CFPB’s RESPA Radar Pointed at Affiliated Business Arrangements

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Have you been wondering whether the Consumer Financial Protection Bureau (“CFPB”) is focusing its enforcement efforts on the Real Estate Settlement Procedures Act (“RESPA” or “Act”)? After the public announcement of two RESPA-related consent orders, the answer is yes. And, given the alleged facts of the most-recent settlement, that focus is on a familiar topic – affiliated business arrangements.

After amendments to RESPA in 1983, affiliated business arrangements became legal under RESPA. That meant that affiliated business arrangements structured in accordance with Section 8 of RESPA could make dividend or profit distributions to their owners that referred settlement service business without violating the Act. The U.S. Department of Housing and Urban Development (“HUD”), which was responsible for RESPA until July 2011, later issued a Statement of Policy to require affiliated business arrangements to be bona fide providers of settlement services and to protect against “sham” affiliated business arrangements designed to circumvent RESPA’s anti-kickback provisions. Given HUD’s concern over the creation of “sham” affiliated businesses under RESPA, affiliated business arrangements soon became a popular target for enforcement actions.

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