The Consumer Financial Protection Bureau Doesn't Like Your MSA

It is no secret that marketing service agreements (“MSAs”) are under increased scrutiny. In addition to initiating numerous enforcement actions, the Consumer Financial Protection Bureau (“CFPB”) recently issued Compliance Bulletin 2015-05, titled “RESPA Compliance and Marketing Service Agreements” (“Bulletin” or “CFPB Bulletin”), which “describe[s] the substantial risks posed by entering into [MSAs].”This Bulletin was expected and eagerly anticipated in light of recent CFPB activity, but was significantly lacking with respect to direction or guidance.

Brief History of MSA Scrutiny

MSAs have traditionally been used to gain access to additional potential customers. Specifically, MSAs are marketing agreements that are generally undertaken by a lender or a title company and a service provider in which the lender or title company pays the service provider a monthly fee based on the “fair market value of marketing and advertising services performed.” Critics of MSAs claim that entities enter into these agreements at the expense of customers because they decrease competition and increase the costs of services customers would incur if they shopped around.

Originally published in the Winter 2015 issue of California Mortgage Finance News; reprinted with permission.