Has anyone been offered an arragement from a mortgage lender that they will pay you a "Marketing fee" for advertising their product to your customers. Said Marketing Fee will then be adjusted periodically based on the success of your advertising?

Is anyone out there using an arrangement such as this? If so, have your examiners said anything, especially if the adjustments appear too closely related to the volume of referred apps?

Inquiring minds want to know! (Okay, okay - marketing wants to know!)

I had a boss once that challenged me to 'ask 1000 questions'. Good advice that's served me well, and I'd definitely take that approach in this case.

It sounds like you'd be referring a settlement service (the mortgage application) - the next question is, are you doing at least 5 things from the magic list? Maybe your activity qualifies you for payment as a mortgage broker.

If not, I infer that you either don't do mortgage lending, or don't do mortgage lending of this type. Otherwise, why refer business out of the bank?

Also, if the bank is going to be used as a form of media for advertising (maybe they advertise in your newsletter, or on your website, or in your statement stuffers), it might be better to set a flat fee that isn't tied to any volume. Get the agreement in writing, so you can wave it at the examiners who try to cry 'foul'.

Finally, I wouldn't sign off on something like this until after a long heart-to-heart with my EIC. Prior to that, you should have a really good grasp of how this program would operate. (That goes back to the 1000 questions...)

On the surface, the concept isn't passing my own personal 'smell test', but I really don't have enough information to offer more than the above speculation. For what it's worth, I think you're asking the right questions up front.

Thanks Bart - that was essentially my reply. I just like to make sure I'm not out of line with what is perhaps an accepted practice. The company is saying they use this arrangement with many other banks with no problem. Yeah - and I can drive 80 on the freeway and not necessarily get a ticket!

My initial reply was if they have a written opinion from HUD blessing their particular arrangement, then I'll be more inclined to accept it. Otherwise, I'm not in the mood to play RESPA Roulette with a Section 8 bullet!

Ditto. This reeks of a Section 8 violation! And the favorite line is "everyone else is doing it..." Don't go there!

There is a marketing and advertising exception in Section 14 of Regulation X. It is unusual for an advertiser to be paid on a success basis, but not entirely unheard of. I agree that this is a very grey area. HUD has rendered informal opinions that allow the sale of customer lists for solicitations, but the fees approved were not success based, and the sale of a list is not necessarily a "referral" since the purchaser of the list is doing all of the soliciting (the seller does not take action to direct the consumer to use the purchaser's services).

The sale of a list of customers referred to in Howard's posting of course introduces the spectre of Regulation P. The sale of the list (if by a bank) would have to fit into one of the exceptions or be subject to opt-out rules.

Why am I reminded of the switching mechanism on train tracks? Perhaps because I rode the train today? I share John's Reg P concern. It is something we'll have to check almost every time marketing and referrals are involved.

I agree on the privacy policy issues. However, you could put a disclosure in the privacy policy that you can share information with the world, and most borrowers would never care let alone read it. I would be interested to see statistics for opt outs by deposit customers and borrowing customers. I would guess that the deposit customers would opt out much more often.

The ones that are really frustrating are those that write to opt out of something they cannot opt out of -- affiliate experiential data sharing, for example. And then they get miffed when you don't write back to acknowledge and confirm their request.

Or the "I don't want you to ever share any of my personal information with anyone for any purpose, no matter what" types. I've wanted in the worst way to write back, "OK, we won't send your name and address to our outsourced data processor, so your account will be shut down, and we won't send info to the credit bureau, so you won't get loans," and so on.

Life would be so much easier if GLB only prohibited the SALE of customer data to third parties. That would have addressed the major abuses from an unnamed northern midwest bank that helped stir up all this nonsense.

John, you are much more restrained than I. I had to really fight hard not to tell a few folks "If you really want that much privacy, then you need to be homeless!" With county records of property ownership, ATM network information, check clearing, IRS information, etc., etc., homeless folks are the only TRULY ANNONYMOUS people on the planet.