The Consumer Financial Protection Bureau (CFPB) ordered RealtySouth to pay a civil penalty of $500,000 for inadequate disclosures. The largest real estate firm in Alabama was charged with leaving consumers unaware of their rights to choose service providers during the home-buying process.
“Disclosures give consumers the power to make informed financial decisions, and buying a house is among the biggest financial decisions most people ever make,” said CFPB Director Richard Cordray. “The Consumer Bureau will continue to take action against companies that attempt to modify disclosures and keep consumers in the dark.”
The CFPB charged RealtySouth with violations of the Real Estate Settlement and Practices Act (RESPA), which offers protection to consumers by prohibiting kickbacks for referrals of real estate settlement services. RealtySouth violated these rules by providing preprinted form purchase contracts, which its agents provided to homebuyers that either explicitly directed or suggested that title and closing services be performed by its affiliate, TitleSouth.
“While RESPA allows real estate companies to refer their customers to affiliated businesses, the law requires them to provide consumers an “Affiliated Business Arrangement” (ABA) disclosure that clearly states their right to shop around for a better price and that they are not required to use the affiliated company,” CFPB said.
The disclosure provided by RealtySouth did not comply with the law. The disclosure did not properly highlight consumers’ rights, and the language was buried in a section of text that also made marketing claim’s about the company.
The case was referred to the CFPB by the Department of Housing and Urban Development (HUD). RealtySouth has since changed its disclosure forms after being contacted by the CFPB.