Is Free Continuing Education a RESPA Violation?

respaSection 8 of the Real Estate Settlement and Procedures Act (RESPA) prohibits settlement service providers from receiving kickbacks, unearned fees or a “thing of value” from another settlement service provider. For example, if a title company gave a computer to a real estate salesperson or a mortgage company paid for a real estate broker’s advertising, the title company, the mortgage company and the real estate licensees would all be violating RESPA.

In order to attract business, title companies, mortgage lenders and other similar companies, who often rely on real estate agents to refer business to them, offer real estate continuing education classes (CE) either through a school the company owns or through independent schools such as Hogan School. If the “sponsor” offers the course at no charge to the real estate licensee both the sponsor and real estate licensees who attend these classes are violating RESPA.

Section 3500.14 of RESPA Regulations (HUD Regulation X) does contain an exemption which addresses this issue. It reads as follows:
g) Fees, salaries, compensation, or other payments. (1) Section 8 of RESPA permits: (vi) Normal promotional and educational activities that are not conditioned on the referral of business and do not involve the defraying of expenses that otherwise would be incurred by persons in a position to refer settlement services or business incident thereto;

In other words, it is permissible if the educational activity does not defray an expense that a real estate licensee would otherwise incur. Since licensees are required to take continuing education classes the exemption does not apply and RESPA is violated.

The National Association of REALTORS® is of the same opinion.’s FAQs about RESPA state: 

Q. Is it legal for Affiliate Members who are settlement service providers to sponsor continuing education or new-member orientation classes?

A. It depends on whether some of the expenses an agent would otherwise bear are defrayed by the affiliate member. In the case of an orientation course there is probably no problem because new members pay an application fee which is the same whether an affiliate sponsors the course or not. If the affiliate is simply recognized as a sponsor it is similar to an affiliate running an ad in the association paper and would be considered normal marketing activity. Sponsorship of continuing education is more likely to be a violation because members normally have to pay a fee to attend such programs. If the cost of the course is underwritten by the affiliate so that the agents need not pay fees that they otherwise would have to pay, such sponsorship could be interpreted as a thing of value received by the agent for RESPA purposes (emphasis mine.)

I don’t think anyone would argue that RESPA was being violated if a mortgage company reimbursed a real estate licensee for their CE or paid their CE tuition directly to the licensed school. There is no difference between that and providing free CE.

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