RealtySouth, the largest real estate firm in Alabama, was ordered to pay a
half-million dollar penalty this week for failing to provide consumers with
adequate transaction disclosures. The
Consumer Financial Protection Bureau (CFPB) said that the firm provided
preprinted purchase contracts to buyers preparing to make an offer on a
home. The forms either explicitly
directed or suggested that title and closing services be conducted by Title
South, LLC, an affiliated company owned by the same holding company that owns
CFPB said the forms could leave consumers unaware of their rights to choose
service providers during the home-buying process and charged that the company
violated the Real Estate Settlement and Practices Act (RESPA), which protects
consumers by prohibiting kickbacks for referrals of real estate settlement services.
"Disclosures give consumers the power to make informed financial decisions,
and buying a house is among the biggest financial decisions most people ever
make," said CFPB Director Richard Cordray. "The Consumer Bureau will continue
to take action against companies that attempt to modify disclosures and keep
consumers in the dark."
CFPB said that while RESPA does not prohibit referrals by real estate companies
to their affiliated businesses it does require that they provide consumers an
"Affiliated Business Arrangement" (ABA) disclosure that clearly states their
right to shop around for a better price and that they are not required to use
the affiliated company. The disclosure RealtySouth gave consumers did not
comply with the law; it did not properly highlight consumers' rights, and the
required language was buried in a section of text that also made marketing
claims about the company's prices.
Under the terms of today's consent order, RealtySouth will pay a civil
penalty of $500,000, ensure that its disclosures comply with RESPA, and ensure
that its training materials emphasize that its agents cannot require the use of
affiliates. RealtySouth changed its disclosure forms immediately after
being contacted by the CFPB.