Senate Bill 133: “The Strictest Law in the Nation on Rebates” and its Effect on Title Marketing

About the author: Ian Sierchio came to Parasec with over seven years experience in the medical and advertising industries. After his years in the advertising industry, on both the state and national levels, he decided to transition into the legal field as a way of satisfying his insatiable thirst for knowledge. Parasec and the wide breadth of its covered service areas have not disappointed. With Parasec’s many departments, covering work in many states, Ian has a never-ending area in which to learn and grow. In addition, spearheading our research and development allows him to uncover new service areas moving forward.

On January 1, 2009, a bill (SB 133) regulating the marketing of title insurance went into effect in California. As a result, solicitation of title business from real estate brokers and agents has been restricted heavily in the hopes of limiting activities which would induce referrals. There are arguments for and against this law, and the trickle-down effect it has had on the real-estate industry. Other states are taking notice of the changes and it is likely that similar bills will be introduced across the nation.

The summary statement from the bill reads as follows: “Would establish procedures for obtaining and renewing a certificate of registration as a title marketing representative, as specified; prohibit a person from marketing, offering, soliciting, negotiating, or selling title insurance in California without a valid certificate of registration as a title marketing representative; and place limits on the value of items that title marketing representatives are allowed to provide to those in a position to refer business to the title insurers they represent.”

This means that all title company sales or title representatives are now required to be licensed with the California Department of Insurance (CDI). The reps as well as the title companies themselves are now subject to fines. Additionally, the reps are also subject to suspensions/revocations if found in violation of the law. If a rep’s license is revoked, the offender cannot reapply for five years from the date of revocation.

Prior to SB 133, the CDI had no enforcement authority over the individual title marketing representatives who engaged in illegal rebating activities. While these practices were still technically illegal, the department only had the ability to fine the title insurers. The CDI is now authorized to bring administrative actions against the sales reps and title insurers who engage in these practices.

One fear was that this type of activity could be viewed in some cases as commercial bribery, which is a crime under the California Penal Code. Another fear is how expensive these “crimes” can be for a title company, which can be fined up to five times the amount of the expense. The law establishes zero tolerance for enticing realtors and lenders with anything that can be construed as an inducement to refer title business. This includes:

· Providing meals
· Purchasing tickets to sporting events
· Purchasing advertising on behalf of an agent or broker
· Creating/providing marketing materials on behalf of an agent or broker
· Distributing any item with monetary value (gift cards, event tickets, car washes, etc)
· Providing unlawful rebates (quote or charge under their filed rate with state of CA)

Many title companies, which have provided “accommodation” work in the past at no charge to law firms, lenders and other real estate-related companies; are now afraid these services could be a violation of the law. Not willing to expose themselves to the potential risks involved, they’re turning to Parasec and other public records filing and retrieval companies, which are then supplying companies with these types of documents.

With the filing and retrieval of deeds no longer being performed gratis, our industry is seeing an influx of outside referrals from our title company clientele. The title companies want to help, but to do so directly exposes them in a way they are not willing to risk. Real estate law firms, lenders and others are now left to fend for themselves while attempting to deal directly with other counties and even states in certain situations They’re spending precious time, money and manpower on a service they’ve been handed for years.

Parasec offers a variety of commercial title support and real-estate-related services to a wide range of businesses, including title companies, developers, lenders, asset managers, pension advisors, real estate attorneys, investors and banks. Title companies certainly offer many of the services Parasec specializes in, but we find that even title companies choose to outsource this “accommodation” work to us.

With the enactment of this law, we are finding new services we can assist with on a regular basis. Parasec is not a title company and this type of accommodation work is what we specialize in. We do not insure or underwrite projects in any way—we simply provide the accurate and timely information needed for the job at hand. From a standard Chain of Title report to a Full Commercial Search to simple Mechanics Lien searches, Parasec is happy to assist you in California and every other state.

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