The United States District Court in Maryland has recently ruled that a lender who uses an internal title company for its real estate settlements is on the hook for the title company’s alleged violations of the Sherman Antitrust Act. This ruling could spell bad news for financial services businesses that use owned or affiliated subsidiaries in their real estate settlements, as it indicates that courts may be willing to look beyond the subsidiary to punish bad behavior. In Wilson v. Eagle National Bank, the court held that an agreement between a lender and a third-party title company could constitute an illegal horizontal price-fixing scheme, if the lender directs its wholly-owned subsidiary title company to set the price for its services to match that of the third-party title company. The fact that the lender is not at the same level of the market structure as the third-party title company will not relieve the lender of liability under the Sherman Act, according to this court. 

            If you are a financial services company that directs real estate settlements to your affiliated or owned title company or insurance company, you should also beware that your actions may violate the Real Estate Settlement Procedures Act (RESPA). While simply using an affiliate company to perform title or insurance services in a real estate settlement is not in itself illegal, it is vital that you make a few key disclosures to the consumer in order to pass muster. On a separate piece of paper, you should make clear the nature of the affiliated relationship and provide the charges or range of charges made by the affiliated provider. Most importantly, you should notify the consumer that he or she is not required to use the affiliate business. If you make these few necessary disclosures, then the use of your affiliate company will be considered completely kosher. You may even offer a discount to incentivize the consumer to use your affiliate business! As long as the consumer knows that they have the option to shop around, you will be in the clear.