Kickbacks as a RESPA Violation (2:21)
When property prices rise, kickbacks in real estate sales become infectious. Although kickbacks, often in the form of referral fees, were banned by the Real Estate Settlement Procedures Act (RESPA) in 1974, they remain under the radar in many forms and for many reasons. In fact, they continue to be one of the most pervasive RESPA violations.
Referral fees become unlawful kickbacks when received by a broker or agent who negotiated a fee-generating home sale when that broker or agent renders no service to the other provider in exchange for the referral fee beyond the referral.
Referral fees of the kickback variety are improper and attack the efficiency of the real estate market. Worse, kickbacks increase the cost of doing business, the cost of which is always passed on to buyers and sellers in the sales transactions.
Kickbacks absolutely result in the elimination of better and cheaper competition. Instead of being directed by agents to legitimate lenders, escrows, title insurers or other types of third-party service providers, buyers are referred to those businesses providing kickbacks to the broker or agent.
Kickbacks to brokers and agents representing sellers and buyers in a home sales transaction are openly undertaken in an unlawful effort by a third-party service provider to garner a larger share of the available business. This is a corrupting business policy. Legitimate operators find it difficult, if not impossible, to compete with fraud without themselves stooping to the same corrupt kickback practices.
Any person who violates RESPA may be fined up to $10,000 or imprisoned for up to one year, or both. RESPA violators are liable, to the person charged for the settlement service, for three times the amount paid for the settlement service. In addition, RESPA violations are often combined with other private lawsuit claims such as antitrust violations, exposing violators to additional civil liability. [12 United States Code §2607(d)]
Related article:
