Published on: July 06, 2017
BY DAWN LEWALLEN
Disclaimer: This blog is provided for informational/instructional purposes only and does not constitute the giving of legal advice or establish an attorney-client relationship. Consult with a RESPA attorney to make sure you understand and properly comply with any and all applicable laws. As a reminder, some state and local laws prohibit or otherwise restrict activities that may be permissible under RESPA.
I often get asked about using social media to advertise and digitally market a title and settlement company’s products and services. Title companies and their referral partners (i.e. lenders, realtors, builders, etc.) must have a clear understanding of Section 8 of the Real Estate Settlement Procedures Act of 1974 (RESPA) and how it affects your use of social media. Simply posting advertising and marketing on social media could subject yourself and your company or both to violations of RESPA which may be severe, ranging civil and criminal penalties, as well as reputational damage.
Simply put, you cannot give or receive a thing of value for referral of real estate settlement services business involving a federal mortgage loan under Section 8(a) of RESPA. Under Section 8(b) of RESPA, you also cannot split fees or receive fees for services that you did not actually perform or earn. In 2011, the Consumer Financial Protection Bureau (“CFPB”) took over from the Department of Housing and Urban Development as the sole regulatory and federal supervisory agency for RESPA enforcement. Subsequently, CFPB issued rules to complement the Federal Financial Institutions Examination Council’s Social Media Guidance, which defines social media as “a form of interactive online communication in which users can generate and share content through text, images, audio, and/or video” (e.g. Facebook®, Google® Plus, MySpace®, Twitter®, Yelp®, Flickr®, YouTube®, LinkedIn®, Second Life®, FarmVille® and CityVille®). CFPB also uses social media to identify problems with individual financial services company’s RESPA compliance.
From the CFPB view, social media possess increased risk of harm to consumers since it makes it easy to attract customers. Some examples of risky posts include:
While RESPA allows a title company to engage in activities that are promotional and educational, these activities may not be conditioned on or tied to referrals and these activities must not defray the expenses of anyone in a position to refer you settlement service business. Simply because you do not pay for use of social media and users may freely join and post does not mean you can use these platforms to advertise for referral partners without sharing in the costs of such advertisement based on fair market value. While RESPA does not prohibit joint advertising, one party may not pay less than its’ pro rata share or an amount in excess of fair market value for the advertisement or there may be a RESPA violation. Remember, there may be costs associated with promotion and advertisement even on social media.
So are there any social media dos and don’ts for title companies?
Advertising and marketing your title, closing and settlement financial services over social media is a great way to take reach a larger audience. Remember to take a closer look at what RESPA and your state laws require to ensure your compliance on social media platforms.