On August 27, the U.S. District Court for the Eastern District of Pennsylvania denied a motion to dismiss claims brought by the Pennsylvania attorney general alleging that the owners of a group of mortgage brokerages violated the CFPA by engaging in conduct that violated RESPA’s anti-kickback provision, Section 8(a). The action, filed in January 2025, alleged the defendants structured equity ownership arrangements with real estate agents to funnel referral-driven profit distributions and entertainment perks. The defendants allegedly sold discounted equity shares in the brokerages to real estate professionals at $450 per unit — yielding annual returns of up to 900 percent — and tracked and communicated to the agents referral volumes and volume expectations, allegedly using such metrics to inform the basis of calculation for offering additional underpriced shares to the agents. The complaint further alleged that the defendants provided more than $500,000 in entertainment-related benefits, including tickets to professional sporting events, food, and alcohol, to encourage ongoing referrals. The attorney general further argued that the mortgage brokerages did not have sufficient initial capital and net worth to operate independently of the guaranteed flow of referrals from the real estate professionals.

The court rejected the defendants’ argument that the arrangements qualified for RESPA’s affiliated business arrangement exemption, finding that the complaint adequately alleged the defendants failed to satisfy at least two of the three statutory conditions: (i) they allegedly routinely failed to provide required disclosures to consumers; and (ii) they purportedly gave things of value, including underpriced shares and entertainment perks, beyond a permissible return on an ownership interest. The court also declined to dismiss the claims on statute-of-limitations grounds, holding that the limitations defense was not apparent on the face of the complaint because the complaint alleged ongoing conduct without specifying when the state discovered the violations or when the last violation occurred. The court further found that the state adequately pleaded the elements of a RESPA Section 8(a) violation, including actual referrals, and that the complaint’s group pleading was permissible given the defendants’ indistinguishable roles in the alleged scheme. The state’s claims under the Pennsylvania Unfair Trade Practices and Consumer Protection Law, which prohibits “fraudulent or deceptive conduct which creates a likelihood of confusion of misunderstanding,” and conduct that causes a “likelihood of confusion” about “affiliation, connection or association” also survived.