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Providing yard signs to realtors to promote financing

Question: 
One of our lenders asked if he is able to provide yard signs to his realtor contacts to place on their listed properties for sale. I think it is a great marketing idea. The sign would state something to the effect of “Financing Available through “XYZ Bank” for qualified applicants. Please contact [loan officer name and phone number] or stop in at our ABC location to complete an application.”
Answer: 

They keep coming up with marketing ideas! This idea has some pros and cons to consider. Fundamentally, placing a bank advertisement in the yard of a house for sale is not a violation of RESPA as long as placement of the sign is the extent of the activity. It would violate RESPA if there were any underlying agreement between the realtor and the loan officer to compensate for the referral of business. Compensation could even be inferred from an understanding that no other lender’s signs would be allowed. So, just a sign with no strings attached is not a problem.

Now let’s look at the cons. For this, we have to consider both RESPA and UDAP. There could be an implication in the wording – “financing available from…” that this is the only financing available or that there is a special arrangement between the realtor or homeowner and the bank. Think about all the construction financing signs that promote the bank’s efforts around the community. It is reasonable to presume that a yard sign using similar terminology has a special relationship with the seller or broker. However, you could change the language to say something less connected. “XYZ bank has competitive rates and terms. Call John Doe at [phone number] for more information.” This language is more generic to an advertisement and does not imply a connection or relationship.

As for UDAP, the danger is making the implication that this is the best or the only financing available. If other options more favorable to the consumer were available, there is a concern that any implication of exclusivity is deceptive.

So the idea is clear under RESPA. But do be careful about the wording!

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First published on 04/25/2016

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