Earlier this year the Consumer Financial Protection Bureau (CFPB) issued a Bulletin notifying banks of their obligation to oversee their business relationship with service providers as it relates to unfair, deceptive and abusive acts or practices. Immediately a new company emerged offering lenders a service which, based on their interpretation of the CFPB Rules, enables lenders to ensure settlement agents closing their loans meet the requirements of the CFPB. Read on for details about the service they provide, cost and invasion of your privacy.
Settlement agents from all over the country began receiving emails from lenders stating they must be registered and vetted by a third party risk management company. The emails stated settlement agents who fail to register would no longer be able to close any loans for them. The cost to register is $299 per year.
According to the emails, each title company or escrow company would be required to register their company, as well as any and all persons with authority to direct or disburse funds and conduct signings. It was quite odd, as these emails were not in conjunction with a specific closing and in some cases came from lenders they did not work with. It was a mass mailing message sent to any and every settlement agent the lender had ever emailed.
Our Company has received solicitations similar to these in the past. Other companies have popped up purporting to compare subscribers of their services against the Excluded Parties List System, Specially Designated Nationals and Limited Denial Participation lists.
We declined to subscribe because access to these lists is completely FREE. Settlement agents can prove they do not appear on these lists at any time. There is no need to pay an outside third party to confirm this. But this solicitation seemed a little different, so National Escrow Administration did some research.
Vetting companies do check the lists mentioned above, but they also look further into the settlement agent. When vetting a settlement agent they also look into:
- Licensing status
- Education credentials
- Credit checks
- Background checks
- Trust account verification and status of the account
- Complaints or disciplinary actions with state or federal regulators
- News about the settlement agent
- Confirming a bond is in place
- Ensuring the settlement agent has E&O insurance
A vetting company is designed for small, individually owned title agents or law firms – not publicly held and traded national companies such as ours. In their own marketing materials they even acknowledge national underwriters need not subscribe for their service.
The Company does not support the idea of settlement agents providing non–public, personal information (required to sign up for this service) to a third party provider. Although many of these service providers promise to keep the information secure there is no guarantee they will not sell the information or use it for other purposes. They do not have to establish and maintain an Information Security Policy or notify their subscribers in the event of a breach of security, so anyone affected could take measures to protect their identity because they are not regulated in the same way as lenders, banks and insurers.
Keep in mind it is the lender's obligation to ensure they are in compliance with the CFPB Regulations — not the service providers. Settlement agents within the FNF Family of Companies need not subscribe to these services.