Title 12, Banks and BankingRelease 119-110
§2607 Prohibition Against Kickbacks and Unearned Fees
Title 12 › CHAPTER 27 — REAL ESTATE SETTLEMENT PROCEDURES › § 2607
Summary
The rule bans paying or taking any fee, kickback, or thing of value for referring settlement services tied to a federally related mortgage loan. It also bans sharing or splitting any charge for those settlement services unless the split is for real work actually done. Payments are still allowed when they are for real services or real work. That includes fees to lawyers who do legal work, payments by title companies or lenders to their agents for services they actually perform, regular wages, and normal payments for goods or facilities. Cooperative brokerage and referral deals are allowed. Affiliated business arrangements are allowed only if the person being referred gets a clear disclosure and an estimate of charges: at or before a face-to-face, written, or electronic referral; within 3 business days after a phone referral (with a short verbal note during the call); or when a lender gives the estimates required under section 2604(c). A written receipt of the disclosure can be collected at closing. The person referred cannot be forced to use a specific provider, and the only extra benefit from the arrangement may be a return on ownership or a franchise. Two specific situations are not treated as breaking this rule: when a buyer, borrower, or seller must pay for an attorney, credit report, or appraiser chosen by the lender to protect the lender’s interest, and when an attorney issues title insurance through an attached title agency. The Bureau may allow other payments by regulation. Violators face a fine up to $10,000, up to one year in jail, or both. They must also pay back three times the amount charged for the settlement service to the person who paid. A defendant is not liable for an affiliated-business disclosure mistake if they prove the error was unintentional and they had reasonable procedures to prevent it. The Bureau has primary enforcement power, and state officials or the Bureau can seek injunctions. A winning private plaintiff can get court costs and reasonable lawyer fees. State laws that are stricter about affiliated business arrangements are not overridden.
Full Legal Text
Title 12, §2607
Banks and Banking, Source: USLM XML via OLRC
(a)Business referrals
No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.
(b)Splitting charges
No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed.
(c)Fees, salaries, compensation, or other payments
Nothing in this section shall be construed as prohibiting (1) the payment of a fee (A) to attorneys at law for services actually rendered or (B) by a title company to its duly appointed agent for services actually performed in the issuance of a policy of title insurance or (C) by a lender to its duly appointed agent for services actually performed in the making of a loan, (2) the payment to any person of a bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed, (3) payments pursuant to cooperative brokerage and referral arrangements or agreements between real estate agents and brokers, (4) affiliated business arrangements so long as (A) a disclosure is made of the existence of such an arrangement to the person being referred and, in connection with such referral, such person is provided a written estimate of the charge or range of charges generally made by the provider to which the person is referred (i) in the case of a face-to-face referral or a referral made in writing or by electronic media, at or before the time of the referral (and compliance with this requirement in such case may be evidenced by a notation in a written, electronic, or similar system of records maintained in the regular course of business); (ii) in the case of a referral made by telephone, within 3 business days after the referral by telephone, (and in such case an abbreviated verbal disclosure of the existence of the arrangement and the fact that a written disclosure will be provided within 3 business days shall be made to the person being referred during the telephone referral); or (iii) in the case of a referral by a lender (including a referral by a lender to an affiliated lender), at the time the estimates required under section 2604(c) of this title are provided (notwithstanding clause (i) or (ii)); and any required written receipt of such disclosure (without regard to the manner of the disclosure under clause (i), (ii), or (iii)) may be obtained at the closing or settlement (except that a person making a face-to-face referral who provides the written disclosure at or before the time of the referral shall attempt to obtain any required written receipt of such disclosure at such time and if the person being referred chooses not to acknowledge the receipt of the disclosure at that time, that fact shall be noted in the written, electronic, or similar system of records maintained in the regular course of business by the person making the referral), (B) such person is not required to use any particular provider of settlement services, and (C) the only thing of value that is received from the arrangement, other than the payments permitted under this subsection, is a return on the ownership interest or franchise relationship, or (5) such other payments or classes of payments or other transfers as are specified in regulations prescribed by the Bureau, after consultation with the Attorney General, the Secretary of Veterans Affairs, the Federal Home Loan Bank Board, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the Secretary of Agriculture. For purposes of the preceding sentence, the following shall not be considered a violation of clause (4)(B): (i) any arrangement that requires a buyer, borrower, or seller to pay for the services of an attorney, credit reporting agency, or real estate appraiser chosen by the lender to represent the lender’s interest in a real estate transaction, or (ii) any arrangement where an attorney or law firm represents a client in a real estate transaction and issues or arranges for the issuance of a policy of title insurance in the transaction directly as agent or through a separate corporate title insurance agency that may be established by that attorney or law firm and operated as an adjunct to his or its law practice.
(d)Penalties for violations; joint and several liability; treble damages; actions for injunction by Bureau and Secretary and by State officials; costs and attorney fees; construction of State laws
(1)Any person or persons who violate the provisions of this section shall be fined not more than $10,000 or imprisoned for not more than one year, or both.
(2)Any person or persons who violate the prohibitions or limitations of this section shall be jointly and severally liable to the person or persons charged for the settlement service involved in the violation in an amount equal to three times the amount of any charge paid for such settlement service.
(3)No person or persons shall be liable for a violation of the provisions of subsection (c)(4)(A) if such person or persons proves by a preponderance of the evidence that such violation was not intentional and resulted from a bona fide error notwithstanding maintenance of procedures that are reasonably adapted to avoid such error.
(4)The Bureau, the Secretary, or the attorney general or the insurance commissioner of any State may bring an action to enjoin violations of this section. Except, to the extent that a person is subject to the jurisdiction of the Bureau, the Secretary, or the attorney general or the insurance commissioner of any State, the Bureau shall have primary authority to enforce or administer this section, subject to subtitle B of the Consumer Financial Protection Act of 2010 [12 U.S.C. 5511 et seq.].
(5)In any private action brought pursuant to this subsection, the court may award to the prevailing party the court costs of the action together with reasonable attorneys fees.
(6)No provision of State law or regulation that imposes more stringent limitations on affiliated business arrangements shall be construed as being inconsistent with this section.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
References in Text
The Consumer Financial Protection Act of 2010, referred to in subsec. (d)(4), is title X of Pub. L. 111–203, July 21, 2010, 124 Stat. 1955. Subtitle B of the Act is classified generally to part B (§ 5511 et seq.) of subchapter V of chapter 53 of this title. For complete classification of this Act to the Code, see
Short Title
note set out under section 5301 of this title and Tables.
Amendments
2010—Subsec. (c)(5). Pub. L. 111–203, § 1098(6), which directed substituting “Bureau” for “Secretary”, was executed by making the substitution for “Secretary” the first time appearing, to reflect the probable intent of Congress. Subsec. (d). Pub. L. 111–203, § 1098(7)(A), inserted “Bureau and” before “Secretary” in heading that had been supplied editorially. Subsec. (d)(4). Pub. L. 111–203, § 1098(7)(B), added par. (4) and struck out former par. (4) which read as follows: “The Secretary, the Attorney General of any State, or the insurance commissioner of any State may bring an action to enjoin violations of this section.” 1996—Subsec. (c)(4). Pub. L. 104–208, § 2103(c)(2), substituted “affiliated business arrangements” for “controlled business arrangements”. Subsec. (c)(4)(A). Pub. L. 104–208, § 2103(d), amended subcl. (A) generally. Prior to amendment, subcl. (A) read as follows: “at or prior to the time of the referral a disclosure is made of the existence of such an arrangement to the person being referred and, in connection with the referral, such person is provided a written estimate of the charge or range of charges generally made by the provider to which the person is referred, except that where a lender makes the referral, this requirement may be satisfied as part of and at the time that the estimates of settlement charges required under section 2604(c) of this title are provided,”. Subsec. (d)(6). Pub. L. 104–208, § 2103(c)(2), substituted “affiliated business arrangements” for “controlled business arrangements”. 1991—Subsec. (c)(5). Pub. L. 102–54 substituted “Secretary of Veterans Affairs” for “Administrator of Veterans’ Affairs”. 1988—Subsec. (c)(5). Pub. L. 100–242 substituted “clause (4)(B)” for “clause 4(B)”. 1983—Subsec. (c). Pub. L. 98–181, § 461(b), redesignated cl. (4) as (5), added cl. (4) and provisions following cl. (5), as so redesignated, relating to arrangements which shall not be considered a violation of cl. (4)(B). Subsec. (d)(2). Pub. L. 98–181, § 461(c), substituted provisions setting forth the liability of persons violating the prohibitions or limitations of this section for provisions setting forth liability, in addition to penalties provided in par. (1), of persons violating subsecs. (a) and (b) of this section, plus costs and attorney’s fees. Subsec. (d)(3) to (6). Pub. L. 98–181, § 461(c), added pars. (3) to (6). 1976—Subsec. (c). Pub. L. 94–205 added cls. (3) and (4).
Statutory Notes and Related Subsidiaries
Effective Date
of 2010 AmendmentAmendment by Pub. L. 111–203 effective on the designated transfer date, see section 1100H of Pub. L. 111–203, set out as a note under section 552a of Title 5, Government Organization and Employees.
Effective Date
of 1983 AmendmentAmendment by Pub. L. 98–181 effective Jan. 1, 1984, see section 461(f) of Pub. L. 98–181, set out as a note under section 2602 of this title.
Effective Date
of 1976 AmendmentAmendment by Pub. L. 94–205 effective Jan. 2, 1976, see section 12 of Pub. L. 94–205, set out as a note under section 2602 of this title.
Effective Date
Section effective 180 days after Dec. 22, 1974, see section 20 of Pub. L. 93–533, set out as a note under section 2601 of this title.
Transfer of Functions
Federal Home Loan Bank Board abolished and functions transferred, see sections 401 to 406 of Pub. L. 101–73, set out as a note under section 1437 of this title.
Reference
Citations & Metadata
Citation
12 U.S.C. § 2607
Title 12, Banks and Banking
Last Updated
Sep 23, 2026
Release point: 119-110