CFPB: The “New Enforcer” Targets Marketing Services Agreements

mike denious

Michael Denious
Attorney, Stoops, Denious, Wilson & Murray, PLC


In my last several articles, I have focused on the regulatory agency that is near and dear to every real estate agent’s heart, the Arizona Department of Real Estate. In many prior articles I have discussed the Arizona Department of Financial Institutions, which regulates (among others) mortgage lenders and escrow companies. Those agencies will surely be the focus of many more articles to come. The focus of this article, however, is a relatively new federal agency, established with the passage of the Dodd-Frank Act.1

The agency is the Consumer Financial Protection Bureau. The Bureau is tasked with various regulatory and enforcement missions, including among other things licensing of mortgage loan originators, enforcement of the mortgage loan “ability to repay” requirements of the DFA; and TILA and RESPA.

RESPA, the Real Estate Settlement Procedures Act, has been around a long time. Real estate licensees, mortgage lenders, escrow and title companies are generally familiar with RESPA and its “anti-kickback” provisions applicable to residential real estate transactions.

With the introduction of the Bureau into the mix, however, an increased level of scrutiny is being given to what are called “Marketing Service Agreements” as potential illegal “kickback” practices under RESPA. This potentially affects any of the various players in the residential real estate business (including real estate brokerages, title / escrow companies, mortgage lenders, appraisers) who are parties to such agreements.

The Bureau has recently released Compliance Bulletin 2015-05 (Oct. 8, 2015) (the “Bulletin”), on the subject of “RESPA Compliance and Marketing Services Agreements.” In the Bulletin, the Bureau voices a wide range of concerns about MSAs – including that “it appears that many MSAs are designed to evade RESPA’s prohibition on the payment and acceptance of kickbacks and referral fees.” (Bulletin, p. 1, ¶ 1.) And, that “MSAs are usually framed as payments for advertising or promotional services, but in some cases the payments are actually disguised compensation for referrals.” (Id., p. 2.)

In other words (this author’s words, not the Bureau’s), the Bureau does not like MSAs. Period. Like, really, really, does not like them.
At all. If you are a party to one, it is time to get it out, review it in detail with assistance of legal counsel, and do a comprehensive audit of your company’s activities to date under the MSA. You need to be prepared to document and establish every single thing, given and received, as reasonable and actual compensation for an actual and legitimate service; and not in any way based upon or connected with getting or giving referrals.3 Don’t assume that just because the MSA says you’re paying “x” dollars for “y” service that you are in the clear. If “x” dollars were paid but it is not clear whether “y” service actually occurred; or vice-versa; or if “x” dollars seems a little high or a little low for “y” service, there could be a problem (see the examples further below).

Even then, assuming the MSA to which you are a party is fully compliant or appears to be, it is not time to relax. The Bulletin goes so far as to note that even where the terms of an MSA have been “carefully drafted to be technically compliant with the provisions of RESPA,” in light of the “strong financial incentives and pressures that exist in the mortgage and settlement service markets, the risk of behaviors that may violate RESPA are likely to remain significant.” (Bulletin, pp. 4-5.) As a result, the Bureau’s determination of whether any individual MSA is or is not in compliance with RESPA is a case-by-case determination. The Bulletin states:

“In the Bureau’s experience, determining whether an MSA violates RESPA requires a review of the facts and circumstances surrounding the creation of each agreement and its implementation. The nature of this fact-intensive inquiry means that, while some guidance may be found in the Bureau’s previous public actions, the outcome of one matter is not necessarily dispositive to the outcome of another. Nevertheless, any agreement that entails exchanging a thing of value for referrals of settlement service business involving a federally related mortgage loan likely violates RESPA, whether or not an MSA or some related arrangement is part of the transaction.”

(Compliance Bulletin 2015-05, p. 2.)

Ouch. “Fact-intensive inquiry.” This means, in other words, the Bureau will “know it when it sees it.” There are no “bright line” or “safe harbor” provisions in the context of MSAs.

The Bulletin further offers examples of recent enforcement cases in the context of non-compliant MSAs:

“In the course of one investigation resulting in an enforcement action that specifically involved MSAs, the Bureau observed a title insurance company entering MSAs as a quid pro quo for the referral of business. The fees paid under the agreements were based, in part, on how many referrals the title insurance company received and the revenue generated by those referrals. From its investigation of the underlying facts, the Bureau found that the number of referrals increased significantly when MSAs existed . . .”

(Bulletin, pp. 2-3.)

Other examples include companies who:

“. . . buried the disclosure that consumers can shop for settlement services in a description of the services that its affiliate provided.”

(Bulletin, p. 3.)

“. . . did not disclose its affiliate relationship with an appraisal management company and did not tell consumers that they had the option of shopping for services before directing them to the affiliate.”

(Bulletin, p. 3.)

“[I]instead of directing their advertising and promotional services toward consumers, as MSAs purport to contemplate, some companies that frequently enter into MSAs actually direct the bulk of their advertising and promotional efforts toward other settlement service providers in an effort to establish more MSAs.”

“ . . . [kept] payments received from other providers without actually performing any contractually-obligated services.” . . . “[N]ot performing underwriting, processing, and closing services; not executing title insurance work; not carrying out marketing services; and not delivering financing to fund the origination of loans. When services promised under an MSA are not performed, but payments are being made, a reasonable inference can be drawn that the MSA is part of an agreement to refer settlement services business in exchange for kickbacks.”

(Bulletin, p. 3.)

To summarize, MSAs are presently in what I would characterize as “substantial disfavor” with the Bureau. Even in the context of well-drafted MSAs with legitimate service arrangements, parties to MSAs need to take a good hard look at their MSAs, the nature of the activities, and the disclosures given to their consumers. Along with confirming that their practices do not trigger any of the various Bureau concerns discussed in the Bulletin, parties should also make an overall “business value” decision on whether the benefits of the MSA arrangement clearly outweigh the risk of potential Bureau disfavor.



1 The full title of the act is the “Dodd-Frank Wall Street Reform and Consumer Protection Act.”

2 A Marketing Services Agreement can be a written or oral agreement.

3 The sole exception to this will be an agreement between properly licensed brokerages to provide referral fees to each other. Not, however, to or from (or in any way involving) any other sources.


Mike has represented real estate agents, developers and lenders since 2002.  Prior to that time he represented the Arizona Department of Real Estate, and the Arizona Department of Financial Institutions, as an Assistant Attorney General.  His office number is (602) 274-9417, email