October Research, LLC., will host a webinar “Life After RESPA: Addressing Modern Practices the Rule Missed” on July 9 beginning at 2 pm ET. Speakers Ken Trepeta, president and executive director of RESPRO, and Rich Andreano, senior counsel at Ballard Spahr, will address issues that include exemptions to the rule’s kickback and referral fee prohibitions and when activities outside RESPA are still subject to anti-inducement laws, among others.
RESPA News sat down with Trepeta and Andreano ahead of the webinar to get their responses to some key issues.
Regulators have increasingly viewed RESPA through the lens of anti-steering. How does this perspective affect common business practices such as online recommendations, preferred-provider relationships and digital marketing?
“The approach of regulators to treat RESPA as an anti-steering statute creates the need to carefully assess common business arrangements when a settlement service provider is involved, particularly given the broad view of regulators regarding what constitutes a referral. Recommendations of a particular provider, or identifying a provider as a preferred provider, are viewed by regulators as referrals. As a result, care must be taken to assess if a regulator may deem that a thing of value is being provided for the referral activity.
“Digital marketing can be different if it is clearly structured as a marketing/advertising arrangement and not a referral arrangement. The Consumer Financial Protection Bureau (CFPB) has indicated that whether a particular activity is a referral or a marketing/advertising service is a fact-specific question for purposes of analysis under RESPA Section 8. Clearly identifying paid marketing/advertising arrangements as such to consumers can be helpful.”
RESPA was written long before today’s internet and social media environment. How do its core principles apply to modern practices such as online reviews, social media posts, likes and digital referrals?
“Years ago, when the Department of Housing and Urban Development (HUD) had responsibility for RESPA, a HUD official observed that the internet created many interesting dynamics for RESPA Section 8 purposes for which there was no guidance. The official indicated that HUD would move forward to provide guidance. However, soon after that, Dodd-Frank was enacted. With RESPA moving from HUD to the CFPB, HUD did not move forward with providing the guidance, nor has the CFPB.
“Had the internet technology of today existed in 1974 when RESPA was adopted, Section 8 likely would have looked a lot different than it does today, particularly in terms of what is a referral and exemptions from the kickback and fee-splitting prohibitions. A sensible view of RESPA Section 8, which was adopted in the context of title agencies paying cash to real estate agents for referrals of business, would allow for much of the activity that occurs on the internet. However, with the overly broad view taken by regulators that RESPA is an anti-steering statute, the industry must be cautious.”
Does the free or discounted exchange of consumer data, CRM platforms, or proprietary software function as an illegal "thing of value" given in exchange for ongoing business referrals?
“Back when movie theater tickets were printed on paper, a HUD official commented that not only is the ticket a thing of value, the paper that the ticket is printed on is a thing of value. In short, regulators take a broad view of what constitutes a thing of value. As a result, a regulator likely would take the view that providing these items for free or below cost in return for referrals of settlement service business would present an issue under RESPA Section 8.”
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