Tax/Legal Quicklink:
Ask a question, make a comment

Home > Blogs > Mobility Law Blog > Posts > CFPB Targets Real Estate Kickbacks
CFPB Targets Real Estate Kickbacks
On May 17, the Consumer Financial Protection Bureau (CFPB) ordered Dallas, Texas homebuilder, Paul Taylor, to pay the federal government $118,194 in restitution for the alleged kickbacks he received for mortgage origination referrals to Benchmark Bank and Willow Bend Mortgage Company. According to the CFPB, Mr. Taylor created sham partnerships with these area lenders in order to funnel kickbacks in the form of “service agreement” fees.
The CFPB asserts that the partnership entities in question did not advertise their mortgage business to the general public and had no separate employees, office space, or distinguishing services of real substance. The only reason they are perceived to have existed was to service Mr. Taylor’s clients.
In response to the settlement the CFPB Director Richard Cordray, who has since been confirmed by the Senate, stated “Kickbacks harm consumers by hampering fair market competition and by unnecessarily increasing the costs of getting a mortgage.”  He further promised that, “The CFPB will continue to take action against schemes designed to let service providers profit through unscrupulous and illegal business practices.” 
Although federal authorities have been taking action against real estate kickback schemes for nearly 40 years, the explosive growth of the “one stop shopping” model in the years leading up to the housing bubble renewed the attention of federal regulators.  This resulted in the transfer of enforcement for RESPA, TILA, and other mortgage related federal law to the CFPB, as outlined in the Dodd-Frank Act. Almost immediately, stakeholders in the U.S. home sales and, of course, the employee mobility industries found themselves in a murky regulatory environment (a topic this blog has previously touched upon).
Yet, as the second such settlement in as many months, the CFPB’s case against Mr. Taylor (and others we have discussed) has helped establish some precedent on how the agency will interpret and enforce RESPA’s Section 8 moving forward.  Mr. Cordray and the CFPB seem to have fired a warning shot across the bow indicating that they mean to stand tough on the rules for “affiliated business arrangements.”
Posted by Sam Wardle


There are no comments yet for this post.

We welcome your comments. Log-in to post yours (creating an account is easy, if you don't have one).

  1. Use this blog only as a means of adding thoughtful commentary directly relevant to the subject under discussion.
  2. Do not use this as a blog to criticize any individual or company.
  3. Do not use this blog to do anything that will violate copyright, anti-trust or any other laws. Click here for more information about the legal constraints.