Recently, a complaint was filed by the Commonwealth of Pennsylvania, through Attorney General Michelle A. Henry (AG) in the U.S. District Court for the Eastern District of Pennsylvania, accusing a group of mortgage brokers and individuals of engaging in unlawful practices that violate RESPA, the CFPA, and Pennsylvania’s Unfair Trade Practices and Consumer Protection Law. The defendants allegedly operated a scheme involving the transfer of underpriced, nonvoting stock to real estate professionals in exchange for client referrals to mortgage brokerages owned by the defendants.

This arrangement was allegedly designed to disguise kickbacks as stock sales and profit distributions, with the total value of these kickbacks exceeding $500,000 and potentially reaching over a million dollars. Additionally, the defendants were accused of providing event tickets and expensive dinners to real estate professionals as part of the scheme. The complaint asserted that the defendants failed to comply with disclosure requirements necessary for qualifying as an “affiliated business arrangement” under RESPA. The AG seeks a permanent injunction to restrain the defendants from continuing these practices, restitution for affected consumers, civil penalties for willful violations, and the costs associated with the legal action.