The CFPB filed suit against Borders & Borders, a Kentucky-based law firm, last week for allegedly illegally paying kickbacks for real estate settlement referrals using several shell companies.
Authorities allege that Borders & Borders and its principals, including Harry Borders, John Borders, Jr. and J. David Borders, violated the Real Estate Settlement Procedures Act by operating a network of shell companies to pay kickbacks for referrals of mortgage settlements.
The CFPB said in the complaint that the law firm operated nine joint operations with the owners and managers of local real estate and mortgage companies, alleging that Borders & Borders used the joint ownership to hide its illegal kickbacks as profit sharing.
“Today’s action sends a clear message that companies cannot design business structures to hide illegal kickbacks,” CFPB Director Richard Cordray said. “The CFPB will continue to pursue companies that seek to profit from convoluted arrangements that limit competition and hurt honest businesses.”
Borders & Borders allegedly received substantial compensation for closing services provided to consumers referred by the operations involved in the network. The CFPB is seeking disgorgement of all ill-gotten gains from the referral arrangement and an injunction to prevent the defendants from further violating RESPA.
The investigation was initiated by the Department of Housing and Urban Development, and after receiving notice of the investigation, the law firm subsequently shut down the joint ventures. The case was transferred to the CFPB in 2011, when the agency was authorized to enforce RESPA.