In a training scenario, a title company offers a gift card for each borrower referral. What action best follows the rule?
Correct Answer
D) Refuse the referral fee because no service is performed
Why this is correct: RESPA (Regulation X, 12 CFR 1024.14(b)) prohibits giving or accepting any fee, kickback, or thing of value (like a gift card) for the referral of settlement service business when no actual service is performed for that payment. Therefore, the compliant action is to refuse the referral fee. Why the other choices are wrong: "Assume another jurisdiction approval automatically cures this file" is wrong because federal RESPA violations are not cured by state or local approval. "Handle TRID timing and fee disclosure with a sales script rather than the required file action" is wrong because a script does not address the underlying illegal referral. "Use the pre-closing review as a reason to postpone the required compliance step" is wrong because the illegal activity must be stopped immediately. Exam tip: For illegal referral fees, the action is always to refuse them. No service performed = no payment allowed.
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 A: Assume another jurisdiction approval automatically cures this file.
Assume another jurisdiction approval automatically cures this file. is not correct because it bypasses the rule supported by the explanation.
Option B: Handle TRID timing and fee disclosure with a sales script rather than the required file action.
Handle TRID timing and fee disclosure with a sales script rather than the required file action. is not correct because it bypasses the rule supported by the explanation.
Option C: Use the pre-closing review as a reason to postpone the required compliance step.
Use the pre-closing review as a reason to postpone the required compliance step. is not correct because it bypasses the rule supported by 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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