The Consumer Financial Protection Bureau (CFPB ) rescinded Bulletin 2015-05, RESPA Compliance and Marketing Services Agreements on October 7, 2020, stating that the bulletin did not provide the regulatory clarity necessary for compliance with the Real Estate Settlement Procedures Act (RESPA) and Regulation X. The CFPB also issued frequently asked questions (FAQs) to clarify when marketing services agreements (MSAs) are acceptable under RESPA.
MSAs are agreements that commonly involve an arrangement where one person agrees to market or promote the services of another and receives compensation in return. An MSA can involve either settlement service providers or third parties. For example, an MSA exists when a mortgage loan originator agrees to market or promote a real estate agent’s services in return for compensation.
Adopted while Richard Cordray was Director of the CFPB, Bulletin 2015-05 stated that it appears many MSAs are designed to evade RESPA's prohibition on the payment and acceptance of kickbacks and referral fees. In contrast to the Bulletin, the CFPB's recent FAQs affirmatively stated that MSAs are not, by themselves, prohibited under RESPA or Regulation X. The FAQs further recognize that MSAs are not referenced in RESPA or Regulation X. Instead, the analysis to determine whether an MSA is permissible depends on the facts and circumstances—including the details of the MSA, and how it is structured and implemented. The CFPB emphasized that it will look to the actual conduct in determining whether there is a RESPA violation, not to the four corners of the MSA.
Relying on the exception in 12 CFR § 1024.14(g)(1)(iv), the CFPB explained that an MSA which provides for payment for marketing services will not violate RESPA as long as the payments are reasonably related to the value of services actually performed. For example, an agreement is prohibited if it is structured or implemented to provide payments based on the number of referrals received. However, if the MSA reflects an agreement for payment for bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed, the MSA does not violate RESPA. The CFPB specifically states that RESPA does not prohibit payments under MSAs if the purported marketing services are actually provided, and if the payments are reasonably related to the market value of the provided services only. Note that under Regulation X, the value of the referral—i.e., any additional business that might be provided by the referral—cannot be taken into consideration when determining whether the payment has a reasonable relationship to the value of the services provided. 12 CFR § 1024.14(g)(2). See also 12 CFR § 1024.14(b).
Overall, an MSA is, or can become, unlawful if the facts and circumstances show that the MSA as structured, or the parties' implementation of the MSA—in form or substance, and including as a matter of course of conduct—involves:
- an agreement to pay for referrals;
- an agreement to pay for marketing services, but the payment is in excess of the reasonable market value for the services performed;
- an agreement to pay for marketing services, but either as structured or when implemented, the services are not actually performed, the services are nominal, or the payments are duplicative; and/or
- an agreement designed or implemented in a way to disguise the payment for kickbacks or split charges.
By rescinding Bulletin 2015-05 and issuing new FAQs, it is clear that the CFPB has softened its stance on MSAs for now. In general, settlement service providers and third parties may enter into MSAs without expecting a presumption of illegality by the CFPB.