Question: Can you give us some tips drafting an MSA for a joint advertising campaign to avoid a RESPA Section 8 issue?
Answer: As I am sure you have found, “marketing services agreements” is definitely a hot topic. It is still unclear to what extent this may be an issue for Section 8 purposes. Joint advertising in and of itself isn’t a violation of RESPA Section 8 if each party is paying the market value for their pro rata share of the advertisement, so the bank should at least pay for its share of the ad and, of course, document how and why it isn’t a referral fee. You should also make sure that there is no ‘quid pro quo’ in this arrangement. In other words, for example, an agreement that says that if the bank pays for part of the advertising space, the individual would send the bank referrals.
In 2015, 5he CFPB put out “RESPA Compliance and Marketing Services Agreements” at http://files.consumerfinance.gov/f/201510_cfpb_compliance-bulletin-2015-05-respa-compliance-and-marketing-services-agreements.pdf to delve into the issue. In 2020, the CFPB put out some FAQs at https://www.consumerfinance.gov/compliance/compliance-resources/mortgage-resources/real-estate-settlement-procedures-act/real-estate-settlement-procedures-act-faqs/#respa-section-8-marketing-services-agreements-msas to dive deeper into a few of the nuances.
Entering into, performing services under, and making payments under MSAs are not, by themselves, prohibited acts under RESPA or Regulation X. In fact, MSAs are not referenced in RESPA or Regulation X. Ultimately, the determination of whether an MSA itself or the payments or conduct under an MSA is lawful depends on whether it violates the prohibitions under RESPA Section 8(a) or RESPA Section 8(b), or is permitted under RESPA Section 8(c). The analysis under RESPA Section 8 depends on the facts and circumstances, including the details of the MSA and how it is both structured and implemented. …
An MSA is or can become unlawful if the facts and circumstances show that the MSA as structured, or the parties’ implementation of the MSA—in form or substance, and including as a matter of course of conduct—involves, for example:
- An agreement to pay for referrals.
- An agreement to pay for marketing services, but the payment is in excess of the reasonable market value for the services performed.
- An agreement to pay for marketing services, but either as structured or when implemented, the services are not actually performed, the services are nominal, or the payments are duplicative.
- An agreement designed or implemented in a way to disguise the payment for kickbacks or split charges.
Excerpt from Answer to Question 3 at RESPA Section 8: Marketing Services Agreements (MSAs): https://www.consumerfinance.gov/compliance/compliance-resources/mortgage-resources/real-estate-settlement-procedures-act/real-estate-settlement-procedures-act-faqs/#respa-section-8-marketing-services-agreements-msas
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