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#161247 - 02/17/04 09:40 PM
What is and what isn't a 'referral' RESPA Sec 8
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Anonymous
Unregistered
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Is it permissible to pay a referral fee to someone other than a settlement service provider, other than within one of the exceptions listed in 3500.14 (g)? For instance, can a lender pay a consumer credit counseling agency for referrals?
What is the difference between a referral, and a lead? In other words, if the non-settlement service provider is merely providing leads, and not acting to influence the borrower’s selection, is this a referral? Can’t this be paid for?
The definition of referral in the regulation requires that the referring party act to influence the selection of the referred party. I’m not sure that a list or contact information or anything of that sort would rise to the level of a “referral.” I do think that care should be taken with regard to how the compensation is calculated and paid.
Referral. (1) A referral includes any oral or written action directed to a person which has the effect of affirmatively influencing the selection by any person of a provider of a settlement service or business incident to or part of a settlement service when such person will pay for such settlement service or business incident thereto or pay a charge attributable in whole or in part to such settlement service or business. (2) A referral also occurs whenever a person paying for a settlement service or business incident thereto is required to use (see Sec. 3500.2, ``required use'') a particular provider of a settlement service or business incident thereto. (3500.14 (F))
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#161248 - 02/18/04 05:22 AM
Re: What is and what isn't a 'referral' RESPA Sec 8
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10K Club
Joined: Jul 2001
Posts: 83,425
Galveston, TX
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Simple answer - no. Quote:
What is the difference between a referral, and a lead?
If you pay them for it - there is no difference.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#161249 - 02/18/04 04:21 PM
Re: What is and what isn't a 'referral' RESPA Sec 8
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Anonymous
Unregistered
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So if you buy a pre-screened list from a CRA, you are in violation of RESPA? And CRA's are settlement service providers too!!!
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#161250 - 02/18/04 05:04 PM
Re: What is and what isn't a 'referral' RESPA Sec 8
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10K Club
Joined: Aug 2002
Posts: 47,535
Bloomington, IN
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No. You are giving the CBR a set of criteria for persons you are wanting to solicit. They in turn produce you a list of the persons meeting your criteria. They are providing a service, for a fee, but they are not referring business to you.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#161251 - 02/18/04 11:07 PM
Re: What is and what isn't a 'referral' RESPA Sec 8
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Anonymous
Unregistered
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So if I were to pay a credit counseling service for a list of people that met particular criteria on a weekly basis, and paid them based on the number of leads, or even if I paid a flat amount, I would be in violation of RESPA - But if I pay a CRA for a list of people that meed particular criteria it is a service and I do not violate RESPA??? I'm not understanding. Seems to me if either activity would come under scrutiny it would be the later, since I may use the same bureau to provide credit reports for all borrowers, a settlement service.
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#161252 - 02/18/04 11:08 PM
Re: What is and what isn't a 'referral' RESPA Sec 8
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Anonymous
Unregistered
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And neither activity seems to meet the Regulations definition of a "referral" in the first place. Does no one agree with that?
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#161253 - 02/19/04 04:05 AM
Re: What is and what isn't a 'referral' RESPA Sec 8
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10K Club
Joined: Aug 2002
Posts: 47,535
Bloomington, IN
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Quote:
So if I were to pay a credit counseling service for a list of people that met particular criteria on a weekly basis,
I think you are, as the old saying goes, "splitting frog hairs".
Here's my take, if the credit counseling service meets all the pre-screening requirements of the FCRA, and for future reference the FACT Act, then I think they could be considered a Credit Reporting Agency and you could purchase your list. The key, IMO anyways, is if the credit counseling service meets FCRA pre-screen requirements and gives the necessary "opt-out" notice.
Other thoughts, or am I off base on this reasoning?
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#161254 - 02/19/04 01:26 PM
Re: What is and what isn't a 'referral' RESPA Sec 8
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Power Poster
Joined: Dec 2000
Posts: 3,455
The Pennant Race
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I agree with Dan. Under the scenario presented, the consumer credit counseling service would be considered a consumer reparting agency under FCRA.
If the counseling service sent clients to see your loan officers for loans as aprt of their workout process, and you paid the service based on each referral, or each sale that came from the referrals, then that would be prohibited under RESPA Section 8.
_________________________
The opinions expressed here are personal and do not represent opinions of my employer.
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#161257 - 04/02/04 05:36 PM
Re: What is and what isn't a 'referral' RESPA Sec 8
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Gold Star
Joined: Mar 2001
Posts: 291
Cedar Rapids, IA,
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Reviving an old post - but isn't the "no person" referring to persons involved with a settlement service - i.e., broker, appraiser, etc? Not a customer? If you read on in your cite, it says ... "No person shall give and no person shall accept any fee, kickback or other thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of a settlement service involving a federally related mortgage loan shall be referred to any person." The customer isn't a settlement provider, so how does giving them a gift certificate become a prohibited kickback? Just curious as to your thoughts. Thanks, Sheryl
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#161258 - 04/02/04 06:58 PM
Re: What is and what isn't a 'referral' RESPA Sec 8
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Anonymous
Unregistered
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I'm not an expert at this but the bank is a settlement service provider and they would be the one giving the referral fee. So it appears to be prohibited.
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#161259 - 04/02/04 07:04 PM
Re: What is and what isn't a 'referral' RESPA Sec 8
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10K Club
Joined: Aug 2002
Posts: 47,535
Bloomington, IN
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Good answer. RESPA plainly states that the only people (unless they have performed the necessary services) a Bank may pay for a referral is its own employees.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#161260 - 04/03/04 01:53 AM
Re: What is and what isn't a 'referral' RESPA Sec 8
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Anonymous
Unregistered
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What about the websites that quote several rates from lenders and the customer picks the one they want to apply to - wouldn't that fall under this - or am I missing something? I'm assuming they are paid a fee from the lender? Just curious. (most are mortgage companies as opposed to banks - is there a difference for this reg section?)
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