Although not a decision involving marketing, every lender should take the time to carefully review the PHH reinsurance case. In the first ever appeal from the decision of an administrative law judge (“ALJ”), Director Cordray imposed a 109 million dollar award against PHH – far more than the 6.4 million dollars awarded by the ALJ. Beyond demonstrating the risk of an internal CFPB administrative appeal, Cordray made certain specific and ominous rulings as follows: 1. Cordray decided that when the CFPB is initiating administrative enforcement proceedings (as opposed to court proceedings) the agency is free to apply the statute of limitations backward from the date the CFPB was created (July 21, 20011) as opposed to the date the agency takes enforcement action. Hence, in the PHH case, instead of the liability stemming back 3 years from the initiation of a complaint against PHH, Director Cordray ruled that the statute of limitations would stretch all the way back to July of 2008. Making matters worse, the Director ruled that actions prior to July 21, 2008 would be subject to disgorgement so long as the payments were received after July 21, 2008. As such, PHH could be held responsible for its actions before July of 2008, notwithstanding RESPA’s 3 year statute of limitations. 2. In ruling that PHH violated RESPA, the Director decided that a violation could be found even when fair market value was paid for services actually provided. Specifically, regardless of whether fair market value was paid, RESPA is violated if the arrangement between the parties was predicated in part on the agreement or understanding referrals would be provided. Put another way, any arrangement between parties that in part involves an agreement to provide referrals violates RESPA, even if the relationship is otherwise completely legitimate. Conversely even when referrals are involved in the provision of services, no violation occurs if the referral itself was not in part a reason for the compensation and/or relationship. Hence, the determination of a RESPA violation depends upon what is ultimately a subjective determination of whether the fee for services arrangement was in any part predicated on an agreement to provide referrals. The CFPB’s decisions in PHH should cause lenders to carefully reevaluate desk rental, co-marketing and MSA relationships to ensure that there is no evidence to suggest that referral business was in part the reason for the creation or maintenance of the relationship.