Business Law

CFPB Brings Action Against Louisville Law Firm for Alleged Illegal Real Estate Kickbacks

On October 24, 2013, the Consumer Financial Protection Bureau (CFPB) further demonstrated how it is taking up the Department of Housing and Urban Development’s (HUD) mantle as the defender and enforcer of the Real Estate Settlement Procedures Act (RESPA).  The CFPB filed a complaint against the Louisville, Kentucky-based law firm Borders & Borders, PLC and its principals, alleging that it had been utilizing a network of sham joint-ventures to disguise the payment of kickbacks to the owners of local real estate and mortgage brokerages in exchange for referrals.  The action was a result of a HUD investigation.  The CFPB complaint alleged that the nine joint ventures setup between Borders & Borders and these real estate and mortgage brokerages were not bona fideentities because, inter alia:

  1. none had their own office space, email address, or phone number;

  2. all nine joint-ventures were manned by the same sole employee, who was also an employee of Borders & Borders;

  3. None issued title insurance to homebuyers not referred by the joint-venture partners to and by Borders & Borders;

  4. None advertised to attract other business;

  5. None performed substantive title research work.  This was all performed by the staff at Borders & Borders.

Section 8 of RESPA prohibits, among other things, the giving and receiving of “any fee, kickback or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.”  12 U.S.C. § 2607(a).  The CFPB is seeking disgorgement of all ill-gotten proceeds from the referral arrangement, and an injunction to prevent Borders & Borders from further violating RESPA. 

While RESPA does provide a safe harbor for certain types of referrals and joint ventures conducted through “affiliated business arrangements”, as described in 12 U.S.C. § 2607(c)(4), the CFPB alleged that the joint ventures established by Borders & Borders did not qualify because, among other things, the returns provided to the joint venture owners did not constitute bona fide returns on ownership interest in the entities.  In some jurisdictions, courts have determined that a violation of RESPA’s affiliated business arrangement provisions constitutes an independent violation of Section 8 of RESPA.  See, e.g., Bolinger v. First Multiple Listing Service, Inc., 2012 WL137883 (N.D. Ga. Jan 18, 2012) (available at and Minter v. Wells Fargo Bank, 274 F.R.D. 525, 539, 545 (D. Md. 2011) (available at  Although the CFPB complaint alleges general violations of section 8 of RESPA, it will be interesting to see whether the CFPB further advances the argument that violation of the affiliated business arrangement provisions constitute an independent violation of RESPA.

For more information, please contact Neil Peretz, General Counsel at BillFloat, Inc. ( or Ryan Ito (, Associate, Severson & Werson, P.C.

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