Three Different Courts Find CFPB and Agency Regulation of Title
Insurance Companies Overall Intrusive
Federal Court Judge Says CFPB Structure is Unconstitutional
Real Estate Attorney William Blanchard
elaborated on three court decisions that each limit or abolish regulatory
efforts by the CFPB or pursuant to RESPA.
St. Charles, Illinois
(July 2018) William Blanchard, a St. Charles, Illinois real estate attorney and
General Counsel of Gaia Title, Inc., spoke about three recent court cases each
ending with a decision to limit or abolish regulatory efforts by the Consumer
Financial Protection Bureau (CFPB) or proceedings under the Real Estate
Settlement Procedures Act (RESPA). The significance
of these decisions is that together they demonstrate that the pendulum is
swinging away from broad agency regulatory authority toward less intrusive
business oversight.
On May 18, 2017, the
Illinois Supreme Court deadlocked in the matter of Chultem vs. Ticor Title
Insurance Co. (2017 IL 120448). Plaintiffs
in that case alleged that the title company defendants paid excessive commissions
to attorney agents who referred title business to defendants. The complaint
recognized that RESPA permitted payment to attorneys who provide core services
during the title production process but argued that the quantity and quality of
services provided did not justify agent commissions of up to 80% of policy
premiums. The trial court rejected plaintiffs' assertion that the attorney
agents must perform all of
the core title services to avoid violating section 2607 of RESPA, and that
under Freeman v. Quicken Loans, Inc.,
132 S. Ct. 2034 (2012), it was irrelevant whether an attorney
agent was overpaid for their services when performing less than all core title services.
The Illinois
Supreme Court justices deadlocked decision resulted in the decision by
Appellate Court Judge Mary Mikva to stand, which favored title companies
(Appeal from the Circuit Court of Cook County, Nos. 06-CH-09488, 06-CH-09489).
In particular, Judge Mikva
noted that “legal precedent holds attorneys need only perform some title
services to allow them to be legally paid by the title companies as a “title
agent.” In the Appellate Opinion Chultem v. Ticor Title Insurance Co., 2015 IL App (1st) 140808, the majority held that the federal law at
issue, known as RESPA, doesn’t spell out how much work attorneys must perform
to receive payment, or control the amounts attorneys can collect in return for
their work on a title.
“…RESPA is not concerned
with whether the attorney agents were paid too much for their actual services,
but asks only whether actual services were rendered,” the majority wrote.
“Thus, the title companies' payments were not unlawful.”
The next example of a
recent court decision that limits regulatory oversight is the decision of Judge
Eileen Rakower of the Manhattan Supreme Court of July 6, 2018. In the case of
the New York Land Title Association v.
the New York Department of Finance, Judge Rakower found that regulations
adopted by the DFS were overly broad and therefore invalid. This case dealt
with title insurance company’s practice of giving gifts of meals, event
tickets, hotel rooms, and other perks to real estate brokers, bankers,
attorneys and others who provided title insurance orders to title
companies. The Department took the
position that these gifts were things of value that increased premiums to
consumers and amounted to unpermitted referral fees or kickbacks. The rules preventing
such gifts had gone into effect earlier this year and were an attempt to lower
real estate closing costs for New York consumers. The
Court thus struck down a state regulation that prevented title insurers from
passing along marketing and client-relation expenses to customers. See
https://www.law.com/newyorklawjournal/2018/07/06/supreme-court-strikes-down-ny-title-insurance-regulation/
“To construe [the law] in this manner is to
hold that the Legislature intended to prohibit title insurance corporations
from marketing themselves for business is an absurd proposition," Judge Rakower
wrote, validating many of the arguments made by title insurers and lawmakers
who attempted to defang the regulations through legislation.
In the third case, a
federal district judge ruled on June 21, 2018 that the structure of the
Consumer Financial Protection Bureau (CFPB) violates the Constitution,
countering a January ruling from a federal appeals court.
Judge Loretta Preska of the Southern District of New York (a Republican judge), in the case of Consumer Financial Protection Bureau et al v. RD Legal Funding LLC et al (No. 1:2017cv00890 - Document 80, S.D.N.Y. 2018) ruled that the CFPB’s creation as an independent agency with a director that could only be dismissed for wrongdoing was unconstitutional. In her written opinion, Judge Preska noted that the Bureau was virtually free from Congressional or Executive oversight and was in fact created as another branch of government not permitted by the Constitution. However, this decision conflicts with an earlier decision by the Court of Appeals of the District of Columbia which found that the President’s ability to fire the CFPB Director at will was sufficient oversight to make its structure constitutional. Judge Preska failed to mention the United States Supreme Court’s reasoning in May of this year in Murphy vs. NCAA which discussed the issue and inferred most judges feel that it would be more logical to rule on specific CFPB actions or powers than to find the entire Act unconstitutional.
These three post-election
decisions highlight the differences in attitude concerning business regulation
between the previous and current administrations. The CFPB was originally
staffed by Senator Elizabeth Warren of Massachusetts while President Trump
recently appointed his choice to lead the Bureau.
Mr. Blanchard pointed out
that, “Future court decisions including a determination by the United States
Supreme Court will determine if this trend continues. An appeal of the conflicting findings by
Judge Preska and the DC Court could determine that the Dodd Frank Wall Street
Reform and Consumer Financial Protection Act is unconstitutional as currently
structured. Presumably the political
make-up of the Supreme Court will be more conservative with a second
appointment by President Trump. All
factors point to another point of contention between Republicans and Democrats
after the mid-term elections.”
Mr. Blanchard received his
Juris Doctor from DePaul University College of Law in 1972 and was admitted to
the practice of law in Illinois in 1973.
He graduated with his B.S. in Business Administration from Southern
Illinois University. More news from William Blanchard are at https://attorneygazette.com/william-blanchard%2C-esq#40b43d7b-94b2-48d3-b055-1979a636f1e7
**** Mr. William B. Blanchard (“Bill Blanchard”) is a Real Estate Attorney with offices in St. Charles and Oakbrook Terrace, Illinois. Bill specializes in representing real estate clients for purchases and sales as well as home owner real estate tax assessment appeals. Mr. Blanchard is General Counsel for Gaia Title, Inc. a title insurance agency and settlement services provider. The Company is owned by real estate attorneys who demand exemplary title insurance services and accurate and efficient settlement services. As General Counsel he is responsible for title examination, commitment and policy review, escrow settlement supervision and regulatory review. - Attorney Profile: https://solomonlawguild.com/william-b-blanchard%2C-esq - Attorney News: https://attorneygazette.com/william-blanchard%2C-esq#40b43d7b-94b2-48d3-b055-1979a636f1e7
