Understanding the Department of Financial Services Guidance on Closing Service Fees
The Florida Department of Financial Services (Department) maintains a page on its website for publishing reminders regarding the Department’s interpretation of laws pertaining to title agents, “Compliance Information: Title Insurance Agents”. The Department tells us that these reminders, sometimes individually termed a Guidance, do not “replace statutes, department rules, orders or case law.” The items published on this page are intended as reminders to help title agents comply with the law.
How We Arrived Here
The Department recently published Guidance followed by an enhanced Guidance relating to charges for “closing services” as defined in F.S. 627.7711. The enhanced Guidance can be found under the tab for Title Insurance Agency Fees on the above described Compliance Information page. Leadership of the Florida Land Title Association (FLTA) presented a written request for clarification to the Department regarding a possible interpretation in the original Guidance to the effect that all closing related charges, including third party charges, must be included in a single charge for closing services. The FLTA had concern the Department was stating third-party charges relating to the closing cannot be “passed through,” or charged directly to consumers on the closing disclosure or settlement statement. Following this request from the FLTA, the Department published the enhanced Guidance you will find on the Department website today to more clearly articulate the position maintained by the Department regarding charges for closing services and the title agent’s ability to charge consumers for third-party fees in addition to the charge for closing services.
Who Regulates What?
The Guidance states clearly that the Department does not regulate the amount of each fee charged at closing. The Guidance clarifies that while other regulators, such as the Consumer Financial Protection Bureau (CFPB), regulate charges included in a closing disclosure, the Department’s role is “making sure consumers are not deceived by our licensees when they purchase title insurance and close on a property.” The Department enforces the Unfair Insurance Trade Practices Act, the scope of which is defined in F.S. 626.9541. This includes deceptive practices relating to premium charges and services provided by title agents, including charges for closing services.
In the present market, title agents are faced with more and more third-party charges that, if incorporated into the charge for closing services would increase the charge significantly and may result in consumers paying for services that were not necessary for their closing. For example, not every closing involves a mobile notary. Delivery service charges vary between closings. There are more examples, but in summary we can conclude that every closing is unique, and the consumer is better served if some of the third-party charges related to closing are charged to the consumer based upon their circumstances.
FLTA Meets With DFS For Clarity and Next Steps
To obtain a clear understanding between the title industry and the Department regarding this important issue, the leadership of the FLTA, including the Executive Director and representatives of the Agent’s Section and the Insurer’s Section, met with Greg Thomas, Director of the Division of Insurance Agent and Agency Services, and his staff on February 22, 2019. The meeting had a friendly tone and the FLTA expressed appreciation to the Director and his staff for agreeing to meet with the FLTA representatives.
At the meeting, the Department again stated that it does not seek to regulate charges for closing services, including the practice of passing through third-party charges to consumers. We were reminded that the CFPB provides guidance on practices relating to charges contained in a closing disclosure. The Department stressed its focus is on deceptive practices, which was described in one example as quoting or advertising a low charge for closing services and then surprising the consumer with several third-party fees and “junk fees” immediately prior to or at closing. The Department confirmed for us that if all charges, including third party “pass through” charges, are disclosed to the consumer and agreed upon by the consumer while the consumer can still shop, then the Department is satisfied because the practice is not deceptive. The message from the Department was to treat consumers fairly by making sure the consumer is aware of charges in advance and agrees to the charges.
The Department recognizes that sometimes a last-minute charge is unavoidable. For example, a person may be snowbound in a city and a mobile notary becomes necessary. The Department does not have an issue with such a charge, and instead is focused upon deceptive practices, which is a pattern of activity. The Department did state that it might prosecute a single act if the act were egregious and harmful to the consumer.
Another issue addressed at the meeting was the practice of paying third party charges, such as a charge for a municipal lien search, outside of closing directly to the company providing the search. The Department stated that such practices may distort rate making through data calls if these charges are not listed on the closing disclosure or settlement statement as “Paid Outside Closing,” or “POC.” The Department noted that it does not directly regulate this practice if it’s not done in a deceptive manner, but the CFPB does regulate the practice of listing all charges related to the settlement on the closing disclosure.
Filing Complaints: Details are Important
Director Thomas pointed out that the Department regulates approximately 900,000 licensees and conducts more than 1000 audits per year, with a focus on identifying deceptive practices. The title industry is not singled out. The Department staff encourages the filing of complaints by licensees if a competitor’s deceptive practice is identified. While it’s possible to make a complaint anonymously, the Department asked that any complaint include the name and identifying information of the party being reported, along with a detailed description and documentary evidence, if available, in support of the complaint. The Department recognized that title agents do not control the entire settlement process, and often the offending parties may not be regulated by the Department. The Department will help to the extent it can and will refer violations to other regulators when appropriate.The Department can be reached directly for questions and complaints at Title@MyFloridaCFO.com.
The FLTA thanks Director Thomas and his staff for meeting with us and for the clarification of the Department’s position. While the Department stated that no further Guidance on this issue is being considered, we will continue to work to keep you informed regarding regulatory developments.
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The above is not legal advice, should you have specific questions you should contact your counsel or DFS directly, firstname.lastname@example.org.
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