Affiliated Business Arrangement Disclosure (ABA Form): Safe Harbor Rules

To fill out the Affiliated Business Arrangement Disclosure Form, use the one-page template in Appendix D to 12 CFR Part 1024: enter the consumer’s name, your name, the property address, and the date at the top; state the affiliated relationship and the ownership percentage; list the referred provider and the estimated charge or range under Paragraph A (or Paragraph B if a lender is requiring a specific attorney, credit reporting agency, or appraiser); include the shop-around notice; and get the consumer’s signature on the acknowledgment line. Print it on its own sheet of paper and hand it over at or before the referral.¹

When You Have to Prepare One

You owe the disclosure whenever you refer a consumer to a settlement service provider you are affiliated with. A broker sending a buyer to a title company under the same parent, a lender pointing a borrower toward its in-house appraisal subsidiary, or a title agent routing closings to an attorney in the corporate family all trigger it.²

The regulation defines “control” as directly or indirectly holding more than 20 percent of the voting interests, contributing more than 20 percent of the capital, or being able to influence the election of a majority of the entity’s directors.³ A beneficial ownership interest can also create the connection even without formal control. When any financial thread connects you to the provider you are recommending, disclose.

The Header Block

Four identifying fields sit at the top of the form:

To: the consumer receiving the referral, full name.
From: the entity making the disclosure.
Property: the address of the property in the transaction.
Date: the date the disclosure is prepared and delivered.

Use the consumer’s legal name as it appears on the transaction documents, and use the same property address that will appear on the closing disclosure.

The Relationship Statement

The body of the form opens with a fixed sentence: “This is to give you notice that [referring party] has a business relationship with [settlement services provider(s)].” Replace the bracketed names with the actual parties.¹

Right after that sentence, describe the relationship in plain language. Two examples of how this reads on a completed form:

“ABC Realty owns 40 percent of XYZ Title Company.”
“Both are subsidiaries of DEF Holdings, Inc.”

Include the ownership percentage whenever one exists. The next line on the form reads: “Because of this relationship, this referral may provide [referring party] a financial or other benefit.” Keep that language intact.

Paragraph A or Paragraph B

The estimated-charges section has two versions, and the referral type decides which one you use.¹

Paragraph A is the standard version. Use it for a typical affiliated referral, such as a broker sending a buyer to an affiliated title company. It lists the provider, the settlement service, and the estimated charge or range of charges. It also carries the consumer-rights notice in capital letters: “YOU ARE FREE TO SHOP AROUND TO DETERMINE THAT YOU ARE RECEIVING THE BEST SERVICES AND THE BEST RATE FOR THESE SERVICES.” That capitalization is part of the prescribed format.

Paragraph B applies only when a lender is requiring the borrower to use a specific attorney, credit reporting agency, or appraiser to represent the lender’s interests. The wording is similar but reflects that the consumer’s choice is limited to the required provider.

Use Paragraph A alone for a standard referral, Paragraph B alone when the lender is mandating a specific provider for its own interests, or both together when the same transaction involves both types of referrals. Describe the charges using the same terminology that will appear on the closing disclosure so the consumer can compare numbers later without having to translate.

The Acknowledgment Signature

The form ends with an acknowledgment line the consumer signs: “I/we have read this disclosure form, and understand that referring party is referring me/us to purchase the above-described settlement service(s) and may receive a financial or other benefit as the result of this referral.”

The statute allows the written receipt to be collected at closing if the consumer does not sign at the time of referral, but when you deliver the form in person, get the signature on the spot.⁴ If the consumer refuses to sign, note the refusal in your business records.

Delivery Timing

Timing depends on how the referral happens. The statute lays out three scenarios.⁴

For a face-to-face, written, or electronic referral, hand over the completed disclosure at or before the time of the referral. A notation in your regular business records can serve as evidence of compliance.

For a telephone referral, give an abbreviated verbal disclosure during the call. Tell the consumer the affiliated relationship exists and that a written disclosure is on the way. Then mail or transmit the written form within three business days. This is the most common place mistakes happen. Calendar the follow-up the moment the call ends.

For a lender referral, the lender may deliver the disclosure at the time it provides the loan estimate, regardless of whether the referral was made in person, by phone, or electronically.

One formatting rule applies to all three scenarios: the disclosure must be printed on a separate piece of paper.² Don’t fold it into the loan application or bury it inside a closing packet.

The Three Safe-Harbor Conditions

Filling out the form correctly is one of three conditions the arrangement has to satisfy to stay out of RESPA violation territory. All three must be met:⁴

The consumer received the written disclosure in the correct format and within the required timeframe.
The consumer was not required to use the affiliated provider as a condition of the loan or the transaction.
The only thing anyone receives from the arrangement is a legitimate return on an ownership interest or franchise relationship, not a fee tied to the number of referrals sent.

The third condition is where affiliated businesses run into trouble. Profit distributions from the affiliate back to the referring party need to track capital investment, not referral volume. Once payments start moving with referral counts, the arrangement stops looking like a return on equity.

Penalties for Getting It Wrong

RESPA Section 8 carries both criminal and civil exposure. On the criminal side, each violation can bring a fine of up to $10,000 and imprisonment for up to one year.⁴

On the civil side, anyone who violates Section 8 is jointly and severally liable to the consumer for three times the amount of the settlement service charge involved.⁴ A $2,000 title charge tainted by a bad referral can produce $6,000 in liability.

The regulation includes a narrow defense for a provider that failed to deliver the disclosure: showing that reasonable compliance procedures were in place and that the failure was unintentional and the result of a genuine error.³ Relying on that defense means admitting the disclosure never went out, which is a poor position to argue from. Delivering the form on time and on its own sheet is the whole job.

1
Legal Information Institute. Appendix D to Part 1024 – Affiliated Business Arrangement Disclosure Statement Format
2
Consumer Financial Protection Bureau. 12 CFR 1024.15 – Affiliated Business Arrangements
3
eCFR. 12 CFR 1024.15 – Affiliated Business Arrangements
4
Office of the Law Revision Counsel. 12 USC 2607 – Prohibition Against Kickbacks and Unearned Fees