An Indiana real estate settlement services provider was ordered to pay up to $1.25 million and cease illegal practices of steering consumers to a title insurer owned by its executives, the Consumer Financial Protection Bureau (CFPB) ordered today.
In a statement, the CFPB said it found that Meridian Title Corporation of South Bend failed to disclose its relationship with the title insurer and illegally benefitted from the referrals for title insurance—which is usually required in real estate purchases involving a mortgage loan, the bureau said.
Under the consent order announced Wednesday, the bureau is ordering Meridian to ensure that it ceases the illegal practice, provide disclosures whenever it makes a covered referral, and pay up to $1.25 million in redress to consumers.
In its release, the CFPB found that Meridian routinely selected Arsenal Insurance Corporation, a company owned in part by three of Meridian’s own executives, as the title insurance underwriter for its customers. When it selected Arsenal, the CFPB found that Meridian could keep extra money beyond the commission it would normally have been entitled to collect, based on an understanding that Meridian would select Arsenal as underwriter.
“A company like Meridian that receives anything of value pursuant to an agreement or understanding that business will be referred to an affiliated business like Arsenal must generally disclose its relationship to the consumer in question, among other conditions, in order to avoid a violation of the Real Estate Settlement Procedures Act,” the bureau stated.
In its investigation, the CFPB found that Meridian failed to make the necessary disclosures to more than 7,000 consumers when it selected Arsenal to provide title insurance and also did not satisfy other conditions for avoiding a violation of the law.