Marketing Services Agreements: Reinterpreting the Wheel

Marketing services agreements (“MSAs”) have been standard mortgage industry practice for decades. While Section 8 of the Real Estate Settlement Procedures Act (“RESPA”) prohibits entities and individuals from giving or receiving “any fee, kickback, or thing of value” pursuant to an agreement to refer settlement service business to any person, it also contains a safe harbor provision which appears to permit MSAs as long as the compensation paid is bona fide and in exchange for services performed (“nothing in this section shall be construed as prohibiting . . . the payment to any person of a bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed”) .

Federal regulators have historically interpreted Section 8 to permit MSAs, under which two or more entities—typically settlement service providers—enter into an arrangement whereby one company is paid to advertise (or provide other non-referral marketing services for) another company’s settlement services to its customers or the general public. Despite widespread usage in the industry and historical acceptance of MSAs by federal banking agencies, recent Consumer Financial Protection Bureau (“CFPB”) enforcement activity has led to new concerns about their viability going forward.