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RESPA & gift certificates
Question: Would it violate RESPA if, at closing, the bank were to provide borrowers with gift certificates to a home improvement center?
Answer: Although this could look like some sort of kickback, the action wouldn't violate RESPA unless the home improvement center was a settlement service provider. On the other hand, if the company is affiliated with the financial institution somehow - such as owned by a director - there could be serious questions about the propriety of the relationship.
On the other hand, there is some reputation risk here. First, there is the fact that the lender appears to be endorsing the home improvement center. What if the customer isn't satisfied with the work or product? Second, this does look like someone is paying for this somewhere. While customers may be delighted to receive a gift basket at closing, they may be more concerned about where the money is coming from.
Copyright © 2002 Compliance Action. Originally appeared in Compliance Action, Vol. 7, No. 5, 5/02
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