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IDFPR Issues Proposed Regulatory Guidance on Title Agent Compensation

Choose Your Underwriter Carefully: Those "Too Good to be True" Examination Fees May Violate the Law

The method by which Illinois title insurance agents are compensated was the topic of a January 3, 2018, Town Hall meeting hosted by the Illinois Department of Financial and Professional Regulation (the Department). The Department shared and is seeking comment on its proposed regulatory guidance publication entitled, Title Insurance: Title Agent Compensation. The publication covers what the Department perceives to be allowable practices relating to title agent compensation and what may or may not constitute one or more of the following: (1) Improper Inducements or Compensation; (2) Improper Splitting of Premium; and (3) Improper Splitting of Fees.

In recent years, competition for title agency business in the Chicago market has become fierce. Several title underwriters and service companies have taken steps to increase title agent compensation. In some cases, those increases appear to disregard the rules that govern the title business, which puts both the agent and the underwriter at risk of violating State and Federal law. We urge you to carefully read the Department's publication, Title Insurance: Title Agent Compensation. While the publication and the guidance it contains has been described by the Department as a starting point, and will likely be amended after a public comment period, it does provide a framework to begin to consider how you're paid as a title agent. If you're getting fees for work you don't do, or paid for products you don't provide, it is very possible that your arrangement violates the regulations governing title insurance. In the Chicago market, we have seen agents being paid hidden or disguised fees for services they have not provided. The Department also indicated that excessive premium splits may violate certain provisions of the Title Insurance Act.

Title agent work is complicated and requires very specialized skills. ATG has always taken the position that title agents perform very important work and ATG is committed to ensuring that agents are fairly compensated for the work they perform. We continually examine our method of calculating the fees that agents retain for examination of title to ensure our program is compliant with regulatory requirements.

If you're an agent for another underwriter, you may want to ask yourself or your representative from that underwriter the following questions:

1. Is the consumer paying additional fees for any service that is routinely included in the title premium?
2. Am I receiving payment for any services that I don't perform?

If the answer to either question is yes, we encourage you to carefully consider that agency program and make a determination as to whether you are comfortable that your compensation plan complies with existing law.

As an anecdotal observation, the Town Hall meeting, attended mostly by title agents and underwriters, had a disturbing undercurrent of "lawyer bashing." It seems that many in the industry, those very companies that are pounding on your door and offering to pay you in ways that may not comply with existing law, are also quick to blame the lawyers for their misdeeds. We caution you to be careful who you work with.

The guidance publication did not address whether reciprocal referral arrangements between real estate broker captive agencies and lawyers are a violation of RESPA, but it was brought up at the Town Hall meeting. The Department indicated that they would look into the issue further.

These matters are complicated and they are incredibly important. ATG consistently and diligently works to promote the interests of lawyers and the clients they serve, and we always will. It is our plan to work closely with the Department to ensure that our agent compensation program continues to comply with all regulatory and federal guidelines. We have encouraged the Department to provide clear and comprehensive guidance.

There will certainly be much more information and discussion on this topic in the coming months. In the meantime, we urge you to carefully consider what you do as a title agent, and with whom you do business. ATG's highest priority is keeping lawyers informed and ensuring that you have a seat at the table. Can you say the same about your other underwriters? Our team welcomes the opportunity to discuss these topics with you further, and if you have questions, please feel free to call me or anyone on the ATG legal staff at 312.372.8361.

Henry L. Shulruff
ATG Senior Vice President - Business Development

[Last update: 1-10-18]

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