Saturday, October 26, 2013

Nine title companies run by one employee in one office?

A Kentucky law firm is in the crosshairs of the Consumer Financial Protection Bureau for its operation of nine title insurance companies.
The bureau sued the six-lawyer Louisville firm, Borders & Borders, on Thursday, claiming the title companies were used to pay kickbacks for work referrals, report the Wall Street Journal Developments Blog, the Louisville Courier-Journal, and the National Law Journal.
The suit (PDF) alleges the law firm paid for referrals by operating nine joint-venture title insurance companies with local real-estate agents and mortgage brokers. The nine companies didn’t have separate office space and were operated by one law firm worker, the suit says. The CFPB claims the split profits for title work were illegal kickbacks that violated the Real Estate Settlement Procedures Act.

But principals at the firm publicly disagreed with the CFPB's findings.
"This case concerns a number of title agencies that were affiliated with our firm several years ago," Borders & Borders said in a statement. The firm calls the title agencies 'affiliated business arrangements,' and says they are "expressly allowed by RESPA."
"There were disclosures to every consumer, as required by the statute, and in every instance in which title insurance was issued through the agencies, the consumer approved," the law firm said. "We note that the CFPB does not allege that there was any consumer harm, or that any consumer paid a penny more for title insurance issued through the agencies in question. Instead, the CFPB is trying to enforce its own version of rules that are not only not in the statute but which have been declared unconstitutional by a United States District Court. We are very disappointed by the CFPB’s conduct, and we will certainly defend the case vigorously."
The Department of Housing and Urban Development kicked off the initial investigation, prompting Borders to shut down its joint ventures. The case was then moved to the CFPB in July 2011 when the bureau obtained RESPA enforcement authority.

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