of unrest and uncertainty in the mortgage industry. This negative attention from the Bureau has already persuaded some major mortgage lenders to stop using MSAs altogether. In general, the mortgage industry has waited for the Bureau to elucidate its position on MSAs, and to provide guidance on how to design RESPA-compliant MSAs. The Bureau partially obliged, taking a seemingly harsh stance against MSAs, but without getting into the specifics of creating a Bureau-approved MSA.

On October 8, 2015, the Consumer Financial Protection Bureau issued a compliance bulletin regarding RESPA compliance and the use of MSAs. The bulletin pointedly notes in its first paragraph that the "Bureau has received numerous inquiries and whistleblower tips from industry participants describing the harm that can stem from the use of MSAs, but has not received similar input suggesting the use of those agreements benefits either consumers or industry."

The bulletin proceeds to remind mortgage industry participants that the use of MSAs may pose a risk of noncompliance with RESPA's prohibition on the payment and acceptance of kickbacks and referral fees. The bulletin specifies that such risks are "greater and less capable of being controlled by careful monitoring than mortgage industry participants may have recognized in the past." The bulletin notes that Bureau enforcement actions for RESPA violations have cost companies and individuals over $75 million in penalties, and that payment of improper kickbacks and referral fees has been the basis of almost all of those actions. The bulletin provides examples of investigations that the Bureau has conducted involving illegal kickbacks and referral fees. The bulletin states that while MSAs are usually framed as payments for advertising or promotional services, in some cases the payments are actually disguised compensation for referrals.

The bulletin explains that determining whether an MSA violates RESPA is a fact-intensive inquiry into the creation of each agreement and its implementation, and that while some guidance may be found in the Bureau's previous enforcement actions, the outcome of one matter is not necessarily dispositive of the outcome of another.

The bulletin states that "a more careful consideration of legal and compliance risk arising from MSAs would be in order for mortgage industry participants generally. This review is especially warranted insofar as whistleblower complaints about MSAs that violate RESPA have been increasing. The Bureau intends to continue actively scrutinizing the use of such agreements and related arrangements in the course of its enforcement and supervision work."

Latif Zaman is an associate in the Maryland office of Hudson Cook, LLP. Latif can be reached at 410-782-2346 or by email at

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