The United States Supreme Court has unanimously ruled that a real estate settlement service provider does not violate Section 8(b) of the Real Estate Settlement Procedures Act (“RESPA”) where it keeps for itself an allegedly “unearned fee.” Instead, a provider violates Section 8(b) when it divides a fee with another entity which did not provide services in connection with the fee. The Court’s decision, Freeman v. Quicken Loans, Inc., resolves a decade-old split among the lower federal appellate courts. Moreover, the decision makes clear that policy statements promulgated by the U.S. Department of Housing and Urban Development (“HUD”), applying Section 8(b) to a broad range of conduct, are not entitled to deference given their conflict with the unambiguous language of the statute itself. Nevertheless, the Court’s holding is limited to assessing unearned fees in light of RESPA, and settlement service providers should be aware that charging such fees may run afoul of other laws and enforcement mechanisms.

Background

Congress enacted RESPA “to insure that consumers throughout the Nation are provided with greater and more timely information on the nature and costs of the settlement process and are protected from unnecessarily high settlement charges.” RESPA contains prohibitions on kickbacks (Section 8(a)) and fee-splitting (Section 8(b)). Section 8(b), the focus of the Freeman decision, states...