Anti-Rebating Statutes and Regulations: RESPA, TDI's P-53, TREC Rules, and More
In response to questions regarding the continued applicability of TDI’s P-53 rule, we are providing the following background info, FAQs, and other helpful information.
TDI Rule P-53
In 2004, the Texas Department of Insurance (TDI) adopted Procedural Rule 53 (P-53), which prohibits rebates and discounts for the soliciting or referring of title insurance business. P-53 is an important market conduct rule that serves to protect consumers and maintain an ethical Texas title insurance industry.
Review TDI’s rule: Texas Department of Insurance Procedural Rule 53
There are also federal and state statutes that prohibit marketing-related rebating practices, as follows:
Under the federal government's Real Estate Settlement Procedures Act (RESPA), kickbacks and unearned fees are prohibited, and a person cannot give or accept anything of value for a referral incident relating to or part of a settlement service involving a federally related mortgage loan. Consumer Financial Protection Bureau (CFPB) is responsible for enforcing RESPA, as well as state attorneys general.
Review the federal statute: RESPA - Section 8
Review CFPB’s rule: 12 CFR § 1024.14
The state statute goes a step further than federal law, specifically citing the title insurance industry. In addition to prohibiting rebates and discounts, the statute states that any “thing of value” may not be “directly or indirectly paid, allowed, or permitted by a person engaged in the business of title insurance or received or accepted by a person for engaging in the business of title insurance or for soliciting or referring title insurance business.”
Review the state statute: Texas Insurance Code §2502.051
Texas Real Estate Commission Regulations Expanded
The Texas Real Estate Commission (TREC) recently amended their rules related to rebates and specifically highlighted the prohibition of pay-to-play arrangements in the real estate marketplace. TREC said their amended rules are intended to strengthen settlement service provider independence and provide clarity for TREC license holders regarding consumer protections that also exist under state and federal rules and statutes.
To enhance your understanding of TREC's expanded regulations, we recommend you read TREC's explanation of their pay-to-play rule revisions.
Here's TREC's expanded §535.148 related to receipt of undisclosed commissions or rebates:
Read TREC's explanation of the changes »
Is P-53 enforced?
Yes, TDI’s disciplinary orders
include P-53 violations. Disciplinary orders dated 2013 and older must be requested via open records request
What is the difference between RESPA and P-53?
RESPA is the federal statute addressing the referral of settlement services and includes the typical activities of Texas title agents. RESPA is enforced by the CFPB and Texas Attorney General. Procedural Rule 53 implements and clarifies the Texas statute as it relates to discounts and things of value used to solicit or refer title insurance business. TDI enforces P-53.
How do I determine if I’m in compliance?
In general, the TDI rule and other applicable statutes were not written with black-and-white examples to guide you. If you’re unsure about your actions and how P-53 might be applied to them, please consult your regulatory counsel.
The statute and rule do offer some clear guidance on how to comply, however. For instance, a title agent or company cannot give a thing of value conditioned on the referral of title insurance or provide a rebate to the consumer.
Past examples of violations include any activities that subsidize or pay for what would be business expenses for a Realtor or any other producer of title insurance business, such as printing sales materials or providing meeting or office space. Additional examples include reducing other fees in the transaction such as an escrow fee on an ad hoc or conditional basis. These are just some examples and there are many others – this is not intended to be an exhaustive list. Again, the best course of action if you are unsure is to consult legal counsel to ensure you are in compliance.
What should I do if I have information about a P-53 violation?
First, consider contacting the management at the companies involved, and alert them that they are engaged in activity that concerns you. If the suspected violation of P-53 does not stop, you can submit a formal complaint
to the Texas Department of Insurance. Once you file a complaint, TDI will keep you informed of the progress and final resolution of the complaint.
The complaint you submit will be publicly available (i.e., this is not an anonymous process).
Additional Information and Resources
Understanding and Complying With P-53 and Other Anti-Rebating Laws by Cass Burton and Kergin Bedell of Burton & Bedell, PLLC
Things You Shouldn’t Do by Richard Worsham of Westcor
RESPA LEGAL FAQs From National Association of Realtors
Agenda Item Memo From TLTA to TDI 2012
2012 Rule Hearing – Withdrawn and Disapproved Agenda Items
2012 Rule Hearing – P-53 Agenda Item