WASHINGTON The Consumer Financial Protection Bureau fined RealtySouth, Alabama's largest real estate firm, $500,000 for allegedly steering consumers to an affiliated title services company.
The order issued Wednesday by the CFPB charges that RealtySouth did not disclose to consumers when buying a house that they had a right to shop around for a title service provider. Instead, customers were directed to TitleSouth LLC, which is owned by the same holding company as RealtySouth. The CFPB said such an action is in violation of the Real Estate Settlement Procedures Act, which prohibits referral kickbacks for real estate settlement services without clear disclosures.
"Disclosures give consumers the power to make informed financial decisions, and buying a house is among the biggest financial decisions most people ever make," CFPB Director Richard Cordray said in a press release. "The Consumer Bureau will continue to take action against companies that attempt to modify disclosures and keep consumers in the dark."
The CFPB said RealtySouth had preprinted form purchase contracts that "either explicitly directed or suggested that" TitleSouth perform the title and closing services. While it is legal to make referrals to an affiliated service provider, the real estate company must also provide a disclosure that clearly says the consumer has a right to shop around.
The CFPB said RealtySouth immediately changed its disclosure forms after it was contacted by the agency and has consented to pay a civil penalty of $500,000, without admitting or denying the claims. The case was referred to the CFPB by the Department of Housing and Urban Development.