Compensation: How Much and When?

NDIP isn't RESPA. You may pay staff for referrals to the NDIP sales team. However, there are several conditions or restrictions on compensation. First, the compensation must be reasonable. Second, the compensation should be at a level to compensate staff for making referrals but not be so great that it over-motivates referrals and thereby creates a conflict of interest.

To achieve this balance, the agencies recommend that the referral fee be nominal ($5 to $10 per referral). Most importantly, the referral fee must not be conditioned upon a sale. The compensation is only for the referral. And remember, anyone making a referral must be trained in the proper techniques.The most important way to measure the compensation structure, according to FDIC, is by whether it leads to suitable customer purchases or results in recommendations that are not suitable.

Copyright © 1997 Compliance Action. Originally appeared in Compliance Action, Vol. 2, No. 16 & 17, 12/97