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12 USC Section 2607 Prohibition Against Kickbacks and Unearned Fees
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 27, 1998]
[Document not affected by Public Laws enacted between
January 27, 1998 and November 30, 1998]
[CITE: 12USC2607]

TITLE 12--BANKS AND BANKING

CHAPTER 27--REAL ESTATE SETTLEMENT PROCEDURES


Sec. 2607. Prohibition against kickbacks and unearned fees

(a) Business referrals

No person shall give and no person shall accept any fee, kickback,
or thing of value pursuant to any agreement or understanding, oral or
otherwise, that business incident to or a part of a real estate
settlement service involving a federally related mortgage loan shall be
referred to any person.

(b) Splitting charges

No person shall give and no person shall accept any portion, split,
or percentage of any charge made or received for the rendering of a real
estate settlement service in connection with a transaction involving a
federally related mortgage loan other than for services actually
performed.

(c) Fees, salaries, compensation, or other payments

Nothing in this section shall be construed as prohibiting (1) the
payment of a fee (A) to attorneys at law for services actually rendered
or (B) by a title company to its duly appointed agent for services
actually performed in the issuance of a policy of title insurance or (C)
by a lender to its duly appointed agent for services actually performed
in the making of a loan, (2) the payment to any person of a bona fide
salary or compensation or other payment for goods or facilities actually
furnished or for services actually performed, (3) payments pursuant to
cooperative brokerage and referral arrangements or agreements between real estate agents and brokers, (4) affiliated business arrangements so long as (A) a disclosure is made of the existence of such an arrangement to the person being referred and, in connection with such referral, such person is provided a written estimate of the charge or range of charges generally made by the provider to which the person is referred (i) in the case of a face-to-face referral or a referral made in writing or by electronic media, at or before the time of the referral (and compliance with this requirement in such case may be evidenced by a notation in a written, electronic, or similar system of records maintained in the regular course of business); (ii) in the case of a referral made by telephone, within 3 business days after the referral by telephone,\1\ (and in such case an abbreviated verbal disclosure of the existence of the arrangement and the fact that a written disclosure will be provided within 3 business days shall be made to the person being referred during the telephone referral); or (iii) in the case of a referral by a lender
(including a referral by a lender to an affiliated lender), at the time
the estimates required under section 2604(c) of this title are provided
(notwithstanding clause (i) or (ii)); and any required written receipt
of such disclosure (without regard to the manner of the disclosure under clause (i), (ii), or (iii)) may be obtained at the closing or settlement
(except that a person making a face-to-face referral who provides the
written disclosure at or before the time of the referral shall attempt
to obtain any required written receipt of such disclosure at such time
and if the person being referred chooses not to acknowledge the receipt of the disclosure at that time, that fact shall be noted in the written,
electronic, or similar system of records maintained in the regular
course of business by the person making the referral), (B) such person
is not required to use any particular provider of settlement services,
and (C) the only thing of value that is received from the arrangement,
other than the payments permitted under this subsection, is a return on
the ownership interest or franchise relationship, or (5) such other
payments or classes of payments or other transfers as are specified in
regulations prescribed by the Secretary, after consultation with the
Attorney General, the Secretary of Veterans Affairs, the Federal Home
Loan Bank Board, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the Secretary of
Agriculture. For purposes of the preceding sentence, the following shall
not be considered a violation of clause (4)(B): (i) any arrangement that
requires a buyer, borrower, or seller to pay for the services of an
attorney, credit reporting agency, or real estate appraiser chosen by
the lender to represent the lender's interest in a real estate
transaction, or (ii) any arrangement where an attorney or law firm
represents a client in a real estate transaction and issues or arranges
for the issuance of a policy of title insurance in the transaction
directly as agent or through a separate corporate title insurance agency that may be established by that attorney or law firm and operated as an adjunct to his or its law practice.

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\1\ So in original.
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(d) Penalties for violations; joint and several liability; treble
damages; actions for injunction by Secretary and by State
officials; costs and attorney fees; construction of State laws

(1) Any person or persons who violate the provisions of this section
shall be fined not more than $10,000 or imprisoned for not more than one year, or both.
(2) Any person or persons who violate the prohibitions or
limitations of this section shall be jointly and severally liable to the
person or persons charged for the settlement service involved in the
violation in an amount equal to three times the amount of any charge
paid for such settlement service.
(3) No person or persons shall be liable for a violation of the
provisions of subsection (c)(4)(A) of this section if such person or
persons proves by a preponderance of the evidence that such violation
was not intentional and resulted from a bona fide error notwithstanding
maintenance of procedures that are reasonably adapted to avoid such
error.
(4) The Secretary, the Attorney General of any State, or the
insurance commissioner of any State may bring an action to enjoin
violations of this section.
(5) In any private action brought pursuant to this subsection, the
court may award to the prevailing party the court costs of the action
together with reasonable attorneys fees.
(6) No provision of State law or regulation that imposes more
stringent limitations on affiliated business arrangements shall be
construed as being inconsistent with this section.

(Pub. L. 93-533, Sec. 8, Dec. 22, 1974, 88 Stat. 1727; Pub. L. 94-205,
Sec. 7, Jan. 2, 1976, 89 Stat. 1158; Pub. L. 98-181, title IV,
Sec. 461(b), (c), Nov. 30, 1983, 97 Stat. 1231; Pub. L. 100-242, title
V, Sec. 570(g), Feb. 5, 1988, 101 Stat. 1950; Pub. L. 102-54,
Sec. 13(d)(4), June 13, 1991, 105 Stat. 275; Pub. L. 104-208, div. A,
title II, Sec. 2103(c)(2), (d), Sept. 30, 1996, 110 Stat. 3009-400.)

Amendments

1996--Subsec. (c)(4). Pub. L. 104-208, Sec. 2103(c)(2), substituted
``affiliated business arrangements'' for ``controlled business
arrangements''.
Subsec. (c)(4)(A). Pub. L. 104-208, Sec. 2103(d), amended subcl. (A)
generally. Prior to amendment, subcl. (A) read as follows: ``at or prior
to the time of the referral a disclosure is made of the existence of
such an arrangement to the person being referred and, in connection with
the referral, such person is provided a written estimate of the charge
or range of charges generally made by the provider to which the person
is referred, except that where a lender makes the referral, this
requirement may be satisfied as part of and at the time that the
estimates of settlement charges required under section 2604(c) of this
title are provided,''.
Subsec. (d)(6). Pub. L. 104-208, Sec. 2103(c)(2), substituted
``affiliated business arrangements'' for ``controlled business
arrangements''.
1991--Subsec. (c)(5). Pub. L. 102-54 substituted ``Secretary of
Veterans Affairs'' for ``Administrator of Veterans' Affairs''.
1988--Subsec. (c)(5). Pub. L. 100-242 substituted ``clause (4)(B)''
for ``clause 4(B)''.
1983--Subsec. (c). Pub. L. 98-181, Sec. 461(b), redesignated cl. (4)
as (5), added cl. (4) and provisions following cl. (5), as so
redesignated, relating to arrangements which shall not be considered a
violation of cl. (4)(B).
Subsec. (d)(2). Pub. L. 98-181, Sec. 461(c), substituted provisions
setting forth the liability of persons violating the prohibitions or
limitations of this section for provisions setting forth liability, in
addition to penalties provided in par. (1), of persons violating
subsecs. (a) and (b) of this section, plus costs and attorney's fees.
Subsec. (d)(3) to (6). Pub. L. 98-181, Sec. 461(c), added pars. (3)
to (6).
1976--Subsec. (c). Pub. L. 94-205 added cls. (3) and (4).

Effective Date of 1983 Amendment

Amendment by Pub. L. 98-181 effective Jan. 1, 1984, see section
461(f) of Pub. L. 98-181, set out as a note under section 2602 of this
title.

Effective Date of 1976 Amendment

Amendment by Pub. L. 94-205 effective Jan. 2, 1976, see section 12
of Pub. L. 94-205, set out as a note under section 2602 of this title.

Transfer of Functions

Federal Home Loan Bank Board abolished and functions transferred,
see sections 401 to 406 of Pub. L. 101-73, set out as a note under
section 1437 of this title.

Section Referred to in Other Sections

This section is referred to in section 2614 of this title.