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 Bulletin can be accessed by clicking here.) 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.”
Background. 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.
RESPA § 8(a) prohibits the payment of fees or other “things of value” for the referral of settlement service business. Notwithstanding RESPA § 8(a), many industry participants have long believed that MSAs could be justified so long as the advertising and marketing services were bona fide, non-duplicative and actually performed, and the compensation paid for the services did not exceed their reasonable market value – even if referrals were involved. This belief was based on § 8(c)(2) of RESPA (“Nothing in [RESPA § 8] shall be construed as prohibiting … the payment to any person of a bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed”), and § 14(g)(iv) of Regulation X (“Section 8 of RESPA permits … [a] payment to any person of a bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed”).