Agents Beware: RESPA Shows Its Teeth

In the last week RESPA provided a strong reminder of what can happen when agents get caught breaking the law. Taking a step in the right direction, two separate lawsuits were filed citing phony broker service fees and illegal kickbacks. It’s good to see the industry continue to police itself.

In Pennsylvania, Long & Foster Real Estate Inc. was hit with a class action suit in federal court last Friday accusing it of charging a “completely phony” broker service fee on top of the company’s commission without providing any additional services.

According to the article:

This ‘broker services fee’ is a completely phony fee for which Long & Foster performs no specific additional services whatsoever beyond what the [company] already does — and is required to do — in exchange for the real estate commission received by Long & Foster.

Separately, First Multiple Listing Service Inc (FMLS) in Georgia was hit with a lawsuit alleging that the dues collected from member brokers amounts to an illegal kickback and price-fixing scheme.

The lawsuit states:

The fee and the dividend payments violate anti-kickback provisions of RESPA because they reward brokers for referring business to FMLS, and consumers are not informed about them or given the opportunity to opt out.

Attorneys for FMLS have filed a motion to dismiss the suit, claiming that it “does nothing more than present inflammatory rhetoric in an effort to transform a legitimate business model and competitive pricing structure into a multimillion-dollar class-action lawsuit.”

  • Penelope

    FMLS is definitely in violation of RESPA and will not be able to get out of this. I found more information in another article: FMLS… “has charged its member brokers a fee every time their agents represent a buyer or seller in a transaction — an amount equal to $1.20 for each $1,000 of the home’s sale price. Once brokers have paid FMLS the minimum $1,500 in annual fees, they have been eligible to receive “patronage dividends” from a fund where the fees are collected.

    That sounds illegal to me!