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 RealtySouth.

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.