Unearned Fees Under RESPA: Kickbacks, Recovery, and CFPB Complaints

Unearned fees under RESPA are charges on your mortgage closing that don’t correspond to work anyone actually performed. Section 8 of the Real Estate Settlement Procedures Act, codified at 12 U.S.C. § 2607, makes it illegal for a settlement service provider to collect money for services it didn’t deliver, to split a fee with someone who did nothing to earn their share, or to accept payment in exchange for sending business to another company.¹ If you paid one, you can sue to recover three times the charge, plus court costs and attorney’s fees — but you only have one year.

How to Spot an Unearned Fee on Your Closing Documents

The most common form of unearned fee is an undisclosed markup. A settlement provider orders a third-party service, such as a credit report or flood certification, pays one price for it, and then charges you a higher price without doing any additional work. The difference is pure profit with no corresponding service behind it, and the Consumer Financial Protection Bureau treats that spread as a prohibited unearned fee.²

These charges are hard to catch because they appear on the Closing Disclosure as ordinary line items. The question regulators ask is whether the provider did anything beyond passing a document along. Simply forwarding a credit report from the bureau to the underwriter doesn’t justify adding a fee. If a provider genuinely adds value by repackaging data, running quality checks, or doing supplemental analysis, a charge for that work can be legitimate. But the work has to be real, and the amount has to be reasonable relative to what was done. A fee that far exceeds the going rate for comparable work in the market can be treated as a disguised kickback even when some work was performed.

The second form is a fee split. No one may accept a portion of a settlement charge unless they actually performed services to earn it.¹ If a mortgage broker splits a closing fee with an attorney who did nothing on your transaction, the attorney’s share is unearned. Every dollar you pay at closing is supposed to correspond to a real service someone actually delivered.

Charges for genuine work are protected. Title searches, document preparation, property inspections, appraisals, and attorney services generate real fees you legitimately owe.³ The test is simple: did the person getting paid do something, and does the amount bear a reasonable relationship to the value of what they did?

Referral Kickbacks

Section 8 also prohibits anyone involved in a real estate closing from giving or accepting anything of value in exchange for sending business to another provider.¹ A title company that pays a real estate agent a $200 bonus for every buyer sent its way is breaking the law, even if the title work is perfectly good. The problem isn’t quality. It’s that the payment exists to influence the referral.

What counts as a “thing of value” is deliberately broad. Federal regulations include stock, partnership distributions, below-market services, trips, paid expenses, special loan terms, discounted rent, and the opportunity to participate in a money-making program.⁴ Kickback schemes rarely involve an envelope of cash. They look like a lender offering a title agent free office space, or a settlement company giving a real estate broker an equity stake. If the benefit is tied to referrals, the form doesn’t matter.

When Affiliated Companies Are Allowed

RESPA does not prohibit a real estate brokerage from owning a title company or a lender from having a stake in an appraisal firm. These affiliated business arrangements are legal, but only if three conditions are met.¹

You received a written disclosure of the ownership relationship, with an estimated charge or range of charges for the affiliated provider, on a separate piece of paper, no later than the time of the referral.⁵
You were not required to use the affiliated provider. The referral had to be a suggestion, not a condition of the transaction.⁵
The referring party received no benefit beyond a legitimate return on their ownership stake, such as dividends. No separate referral fee on top.¹

If any one of those conditions is missing, the arrangement is treated the same as an illegal kickback. Disclosure is where violations most commonly show up: delivered after the referral instead of at or before it, or buried in a stack of other paperwork rather than presented on its own page.

What You Can Recover

If you were charged an unearned fee, you can sue and recover three times the amount of the illegal charge.⁶ A $600 junk fee that no one earned becomes an $1,800 recovery. The person who paid the kickback and the person who received it are jointly and severally liable, so you can collect the full amount from either party. You don’t have to chase both.

A winning borrower also recovers court costs and attorney’s fees, which is what makes smaller claims worth bringing. Criminal penalties exist on paper too — up to a $10,000 fine and up to one year in prison — but criminal prosecutions are rare.⁶ Civil recovery is where the real action happens for borrowers.

The One-Year Deadline

You have one year from the date of the violation to file a private lawsuit under Section 8.⁷ That clock typically starts on your closing date, when the unearned fee was actually paid. One year is a short window, especially if you only read your Closing Disclosure carefully months after you moved in. If you suspect something was off, pull your closing packet now and compare line items against actual invoices from third-party providers where you can get them.

Government enforcement runs on a longer timeline. The CFPB, the HUD Secretary, and state attorneys general and insurance commissioners have three years to bring an action, and they can seek injunctions to shut down ongoing violations.⁷

Filing a Complaint With the CFPB

If your one-year window has closed, filing a complaint with the Consumer Financial Protection Bureau is still worth doing. The Bureau accepts mortgage-related complaints through its online portal at consumerfinance.gov/complaint or by phone at (855) 411-2372.⁸ Your individual lawsuit may be time-barred, but your complaint can feed into a larger enforcement action that recovers money for other borrowers in the same situation.

Which Loans Section 8 Covers

Section 8 applies to “federally related mortgage loans,” which captures most residential mortgages but not all. A loan qualifies if it’s secured by a lien on residential property for one to four families and meets at least one federal connection test: it was made by a federally insured or regulated lender, insured or guaranteed by a federal agency such as FHA or VA, or intended to be sold to Fannie Mae, Freddie Mac, or Ginnie Mae.⁹ A catchall also covers any creditor who makes or invests in more than $1,000,000 in residential loans per year.

In practice, that includes nearly all conventional, FHA, VA, and USDA purchase loans and refinances. Temporary financing like construction loans is excluded. Commercial real estate loans and loans on properties with five or more units fall outside RESPA entirely. If your loan isn’t covered, Section 8 won’t help you, though state consumer protection laws may still provide a path.

1
Office of the Law Revision Counsel. 12 USC 2607 – Prohibition Against Kickbacks and Unearned Fees
2
Consumer Financial Protection Bureau. Real Estate Settlement Procedures Act FAQs
3
Office of the Law Revision Counsel. 12 USC 2607 – Prohibition Against Kickbacks and Unearned Fees
4
eCFR. 12 CFR 1024.14 – Prohibition Against Kickbacks and Unearned Fees
5
Consumer Financial Protection Bureau. 12 CFR 1024.15 – Affiliated Business Arrangements
6
Office of the Law Revision Counsel. 12 USC 2607 – Prohibition Against Kickbacks and Unearned Fees
7
Office of the Law Revision Counsel. 12 USC 2614 – Jurisdiction of Courts and Limitation on Actions
8
Consumer Financial Protection Bureau. Submit a Complaint
9
Office of the Law Revision Counsel. 12 USC 2602 – Definitions