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#2262474 - 11/15/21 03:24 PM Referrals by bank employees
BSAguy Offline
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Joined: Aug 2007
Posts: 285
Kansas
Management is considering a referral program for consumer mortgage loans. They would get $50 for any loan that closes. RESPA's prohibition against kickbacks and unearned fees in 1024.14 doesn't exempt bank employees does it? I don't think their proposed program complies, but I want to make sure before I throw up the red flag.

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RESPA
#2262478 - 11/15/21 03:58 PM Re: Referrals by bank employees BSAguy
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,958
Bloomington, IN
(g) Fees, salaries, compensation, or other payments. (1) Section 8 of RESPA permits:


(vii) An employer's payment to its own employees for any referral activities.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#2269633 - 04/26/22 03:15 PM Re: Referrals by bank employees BSAguy
Compliance504 Offline
Platinum Poster
Joined: Dec 2008
Posts: 702
Tennessee
Thanks Dan...this just made me feel a whole lot better...

I just received an email that we are starting such a program...and I knew nothing about it....

I knew there were a lot of no nos with referrals.....it's good to know this is allowed.....WHEW!!!

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#2269644 - 04/26/22 06:06 PM Re: Referrals by bank employees BSAguy
Compliance504 Offline
Platinum Poster
Joined: Dec 2008
Posts: 702
Tennessee
While RESPA allows this......do the employees need to be registered MLOs to participate in a referral program....

The program they have started is for any employee on the frontline.......tellers, customer service reps....etc......

They are to ask questions to determine if the customer should be referred...then they complete a referral form....

Is there an issue here????

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#2269651 - 04/26/22 06:50 PM Re: Referrals by bank employees BSAguy
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 79,923
Galveston, TX
No, but they fall under all the compensation rules found in 1026.36.

36(a) Definitions
1. Meaning of loan originator. i. General. A. Section 1026.36(a) defines the set of activities or services any one of which, if done for or in the expectation of compensation or gain, makes the person doing such activities or performing such services a loan originator, unless otherwise excluded. The scope of activities covered by the term loan originator includes:

1. Referring a consumer to any person who participates in the origination process as a loan originator. Referring is an activity included under each of the activities of offering, arranging, or assisting a consumer in obtaining or applying to obtain an extension of credit. Referring includes any oral or written action directed to a consumer that can affirmatively influence the consumer to select a particular loan originator or creditor to obtain an extension of credit when the consumer will pay for such credit.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2269654 - 04/26/22 06:54 PM Re: Referrals by bank employees BSAguy
Compliance504 Offline
Platinum Poster
Joined: Dec 2008
Posts: 702
Tennessee
Does this mean that they have to be registered loan originators to make referrals?

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#2269656 - 04/26/22 07:04 PM Re: Referrals by bank employees BSAguy
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 79,923
Galveston, TX
No - whether they are a loan originator under the SAFE Act would determine that.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2269657 - 04/26/22 07:07 PM Re: Referrals by bank employees BSAguy
Compliance504 Offline
Platinum Poster
Joined: Dec 2008
Posts: 702
Tennessee
Oh.....I was getting confused on that.....so I need to review all the rules in 1026.26 only and make sure that everyone who is participating in the program is doing everything in that section....is that correct?

Sorry to be so dense on this.....

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#2269658 - 04/26/22 07:07 PM Re: Referrals by bank employees BSAguy
Compliance504 Offline
Platinum Poster
Joined: Dec 2008
Posts: 702
Tennessee
I mean 1026.36

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#2269659 - 04/26/22 07:12 PM Re: Referrals by bank employees BSAguy
Compliance504 Offline
Platinum Poster
Joined: Dec 2008
Posts: 702
Tennessee
Randy....1026.36(f) Loan Originator Qualifications says a loan originator needs to be registered under the SAFE Act.....

What am I not understanding.....

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#2269661 - 04/26/22 07:13 PM Re: Referrals by bank employees BSAguy
Compliance504 Offline
Platinum Poster
Joined: Dec 2008
Posts: 702
Tennessee
Never mind....it's if they are required to be registered....so then you go to the SAFE Act to see.....

I'm going in circles today....

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#2269672 - 04/26/22 07:49 PM Re: Referrals by bank employees Compliance504
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 46,958
Bloomington, IN
Let me preface this by saying you should first check with your EIC.

Previous conversation.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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#2269673 - 04/26/22 08:05 PM Re: Referrals by bank employees BSAguy
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 79,923
Galveston, TX
I think there is little doubt that if a teller refers a customer to the bank for additional direct compensation that they are a loan originator under 1026.36.

36(a) Definitions
1. Meaning of loan originator. i. General. A. Section 1026.36(a) defines the set of activities or services any one of which, if done for or in the expectation of compensation or gain, makes the person doing such activities or performing such services a loan originator, unless otherwise excluded.

1. Referring a consumer to any person who participates in the origination process as a loan originator. Referring is an activity included under each of the activities of offering, arranging, or assisting a consumer in obtaining or applying to obtain an extension of credit. Referring includes any oral or written action directed to a consumer that can affirmatively influence the consumer to select a particular loan originator or creditor to obtain an extension of credit when the consumer will pay for such credit.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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