On October 8, 2015, following up on a series of enforcement actions against industry participants engaged in “marketing services agreements” (“MSAs”), the CFPB issued a Compliance Bulletin (No. 2015-15) entitled “RESPA Compliance and Marketing Services Agreements [“MSAs”].” The thrust of the Bulletin is again warning companies that “many MSAs necessarily involve substantial legal and regulatory risk for the parties to the agreement, risks that are greater and less capable of being controlled by careful monitoring than mortgage industry participants may have recognized in the past.”
MSAs have been around for some time now. Basically, they are contracts in which a person who is in a position to refer settlement service business (e.g., real estate brokers, title insurance agents, residential mortgage lenders) agrees to perform certain advertising and marketing services on behalf of a settlement service provider in return for compensation. The Bulletin begins by describing MSAs as agreements that are “usually framed as payments for advertising or promotional services, but in some cases the payments are actually disguised compensation for referrals.” This, in turn, could violate the Real Estate Settlement Procedures Act’s prohibition of the payment of fees or other “things of value” for the referral of settlement service business.
The CFPB’s intended message to settlement service providers appears to be that the legal and regulatory risks of being involved in MSAs (to both the companies and individuals within the companies) are simply too great and too difficult to control to justify entering into or continuing them.
Companies and individuals thinking of entering into an MSA or that are currently involved in an MSA should read our full blog post here.