The CFPB, in 2015, issued a 5-page manual outlining the regulations for how Marketing Service Agreements (MSAs) would be enforced.

CFPB: RESPA Compliance and Marketing Services Agreements

MSAs can be legal IF done correctly. Most aren’t.

Multiple headlines indicate the CFPB and FDIC are out to nail RESPA violators. (See the bottom of this post).

After Director Richard Cordray stepped down, the CFPB was a paper tiger  (2018 and 2021). But during his tenure (2015-2017), one blockbuster prosecution in California put RESPA violators on notice in 2017.

CFPB Orders Prospect Mortgage
to Pay a $3.5 Million Fine for an Illegal Kickback Scheme  

California Gets into the Act

Prospect Mortgage also agreed with the Calif. Dept. of Business Oversight, now the Dept. of Financial Protection and Innovation, to refund 12,000 Californians totaling approximately $1.33 million.

The real estate brokerage was also fined and forfeited past commissions.

.What About Individual Violators

“They can’t collect legal taxes from illegal money.”
Al Capone – On appeal while at Alcatraz

Here’s what violators can expect:

Kickbacks are Not Tax Deductible  26 U.S. Code § 162 

Most violators write off kickbacks (ine #8“ of ”Schedule C) as advertising.

Paying AND Receiving Kickbacks are Both a Felony

After all, what self-respecting violator would pay a hefty referral fee AND pay additional taxes (state, federal, and social security) on the gross income from that referral? Only shortsighted violators.

When one violator gets audited – the paper trail of THEIR tax return(s) – If there is a fraud that may reveal other co-conspirators.

Since the IRS has no statute of limitations (for fraud), the IRS can go back to when the violator was a “paper boy/girl”.

If fraud is found, then those results are routinely forwarded to the violator’s state tax authorities for collection. The Calif. State Franchise Tax Board has 20 years to examine all returns.”

The proposed debt ceiling deal cuts part of the $80 billion IRS funding

Most of the $80 billion in the 2022 budget were already “hard” budgeted, and the clawback in the Debt Ceiling negotiation was only 21 billion dollars.

Surviving an IRS Audit 
How Undisclosed Liens – Kill Deals
The IRS Targets Realtors and Lenders – Here’s How

Where from Here?
The CFPB was a paper tiger – now, not so much! The former director Cordray was a political appointee and “in over his head” for starting up a new, vast agency (within the Treasury Dept).

“Have Gun Will Travel”

Enforcement of RESPA is a High Profile “Reformer” and Public Issue 

Currently, the Director of the CFPB is Rohit Chopra , and is a member of Wash. DC. establishment. He appears to be seeking a higher office (i.e., Secretary of the Treasury? Or Chairperson of the Federal Reserve).

CFPB Orders Wells Fargo to Pay $3.7 Billion 

In 2018, Chopra was unanimously confirmed by the U.S. Senate as Director of the FTC and later the CFPB.  He’s also a member of the Board of Directors of the FDIC and – the Financial Stability Oversight Council.

The CFPB is looking for scalps – and these headlines are proof of it.

Rocket Faces Refi Lawsuit with Fraud, TILA Claims

CFPB Investigating Quicken Loans – Rocket Homes for Soliciting Kickbacks

Are FinTech lenders shaking down real estate agents and violating RESPA?

Coming Soon: FDIC: Indicates Scrutiny of Bank-Fintech Partnerships

Coming Soon: The CFPB Issues Guidance to Protect Mortgage Borrowers
from Pay-to-Play Digital Comparison-Shopping Platforms