CFPB Files Brief In Long-Running RESPA Case

CFPB U.S. Supreme Court Mortgage Origination RESPA Title Insurance

On October 30, the CFPB filed an amicus brief in Edwards v. First American, a long-running case concerning the anti-kickback provisions of the Real Estate Settlement Procedures Act (RESPA) that is currently pending in the U.S. Court of Appeals for the Ninth Circuit. The case revolves around allegations that the defendant-title insurer purchased interests in title insurance agencies in order to secure referrals of insurance business from those agencies. The consumer-plaintiffs alleged that these arrangements constituted illegal kickback agreements under Section 8 of RESPA, even though they did not suffer any actual damages.

At issue before the Ninth Circuit is whether a private plaintiff must specifically allege an overcharge in order to have standing under RESPA. The district court held that (i) to constitute a “thing of value” exchanged for a referral in violation of RESPA, the putative class must show that the defendant overpaid for the interests in the title insurance agencies in exchange for referrals of settlement service business, and (ii) all members of the class must prove not only that they were referred to the title company but also that the referral influenced their selections of a settlement service provider.

The Bureau disagrees that proof of an overpayment for the interests in the title companies is required to establish that the referrals violated RESPA.  Instead, the CFPB’s brief argues that the “thing of value” exchanged includes the value of the transaction itself and that the plaintiffs need only show that the defendant-company purchased the ownership interests in order to ensure the referral of future settlement business, even if the price paid was fair. The CFPB also disputes the district court’s conclusion that violations require proof of referral and influence on a plaintiff-by-plaintiff basis, arguing that under the plain language of the statute, the level of influence on a consumer is irrelevant in cases of explicit referrals.

The CFPB filed an amicus brief in the same case in October 2011, when a separate standing issue was appealed to the U.S. Supreme Court.  The Supreme Court heard the case but declined in June 2012 to issue an opinion, stating that certiorari was “improvidently granted.”