Strategic partnerships can be highly beneficial for the parties involved. With the benefits, however, also come some risks if the venture is not compliant. Compliance is crucial to avoiding a RESPA violation and enforcement action by the Consumer Financial Protection Bureau (CFPB). During October Research, LLC’s 2014 National Settlement Services Summit (NS3) in June expert attorneys will discuss the ins and outs of complying with the laws and regulations governing affiliated business arrangements (AfBAs) and marketing services agreements (MSAs), as well as CFPB enforcement and increased regulatory scrutiny.
At the NS3 session, The Truth about Affiliated Businesses, Marketing Agreements and CFPB Enforcement, compliance attorneys Jeffrey Arouh, partner at McLaughlin & Stern LLP and Mitchel Kider, chairman and managing partner at Weiner Brodsky Kider PC, will provide in-depth information regarding AfBAs, MSAs and other strategic partnerships.
“Real estate markets are changing,” said Arouh. “There is increased competition among settlement service providers, and the industry is becoming more and more competitive. Various settlement service providers are looking for compliant ways to maintain and increase their business. This includes the creation and maintenance of strategic relationships. Joint ventures, affiliated businesses, marketing agreements, work share agreements and other strategic relationships are one way to accomplish this. Compliance with the rules applicable to these structures is an important consideration.”
RESPA Section 8(a) and (b) prohibit kickbacks for referrals of business and fee splitting if services are not performed. Section 8(c) provides certain exceptions to those prohibitions, which permit AfBAs and MSAs as long as certain, specific conditions are met. Successfully meeting those requirements is vital to having a compliant strategic partnership.
The focus of this session is to provide guidance to settlement service providers with respect to these types of relationships. Arouh and Kider will address whether AfBAs are still a viable alternative, how to set up a compliant joint venture, how to ensure MSAs are compliant and the actions the CFPB has taken in this area.
“The CFPB has made clear its desire to: 1) enforce RESPA consistently with the statute; 2) ensure that settlement service providers are not doing anything inconsistent with their obligations to the consumers; and 3) ensure that the consumer is adequately protected,” Arouh said.
Under the Dodd-Frank Act, the CFPB has extensive enforcement authority. It has the ability to file civil suits. It also has a variety of penalties available to it that include limiting the future actions of companies or individuals, disgorgement of funds and civil penalties that could reach up to $1 million a day.
The agency doesn’t discriminate on the size of the companies it investigates. Small or large, if a company is under the CFPB’s jurisdiction it needs to know the rules and follow them. The bureau has already filed enforcement actions related to AfBAs, and there are indications that the agency is currently investigation MSAs.
This program will provide helpful compliance information to any settlement service provider that currently maintains an AfBA or MSA or is interested in entering into such a relationship.
Arouh is one of the nation’s leading RESPA and settlement services attorneys. He has practiced in the real estate, title insurance, settlement services and executive relocation areas for several years and represents developers, title insurance agencies, title insurance underwriters, lenders, real estate brokers and appraisers among others.
Kider, who has been a practicing attorney for 30 years, has represented banks, mortgage companies, homebuilders, credit card issuers and other financial service companies in a broad range of litigation and regulatory and compliance matters. He represents clients in investigative and enforcement actions before HUD, the Department of Veterans Affairs, the Department of Justice, the Federal Trade Commission, Ginnie Mae, Fannie Mae, Freddie Mac, and various state and local regulatory authorities and attorneys general offices.
Click here to get more information about the 2014 National Settlement Services Summit in New Orleans June 9-11, including the agenda and a list of speakers. You can register for the Summit online or click here to get information about how to register via mail, fax or phone.