A branch manager asks about a loan file because a title company offers a gift card for each borrower referral. What should happen?
Correct Answer
A) Refuse the referral fee because no service is performed
Why this is correct: The governing concept is the RESPA prohibition against kickbacks and referral fees under 12 CFR 1024.14(b). This rule forbids giving or accepting any "thing of value" (like a gift card) for the referral of settlement service business. This is a strict liability violation; it does not matter if the borrower's charge increases or if the service is performed. The correct action is to refuse the fee. Why the other choices are wrong: "Treat the compliance requirement as optional because closing is near" is wrong because RESPA requirements are mandatory, not optional, regardless of the loan's stage. "Continue processing without correcting the disclosure, licensing, compensation, or consumer-protection issue" is wrong because accepting the gift card creates multiple compliance violations that must be corrected immediately. "Ignore the issue if the borrower orally agrees to continue" is wrong because borrower consent does not waive a lender's legal obligations under RESPA. Exam tip: Remember: RESPA's anti-kickback rule is absolute. Any payment for a referral is illegal, even if it's a small gift card and even if the borrower isn't directly charged more.
Why This Is the Correct Answer
The correct response is "Refuse the referral fee because no service is performed". A thing of value for a referral is prohibited even if the borrower charge does not increase.
Why the Other Options Are Wrong
Option B: Treat the compliance requirement as optional because closing is near.
Treat the compliance requirement as optional because closing is near. is not correct because the governing rule requires the compliant answer shown in the explanation.
Option C: Continue processing without correcting the disclosure, licensing, compensation, or consumer-protection issue.
Continue processing without correcting the disclosure, licensing, compensation, or consumer-protection issue. is not correct because the governing rule requires the compliant answer shown in the explanation.
Option D: Ignore the issue if the borrower orally agrees to continue.
Ignore the issue if the borrower orally agrees to continue. is not correct because the governing rule requires the compliant answer shown in the explanation.
Memory Technique
Gift, split, bonus, or credit tied to referrals should trigger RESPA Section 8.
Exam Tip
Gift, split, bonus, or credit tied to referrals should trigger RESPA Section 8.
Common Mistakes to Avoid
- -No borrower overcharge is not a defense to a referral-fee arrangement.
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