ALTA still supports a 2007 proposal that would provide businesses subject to unfair competition from sham affiliated business arrangements the right under Section 8 of the Real Estate Settlement Procedures Act (RESPA) to ask a court to force the sham arrangement to come into compliance with the law or cease operations, Source of Title has learned.

If such an amendment were passed, a business would be able to file suit in the courts for injunctive relief-- a lawsuit asking a court for an order forcing a competitor in violation of RESPA Section 8 to stop the illegal practice. Currently under RESPA, businesses have no avenue for relief in the courts when they are subjected to unfair competition by a sham affiliated business arrangement.

ALTA included support for the amendment along with its "Principles Of Fair Conduct", a code of conduct structured as a voluntary pledge that ALTA formulated as part of its Title Industry Consumer Initiative, which ALTA rolled out in September, 2007. ALTA members signing the Principles of Fair Conduct agreed to adhere to a set of high standards and ethics, but as part of the steps to implement the principles, ALTA also included imperatives for government, including a statement that "Congress should amend section 8 of RESPA to provide a competitor’s right of action for injunctive relief".  Over 100 businesses, including all four major underwriters-- Fidelity National Title, First American, Old Republic and Stewart Title-- signed the pledge.

ALTA's President at the time, Greg Kosin, expressed support for the amendment. "When members of our industry engage in unlawful practices in order to gain business, they create an uneven playing field for everyone else," Kosin stated in a September 18th, 2007 press release. "Many of the regulatory bodies lack adequate enforcement resources, and we believe that members of our industry are in the best position to recognize violations among their competitors."  In that press release, ALTA said it would ask Congress for the amendment.

Justin Ailes, ALTA Vice President of Government Affairs, confirmed this week that ALTA is still supportive of the idea of an amendment to RESPA providing injunctive relief for competitors of sham affiliated business arrangements.
 
According to Ailes, such an amendment had both agent and underwriter support when it was proposed by ALTA in 2007, but ALTA has not actively discussed the amendment since that time. While the proposed amendment may not have had unanimous support within ALTA, Ailes characterized the idea as one that still has merit.
 
As to why ALTA did not actively advocate for the legislation, Ailes said that RESPA reform immediately followed the issuance of the Principles of Fair Conduct and industry attention shifted entirely to implementing the new RESPA rule. In addition, Ailes said that the housing market crash, which was already underway when the proposal was publicized and accelerated shortly thereafter, was also a likely reason why ALTA did not hear much from its members about the proposal at the time.  ALTA's businesses were likely concentrating on saving their own businesses at that time, he said.  Ailes also speculated that many sham affiliated businesses may have closed up shop because of the crash, perhaps reducing the imperative for a private right of action for competitors.
 
Ailes said to revive the idea, ALTA simply needs to hear support from ALTA members-- something they haven't heard for some time, according to Ailes.

Unlike the consumer right of action already provided in RESPA Section 8, ALTA's proposal for competitors harmed by sham affiliated business arrangements does not include the right to collect statutory damages-- monetary damages specified by law-- from violators.  Consumers who prove violations of RESPA Section 8 are entitled to statutory damages of three times the amount they were charged for the settlement service provided by the violator. 

But even if statutory damages were not part of such an amendment, providing injunctive relief to competitors of sham AfBAs could be a good thing, said Robert A. Franco, an attorney and owner of Source of Title who has also owned and operated an independent title business since 1993.  “But, what would really help is a provision awarding a successful litigant their attorney’s fees," Franco said.  "Otherwise, the cost for a competitor to bring a suit for an injunction may be prohibitive.” [Also see ALTA's Principles Of Fair Conduct, Source of Title Blog, 9/20/2007]

A related issue is the ongoing dispute over what actually constitutes a sham affiliated business arrangement.  The current venue for that fight is an appeal of a federal court decision which ruled that HUD's set of 10 criteria to determine legitimacy of an affiliated business arrangement was "unconstitutionally vague".  [See Federal Government Submits Brief in Closely Watched AfBA Case, Source of Title, 1/13/2011]