Respa Compliance and Marketing Services Agreements
RESPA Compliance and Marketing Services Agreements: What You Need to Know
If you work in the real estate industry, you`re likely familiar with the Real Estate Settlement Procedures Act (RESPA), which regulates the financial relationships between homebuyers, sellers, and settlement service providers. But did you know that RESPA compliance also extends to marketing services agreements (MSAs)?
MSAs are contracts between settlement service providers and marketing companies, in which the marketing company agrees to market the services of the settlement service provider in exchange for payment. While MSAs can be a valuable tool in promoting a settlement service provider`s business, they must be structured carefully to avoid running afoul of RESPA regulations.
Here are some key things to keep in mind when structuring an MSA:
1. Ensure that the services provided by the marketing company are bona fide.
Under RESPA, MSAs must involve “bona fide” services. This means that the marketing company must actually provide valuable services that help promote the settlement service provider`s business, rather than simply acting as a middleman for payments. Examples of bona fide services might include website design, social media management, or direct mail campaigns. It`s important to document the services provided by the marketing company in detail, to demonstrate their value.
2. Avoid tying payment to the volume or value of referrals.
One of the key provisions of RESPA is that settlement service providers cannot pay or receive anything of value in exchange for the referral of business. This means that MSAs cannot be structured as a payment for referrals. However, settlement service providers may still pay marketing companies for bona fide services, as long as the payment is reasonable and not tied to the volume or value of referrals.
3. Ensure that the MSA is disclosed to consumers.
Another important RESPA requirement is the disclosure of business relationships between settlement service providers. This means that if a settlement service provider has an MSA with a marketing company, that relationship must be disclosed to consumers. This can typically be done through a written disclosure form that is provided to the consumer at the time of closing.
4. Be prepared to demonstrate compliance.
Finally, it`s important to keep detailed records of all MSA transactions, including documentation of the services provided and the payments made. If you are ever audited by a regulatory agency, you will need to be able to demonstrate that your MSA was structured in compliance with RESPA regulations.
In conclusion, MSAs can be a valuable marketing tool for settlement service providers, but they must be structured carefully to avoid running afoul of RESPA regulations. By following these guidelines and staying up-to-date on regulatory changes, settlement service providers can ensure that their MSAs are both effective and compliant.
