Firm Fined for Steering Consumers to Affiliate Company

RealtySouth, the largest real estate firm in Alabama, was ordered to pay arnhalf-million dollar penalty this week for failing to provide consumers withrnadequate transaction disclosures.  ThernConsumer Financial Protection Bureau (CFPB) said that the firm providedrnpreprinted purchase contracts to buyers preparing to make an offer on arnhome.  The forms either explicitlyrndirected or suggested that title and closing services be conducted by TitlernSouth, LLC, an affiliated company owned by the same holding company that ownsrnRealtySouth.</p

CFPB said the forms could leave consumers unaware of their rights to choosernservice providers during the home-buying process and charged that the companyrnviolated the Real Estate Settlement and Practices Act (RESPA), which protectsrnconsumers by prohibiting kickbacks for referrals of real estate settlement services.</p

“Disclosures give consumers the power to make informed financial decisions,rnand buying a house is among the biggest financial decisions most people everrnmake,” said CFPB Director Richard Cordray. “The Consumer Bureau will continuernto take action against companies that attempt to modify disclosures and keeprnconsumers in the dark.”</p

CFPB said that while RESPA does not prohibit referrals by real estate companiesrnto their affiliated businesses it does require that they provide consumers anrn”Affiliated Business Arrangement” (ABA) disclosure that clearly states theirrnright to shop around for a better price and that they are not required to usernthe affiliated company. The disclosure RealtySouth gave consumers did notrncomply with the law; it did not properly highlight consumers’ rights, and thernrequired language was buried in a section of text that also made marketingrnclaims about the company’s prices.  </p

Under the terms of today’s consent order, RealtySouth will pay a civilrnpenalty of $500,000, ensure that its disclosures comply with RESPA, and ensurernthat its training materials emphasize that its agents cannot require the use ofrnaffiliates.  RealtySouth changed its disclosure forms immediately afterrnbeing contacted by the CFPB.

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