The District of Columbia (DC) Office of the Attorney General (OAG) recently entered into settlements with four title companies in connection with title company joint ventures that included the companies and real estate agents as owners. The basic allegation of the OAG is that real estate agents were offered the opportunity to purchase interests in title company joint ventures, and that the referral of consumers to the ventures by the agents for title and escrow business violated the DC anti-inducement provision applicable to title insurance, and also the unfair and deceptive trade practice prohibition under the DC Consumer Protection Procedures Act (CCPA). It is interesting to note that, subject to conditions, the federal Real Estate Settlement Procedures Act (RESPA) contains an exception that expressly authorizes title company and other joint venture arrangements notwithstanding the RESPA prohibition on referral fee arrangements, and that DC’s similar anti-inducement provision applicable to title insurance simply does not have the express exception that is contained in RESPA.

In announcing the settlement, the OAG states that “[t]hese conflict of interest-plagued, anticompetitive arrangements limited District homebuyers’ ability to shop for the best price and service when purchasing title insurance and escrow services and hurt law-abiding competitors in the title insurance industry, in violation of the District’s [CCPA].” However, the OAG also admits that “[w]hile federal law allows for certain affiliated business arrangements that meet specific requirements, District law is more stringent and does not have such an exception.” Thus, what the OAG asserts to be an improper arrangement is an arrangement that RESPA actually authorizes.

The OAG also announced that the total amount that the four title companies will pay in connection with the settlements is $3.29 million, ranging from $65,000 to $1.9 million. We understand that other OAG investigations in this area are proceeding and that there may be additional settlements forthcoming.

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