The Consumer Financial Protection Bureau reports it fined real estate settlement services provider Meridian Title Corp. over violations of the Real Estate Settlement Procedures Act, ordering the company to pay up to $1.25 million to harmed consumers.
The CFPB stated that the South Bend, Indiana-based company routinely steered consumers to Arsenal Insurance Corporation, a title insurer company owned in part by three of Meridian’s own executives.
As a title insurance agent, Meridian receives orders for title insurance policies from lenders and real estate agents, and in some cases directly from consumers, and assigns those orders to title insurance underwriters, the CFPB explained.
By steering consumers to Arsenal Insurance and not disclosing its relationship with the title insurer, Meridian Title illegally benefitted from the referrals for title insurance, the CFPB claims.
According to the release, Meridian was able to keep extra money beyond the commission it would normally have been entitled to collect, based on an understanding that Meridian would select Arsenal as underwriter.
Under the Real Estate Settlement Procedures Act, if Meridian receives anything of value pursuant to an agreement or understanding that business will be referred to an affiliated business, it must generally disclose its relationship to the consumer in question.
The CFPB uncovered in its investigation that Meridian failed to make the necessary disclosures to more than 7,000 consumers.
The regulator ordered Meridian Title to implement policies and procedures to ensure it properly discloses to consumers whenever it makes an applicable referral.
The company must also pay up to $1.25 million in redress to consumers who were referred to and purchased title insurance from Arsenal but did not receive appropriate disclosures.
“Meridian Title illegally steered consumers into purchasing a product from an affiliated company to add to its bottom line,” said CFPB Director Richard Cordray. “We’re ordering it to halt this practice and pay up to $1.25 million to consumers who were harmed.”