Understanding the CFPB Case Against Borders & Borders
How a real estate law firm’s marketing arrangement triggered a major CFPB enforcement action under federal mortgage disclosure laws.
The enforcement action brought by the Consumer Financial Protection Bureau (CFPB) against Borders & Borders, PLC and its partners is a detailed example of how federal consumer financial laws apply to real estate settlement services. Using that case as inspiration, this article explains the legal issues at stake, how enforcement actions unfold, and what businesses and consumers can learn about avoiding unlawful kickbacks and maintaining transparency in mortgage transactions.
Background: The CFPB’s Role in Policing Real Estate Transactions
The CFPB is the federal agency responsible for enforcing a range of consumer financial protection laws, including laws that govern mortgage lending and real estate settlement services. These laws seek to ensure that consumers receive clear information, are not steered into higher-cost options due to hidden incentives, and are protected from unfair, deceptive, or abusive acts or practices.
One of the central statutes in the real estate settlement context is the Real Estate Settlement Procedures Act (RESPA). RESPA prohibits kickbacks and unearned fees in connection with federally related mortgage loans and requires certain disclosures when there are business relationships that might influence referrals.
Key consumer protection goals in this area
- Transparency in settlement costs, fees, and affiliated relationships.
- Prevention of kickbacks that may lead to inflated prices or biased referrals.
- Promotion of competition among service providers, so consumers can shop for the best value.
- Accountability for law firms, lenders, title agencies, and other service providers involved in mortgage closings.
The Borders & Borders Case: Core Allegations and Issues
In the enforcement matter that inspired this discussion, the CFPB alleged that a real estate law firm and its principals used a network of marketing or joint venture entities in connection with title and settlement services. The Bureau claimed these arrangements constituted illegal kickbacks under RESPA because referrals allegedly generated ownership interests or profit streams not tied to the actual value of services performed. While the specific factual findings and procedural history are contained in the CFPB’s public filings, this article focuses on the legal and compliance takeaways rather than the litigation details.
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Typical structure of the disputed arrangements
CFPB enforcement documents and related RESPA guidance indicate that problematic arrangements often share several characteristics:
- A law firm, lender, or real estate broker forms an “affiliated” title or settlement business with referral sources.
- Ownership interests are allocated to those who are in a position to refer settlement business.
- Little or no staff, capital, or independent operations exist at the affiliated entity, suggesting it is a “sham” provider.
- Profits from settlement services flow back to the owners based primarily on referral volume, not on services actually rendered.
When arrangements look like this, the CFPB may argue that the referrals are being rewarded through ownership distributions and that the structure functions as a disguised kickback scheme, even if it is labeled as a joint venture or marketing partnership.
RESPA’s Anti-Kickback Rules Explained
To understand why the Borders & Borders–type arrangement raised concerns, it is essential to review RESPA’s anti-kickback framework. RESPA section 8 generally prohibits any person from giving or accepting a fee, kickback, or thing of value pursuant to an agreement or understanding that business incident to a real estate settlement service will be referred.
What counts as a “thing of value”?
Under RESPA and related regulations, a “thing of value” is interpreted broadly. It can include:
- Cash payments, bonuses, or referral fees.
- Ownership interests or dividend payments.
- Free or discounted office space, marketing support, or services.
- Any privilege or benefit tied to the volume of referrals.
Legal exceptions: Affiliated Business Arrangements
RESPA does allow affiliated business arrangements if strict conditions are met, including disclosure and limits on compensation. To qualify under this exception, typically:
- Consumers must receive a written disclosure of the ownership interest and estimated charges.
- Consumers must be free to shop for alternative providers and cannot be required to use the affiliate.
- Any return on ownership interest must be a bona fide return based on the owner’s capital at risk and normal business profits, not on the number of referrals.
The CFPB often scrutinizes whether an affiliated business is a genuine, fully functioning operation or instead a shell entity that exists primarily to facilitate the flow of referral-based payments.
How CFPB Enforcement Actions Unfold
The Borders & Borders case is one among many enforcement actions the CFPB has taken against financial firms, law practices, and settlement service providers for alleged violations of federal consumer financial laws. The Bureau has a structured process for investigating and bringing such actions.
Typical life cycle of an enforcement action
| Stage | Main Activities | Key Outcomes |
|---|---|---|
| 1. Intake & Prioritization | Review of complaints, referrals, or exam findings to decide whether to open an investigation. | Decision to open or decline a formal investigation. |
| 2. Fact Gathering | Use of civil investigative demands (CIDs), document requests, and interviews to collect evidence. | Determination whether violations likely occurred and whether enforcement is warranted. |
| 3. Legal Analysis | Assessment under statutes such as RESPA, the Consumer Financial Protection Act, and other laws. | Recommendation to pursue or not pursue public enforcement. |
| 4. Public Action | Filing a lawsuit in federal court or initiating an administrative adjudication. | Complaint, consent order, or adjudicative proceeding is made public. |
| 5. Resolution & Remedies | Negotiated settlement or final order specifying penalties, injunctions, and consumer redress. | Orders to pay restitution, penalties, and adopt compliance measures. |
Common remedies in RESPA enforcement cases
- Injunctive relief: Prohibitions on certain referral practices or business structures.
- Civil money penalties: Monetary fines calibrated to the severity and duration of the conduct.
- Disgorgement or restitution: Returning ill-gotten gains or compensating affected consumers when harms can be quantified.
- Compliance obligations: Requirements to implement robust policies, training, and monitoring.
Impacts on Law Firms and Real Estate Professionals
The Borders & Borders enforcement matter underscores that law firms and real estate professionals are not exempt from federal consumer financial laws simply because they provide legal or agency services. When they engage in title, closing, or other settlement-related activities for federally related mortgage loans, RESPA and the CFPB’s jurisdiction can apply.
Risk areas for professionals
- Joint ventures and marketing entities formed with real estate agents, lenders, or builders that refer settlement business.
- Exclusive referral arrangements that provide financial incentives or benefits to specific partners.
- Failure to provide accurate affiliate disclosures when there is an ownership interest in a settlement service provider.
- Compensation structures where profits or distributions bear a direct relationship to the volume of referrals.
Even where professionals believe their arrangements are lawful, the CFPB may take a different view, particularly if the affiliated entity has limited staff, minimal capital, or relies entirely on referrals from its owners.
Consumer Implications: Why Kickbacks Matter
From a consumer’s perspective, kickbacks and undisclosed financial ties can distort the settlement marketplace. The concern is not merely technical compliance but whether consumers are paying more than they should or are being steered away from competitive options.
Potential harms to consumers
- Higher settlement costs due to inflated fees that cover referral payments.
- Reduced choice if consumers are discouraged or misled about shopping for alternatives.
- Lack of transparency about why a particular title company or closing agent was recommended.
- Erosion of trust in professionals whose financial interests are not aligned with those of their clients.
By policing arrangements like those alleged in the Borders & Borders case, the CFPB aims to foster a marketplace where recommendations are based on price, quality, and service—not on hidden financial incentives.
Compliance Lessons From the Case
Businesses can draw several compliance insights from enforcement actions involving law firms and settlement service providers. While every case turns on its specific facts, a number of principles recur across CFPB enforcement history.
1. Evaluate affiliated business structures carefully
Before forming a joint venture or marketing affiliate, entities should:
- Assess whether the affiliate is a fully operating business with its own staff, capital, and risk.
- Ensure that owners receive returns based on legitimate investment and business performance, not referral volume.
- Confirm that no payments or other benefits are conditioned on, or vary with, the number of referrals.
2. Deliver clear and timely disclosures
When an affiliated business arrangement is used, disclosures should:
- Identify the nature of the ownership interest in straightforward language.
- Describe the consumer’s right to shop for other providers.
- Include realistic estimates of charges the consumer may pay.
3. Build a culture of compliance
Enforcement experience suggests that institutions with strong compliance cultures are better able to detect and correct potential violations before they become enforcement matters.
- Provide regular training on RESPA, CFPB rules, and state law to staff and partners.
- Adopt written policies that explicitly prohibit kickbacks and unearned fees.
- Conduct periodic audits of referral patterns, compensation schemes, and entity structures.
- Engage compliance or legal professionals early when designing new business relationships.
How the CFPB Uses Enforcement to Shape the Market
The Borders & Borders matter took place in the broader context of the CFPB’s enforcement program, which has secured billions of dollars in relief for consumers across financial markets such as mortgages, credit cards, auto loans, and deposit accounts.
Enforcement by the numbers
Recent summaries of CFPB activity highlight the scale of enforcement:
- In a single year, the Bureau has filed dozens of new enforcement actions and resolved previously filed cases with final orders requiring billions of dollars in relief and civil penalties.
- Over multiple years, CFPB enforcement has produced billions in consumer redress and civil monetary penalties, signaling an ongoing focus on deterrence and market correction.
Cases involving RESPA and settlement services form an important part of this portfolio, reinforcing standards for transparency and fair competition in the housing finance market.
Practical Tips for Consumers in Real Estate Closings
Although enforcement actions are directed at companies and individuals, consumers can take steps to protect themselves when entering into mortgage and real estate transactions.
Before choosing a title company or closing agent
- Ask for written estimates of title and settlement fees from more than one provider.
- Inquire about relationships between your real estate agent, lender, lawyer, and the recommended title or settlement provider.
- Read any disclosures about affiliated business arrangements carefully and ask questions if anything is unclear.
During the closing process
- Review the Loan Estimate and Closing Disclosure documents closely to verify fees and service providers.
- Do not hesitate to request explanations for any unfamiliar charges or parties involved in your transaction.
- Remember that, in many cases, you have the right to choose your own title or settlement provider.
If you suspect improper conduct
- Keep copies of your loan and closing documents.
- Document conversations and referrals you received related to settlement services.
- Consider submitting a complaint to the CFPB, your state attorney general, or a state regulator if you believe a provider engaged in unlawful practices.
Frequently Asked Questions (FAQs)
Q1: What is RESPA and why does it matter in real estate closings?
RESPA is a federal law that regulates real estate settlement practices for most mortgage loans. It aims to protect consumers by banning kickbacks and unearned fees, requiring certain disclosures, and promoting transparency in how settlement services are chosen and priced.
Q2: Are all affiliated business arrangements illegal?
No. Affiliated business arrangements can be lawful if they are bona fide businesses that provide real services, comply with RESPA’s disclosure and consumer choice requirements, and do not base compensation on the number of referrals. Problems arise when affiliates are shams or when profits effectively reward referrals.
Q3: How does the CFPB decide to bring an enforcement action?
The CFPB evaluates factors such as the strength of the facts, the magnitude of consumer harm, and the alignment with its enforcement priorities. It uses investigative tools like civil investigative demands to gather information before determining whether to proceed with a public action.
Q4: What penalties can result from violating RESPA’s anti-kickback rules?
Consequences can include civil money penalties, court orders to cease certain practices, requirements to change business structures, and, in some cases, restitution or disgorgement. The exact remedy depends on the nature and extent of the violations.
Q5: Where can I find information on CFPB enforcement actions?
The CFPB maintains an online database of enforcement actions, including complaints, consent orders, and related materials. This resource allows the public to review how the Bureau applies consumer financial protection laws in specific cases.
References
- Life cycle of an enforcement action — Consumer Financial Protection Bureau. 2023-01-10. https://www.consumerfinance.gov/enforcement/life-cycle-of-enforcement-action/
- Enforcement Actions — Consumer Financial Protection Bureau. 2025-08-21. https://www.consumerfinance.gov/enforcement/actions/
- Enforcement — Consumer Financial Protection Bureau. 2024-06-05. https://www.consumerfinance.gov/enforcement/
- The CFPB’s 2021-2025 Enforcement Legacy — Consumer Federation of America. 2025-03-19. https://consumerfed.org/the-cfpbs-2021-2025-enforcement-legacy/
- The CFPB’s enforcement work in 2023 and what lies ahead — Consumer Financial Protection Bureau. 2024-02-14. https://www.consumerfinance.gov/about-us/blog/the-cfpbs-enforcement-work-in-2023-and-what-lies-ahead/
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