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#1740114 - 09/12/12 03:07 PM Section 8 problem?
Ninky Offline
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Ninky
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Our MLOs want to do a prize drawing as the "draw" to their booth at a Mortgage Originator Fest. Last year, they indicated that many other originators had some sort of prize they were raffling off.

My understanding is that any time you provide something of value in exchange for the anticipated referral of business (some of which might be business of a nature covered by RESPA), you're playing with fire. Granted, this is a random drawing, but the entire participating audience is in a mortgage related field. Am I correct that this could constitute a Section 8 violation?

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#1740121 - 09/12/12 03:13 PM Re: Section 8 problem? Ninky
rlcarey Online
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rlcarey
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As long as it is open to everyone, I would chalk it up under this exception:

(vi) Normal promotional and educational activities that are not conditioned on the referral of business and that do not involve the defraying of expenses that otherwise would be incurred by persons in a position to refer settlement services or business incident thereto;
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#1740183 - 09/12/12 05:01 PM Re: Section 8 problem? Ninky
RR Joker Offline
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However, I would think it would fall under lottery rules...doesn't sound like this is open to John Q Public to me.
Last edited by RR Joker; 09/12/12 05:02 PM.
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#1740209 - 09/12/12 05:35 PM Re: Section 8 problem? Ninky
rlcarey Online
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What "consideration" is involved to make this a lottery?
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#1740262 - 09/12/12 06:14 PM Re: Section 8 problem? Ninky
RR Joker Offline
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I have no idea...might they have to pay to be there? Buy a ticket for instance?
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#1740266 - 09/12/12 06:20 PM Re: Section 8 problem? Ninky
rlcarey Online
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What would they be giving to the bank? I don't see any direct consideration. It's like drop your business card into a fish bowl type event I am sure.
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#1740286 - 09/12/12 06:50 PM Re: Section 8 problem? Ninky
RR Joker Offline
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I was thinking of this:

Consideration is a somewhat elusive aspect of promotion law, but some generalities can be drawn. It takes either of two basic forms: monetary, in which the consumer must pay the sponsor to play (a purchase or an entry fee), or non-monetary, in which the consumer must expend substantial time or effort (completion of a detailed questionnaire or a mandatory visit to the sponsor's retail location, for example) to participate.

Someone is holding the event...if they are charging for entry, this would seem to apply. If they (the participants) had no idea there would be drawings, then it wouldn't hold up. Is it probably any kind of real risk involved? Doubtful...just throwing the thought out there.

Last edited by RR Joker; 09/12/12 06:51 PM. Reason: added ( )
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#1740357 - 09/12/12 08:14 PM Re: Section 8 problem? Ninky
Beagles22 Offline
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I think the 'entry fee' would only be in there if they were paying to get into the drawing, not teh event where the drawing is taking place. I think this type of drawing is fine as long as they aren't paying for a chance to win the prize and anyone can enter. Just MHO.
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#1740496 - 09/13/12 01:16 PM Re: Section 8 problem? Ninky
RR Joker Offline
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It reads like a very grey area...going back to whether or not the fee is 'blind' or the fact they know there will be prizes involved.

Again..just throwing it out for the sake of a 'full circle thought'...I don't see it as any kind of big risk. wink
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