Consumer Agency Sues Law Firm Over Real Estate Kickbacks

Consumer Agency Sues Law Firm Over Real Estate Kickbacks A Kentucky real estate law firm has become the target of the U.S. Consumer Financial Protection Bureau over its alleged kickbacks to real-estate agents and mortgage brokers in exchange for work.
The CFPB Thursday sued Louisville-based law firm Borders & Borders PLC, accusing it of paying illegally for real estate settlement referrals through a network of shell companies.
The CFPB alleges that the firm and its principals, Harry Borders, John Borders, Jr., and J. David Borders, violated the Real Estate Settlement Procedures Act (RESPA) by operating a network of affiliated companies to pay kickbacks for referrals of mortgage settlement business.
RESPA prohibits giving and receiving kickbacks for referrals of settlement service business involving federally-related mortgages.
“When companies pay kickbacks in exchange for referrals, it can hurt competition and inflate real estate settlement costs for consumers, while creating an uneven playing field that puts law-abiding businesses at a disadvantage,” the CFPB said in a statement.
The lawsuit is the agency’s third enforcement case involving alleged kickbacks in the real-estate industry, a sign that the relatively-new regulator is increasing its oversight of kickbacks in the real estate industry.
The lawsuit accuses Borders & Borders of operating nine joint venture title insurance companies with local real-estate agents and mortgage brokers, and splitting the profits with them.
The lawsuit states that the joint ventures did little actual work, existing as a way to pay for referrals. According to the complaint, the joint ventures did not have their own office space, email addresses, or phone numbers, and all nine companies shared a single independent contractor who was also an employee of Borders & Borders
Borders & Borders disputed the regulator’s allegations, saying that the business relationships were legitimate.
“The CFPB is out on a limb with this lawsuit,” Morgan Ward, a lawyer with Stites & Harbison PLLC, who represents Borders & Borders, told the Wall Street Journal. “It has made allegations that are simply not true from a factual standpoint, and its interpretation of the law is incorrect.”

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