RealtySouth, the state’s largest residential real estate company, will pay $500,000 to settle claims that it improperly steered homebuyers to use the company’s own title insurance and closing agency. RealtySouth stipulated and consented to the issuing of the consent order. The settlement comes after the Consumer Financial Protection Bureau (CFPB) identified violations of the Real Estate Settlement Procedures Act (RESPA).
The CFPB ordered RealtySouth to pay a $500,000 civil penalty to the bureau within 10 days of the consent order’s effective date, which is May 28. Specifically, the consent order states:
RealtySouth strongly encouraged its agents and, in certain instances told them they were required to use, RealtySouth’s family of services, in particular, TitleSouth.
RealtySouth and TitleSouth are wholly owned by the same company, HomeServices of America, an affiliate of Berskshire Hathaway. The consent order further states that “from March 2011 until May 2012, RealtySouth had a preprinted purchase contract that explicitly directed title and closing services for which consumers would pay a charge to TitleSouth.” In 2012, a new contract included a checkbox list to allow customers to choose between “TitleSouth” or “Other” when selecting the source of the title insurance policies. Although RealtySouth did include the required “Affiliated Business Arrangement Disclosure Statement” in its contracts, the consent order states that the format did not meet RESPA requirements and it “included marketing statements touting the benefit and value of the affiliated entities.”
The CFPB ordered RealtySouth to make changes to its ABA Disclosure Statement in keeping with RESPA. The consent order said RealtySouth did so after it was informed of the violations. The consent order also commands that RealtySouth include training of its agents within the next 30 days to “emphasize that agents cannot require the use of any affiliate in real estate transactions.” While having an affiliated title company isn’t illegal, specific steps have to be taken to make consumers aware of the affiliation, the estimated costs and their freedom to shop around for another company to provide that service. Richard Cordray, Director of the CFPB, said in a statement:
Disclosures give consumers the power to make informed financial decisions, and buying a house is among the biggest financial decisions most people ever make. The Consumer Bureau will continue to take action against companies that attempt to modify disclosures and keep consumers in the dark.
RealtySouth and TitleSouth agreed to the issuance of the order. The two companies agreed that “the facts set forth in (the order’s findings and conclusions) shall be taken as true.” If you need additional information on this subject, contact Rebecca Gilliland, a lawyer in our Consumer Fraud Section, at 800-898-2034 or by email at Rebecca.Gilliland@beasleyallen.com.
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