A lender at my bank has proposed paying referral fees to car dealerships when the referral results in a vehicle loan. I know RESPA prohibits referral fees involving federally related mortgage loans and there are guidelines for referral fees regarding nondeposit investment products. I haven't found any guidance regarding consumer loans. Can we do this?

Be very careful if the borrower will occupy the car as their primary residence.

Seriously, see the Federal Trade Commission Rle Concerning Preservation of Consumer Claims and Defenses. You must include prescribed language in the contract and probably lose your position as a holder in due course.

It is at 15 USC 45 (beginning on page 7161 of the FDIC Rules and Regs).

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Al Miller, CRCM
Fremont Bank (CA)
(510) 790-5825
(510) 505-5211 FAX

Opinions expressed are my own and not necessarily shared by my employer.

Auto dealers usually expect a healthy cut of the profits of any financing they touch. Unless you're paying major fees for referrals, I'd watch the credit quality of these referrals VERY carefully.