Understanding the Department of Financial Services Guidance on Closing Service Fees

The Florida Department of Financial Services (Department) maintains a page on its website for publishing reminders regarding the Department’s interpretation of laws pertaining to title agents, “Compliance Information: Title Insurance Agents”.  The Department tells us that these reminders, sometimes individually termed a Guidance, do not “replace statutes, department rules, orders or case law.”  The items published on this page are intended as reminders to help title agents comply with the law.

How We Arrived Here

The Department recently published Guidance followed by an enhanced Guidance relating to charges for “closing services” as defined in F.S. 627.7711.  The enhanced Guidance can be found under the tab for Title Insurance Agency Fees on the above described Compliance Information page.  Leadership of the Florida Land Title Association (FLTA) presented a written request for clarification to the Department regarding a possible interpretation in the original Guidance to the effect that all closing related charges, including third party charges, must be included in a single charge for closing services.  The FLTA had concern the Department was stating third-party charges relating to the closing cannot be “passed through,” or charged directly to consumers on the closing disclosure or settlement statement.  Following this request from the FLTA, the Department published the enhanced Guidance you will find on the Department website today to more clearly articulate the position maintained by the Department regarding charges for closing services and the title agent’s ability to charge consumers for third-party fees in addition to the charge for closing services. 

Who Regulates What?

The Guidance states clearly that the Department does not regulate the amount of each fee charged at closing.  The Guidance clarifies that while other regulators, such as the Consumer Financial Protection Bureau (CFPB), regulate charges included in a closing disclosure, the Department’s role is “making sure consumers are not deceived by our licensees when they purchase title insurance and close on a property.”  The Department enforces the Unfair Insurance Trade Practices Act, the scope of which is defined in F.S. 626.9541.  This includes deceptive practices relating to premium charges and services provided by title agents, including charges for closing services.   

In the present market, title agents are faced with more and more third-party charges that, if incorporated into the charge for closing services would increase the charge significantly and may result in consumers paying for services that were not necessary for their closing.  For example, not every closing involves a mobile notary.  Delivery service charges vary between closings.  There are more examples, but in summary we can conclude that every closing is unique, and the consumer is better served if some of the third-party charges related to closing are charged to the consumer based upon their circumstances. 

FLTA Meets With DFS For Clarity and Next Steps

To obtain a clear understanding between the title industry and the Department regarding this important issue, the leadership of the FLTA, including the Executive Director and representatives of the Agent’s Section and the Insurer’s Section, met with Greg Thomas, Director of the Division of Insurance Agent and Agency Services, and his staff on February 22, 2019.  The meeting had a friendly tone and the FLTA expressed appreciation to the Director and his staff for agreeing to meet with the FLTA representatives. 

At the meeting, the Department again stated that it does not seek to regulate charges for closing services, including the practice of passing through third-party charges to consumers.  We were reminded that the CFPB provides guidance on practices relating to charges contained in a closing disclosure.   The Department stressed its focus is on deceptive practices, which was described in one example as quoting or advertising a low charge for closing services and then surprising the consumer with several third-party fees and “junk fees” immediately prior to or at closing.  The Department confirmed for us that if all charges, including third party “pass through” charges, are disclosed to the consumer and agreed upon by the consumer while the consumer can still shop, then the Department is satisfied because the practice is not deceptive.  The message from the Department was to treat consumers fairly by making sure the consumer is aware of charges in advance and agrees to the charges.

The Department recognizes that sometimes a last-minute charge is unavoidable.  For example, a person may be snowbound in a city and a mobile notary becomes necessary.  The Department does not have an issue with such a charge, and instead is focused upon deceptive practices, which is a pattern of activity.  The Department did state that it might prosecute a single act if the act were egregious and harmful to the consumer. 

Another issue addressed at the meeting was the practice of paying third party charges, such as a charge for a municipal lien search, outside of closing directly to the company providing the search.  The Department stated that such practices may distort rate making through data calls if these charges are not listed on the closing disclosure or settlement statement as “Paid Outside Closing,” or “POC.”  The Department noted that it does not directly regulate this practice if it’s not done in a deceptive manner, but the CFPB does regulate the practice of listing all charges related to the settlement on the closing disclosure.

Filing Complaints: Details are Important

Director Thomas pointed out that the Department regulates approximately 900,000 licensees and conducts more than 1000 audits per year, with a focus on identifying deceptive practices.  The title industry is not singled out.  The Department staff encourages the filing of complaints by licensees if a competitor’s deceptive practice is identified.  While it’s possible to make a complaint anonymously, the Department asked that any complaint include the name and identifying information of the party being reported, along with a detailed description and documentary evidence, if available, in support of the complaint.  The Department recognized that title agents do not control the entire settlement process, and often the offending parties may not be regulated by the Department.  The Department will help to the extent it can and will refer violations to other regulators when appropriate.The Department can be reached directly for questions and complaints at Title@MyFloridaCFO.com.

The FLTA thanks Director Thomas and his staff for meeting with us and for the clarification of the Department’s position.  While the Department stated that no further Guidance on this issue is being considered, we will continue to work to keep you informed regarding regulatory developments.

Your Association Hard at Work!

The above is not legal advice, should you have specific questions you should contact your counsel or DFS directly, title@myfloridacfo.com.

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DFS: Repeals and Replaces Interpretation

As you can imagine, this week has been very busy for FLTA. Following the initial posting of the interpretation of 3rd party fees we have hosted numerous meetings and conversations addressing our members' concerns. As a result, DFS has repealed their initial statement titled "Third Party Fees" and replaced it with an entirely different clarification titled "Title Insurance Agency Fees".

February 6: Initial "3rd Party Fees" statement posted

February 13: Posting removed

February 14: New "Title Insurance Agency Fees" statement posted

We applaud DFS's swift action and attention to this matter, and look forward to continued dialogue of working together.

Be sure to read and understand the new bulletin through these links:

Compliance Information: Title Agents

Compliance Information: Title Agencies

(Click "Title Insurance Agency Fees")

By: Nancy Baumann, Agents' Section Chair, Sun Title Insurance Agency

This is a challenging time of year for Florida Title Agents.  In addition to having to constantly adjust to the continuing demands of rapidly changing technology, Cyber Security, Identity Theft, Fraud, Protection of Escrow Funds and for the last five years we have been struggling with the Dreaded Data Call.

What it is.  The Florida Data Call for title agents was created in 2014 by the state’s Office of Insurance Regulation (OIR).  Its stated purpose is to collect revenue, loss and expense data from every title agency in the state to assist the OIR in the analysis of title insurance premium rates, title search costs and the overall condition of the title insurance industry in Florida.  Every one of us is required to maintain data on a calendar year basis and to submit this detailed financial information annually to the OIR not later than May 31 each year.  So, data for the first applicable calendar year, 2014, was due June 1, 2015 and now it is due by May 31, 2019.  Failure to timely submit all data required of an agent is punishable by fines, other penalties and even the potential loss of an agent’s license. 

Those darned reports.  The Office has promulgated forms we are required to use for our reporting.  The reports require us to fit all of our financial data into accounts that the Office has defined.  The earliest forms promulgated for the annual reports were confusing at best.  We believe that led to the transmission to the OIR of inaccurate information.  Since then, FLTA has provided technical expertise to the Office in an effort to make the data collection more accurate and to make compliance by us easier.  Our work has seen results. 

FLTA working for you.  While Data Call compliance can still be burdensome, it has gotten better with the help of our association.  Shelley Stewart is the chair of the FLTA Data Call Committee.  She has spent many hours giving assistance to OIR in-person in Tallahassee, on the telephone and in emails.  She has been working on and refining the reports the law requires of us.  Her goals are to be sure the data collected reflects all the good work title agents do to earn their commissions and fees and to ease the burden on agents for data collection and reporting.  In a 2015 report, OIR has referred to the input of FLTA agents and underwriters as “tremendous help.”  View the recommended redline report by FLTA delivered to OIR earlier in January.

Don’t harm yourself.  The National Association of Insurance Commissioners (NAIC) has noted that data calls in other states do not fully capture the agent experience as it pertains to items caught and corrected prior to issuance of a title insurance policy.  That could lead to undercompensating insurance agents who could see the states cut their rates.  At the specific request of title agents, most of whom are members of FLTA, the OIR included in its Data Call a Schedule B, designed to “capture the agent experience as it pertains to items caught and corrected prior to issuance of policy.”  But, here is the rub:  If agents do not take the time to fully prepare their respective Schedule Bs, that information will not make it into the Data Call, the regulators will not fully see what you do to earn your portion of the title insurance premium, and you could see your revenue being cut by the state.  So, please, take every bit of your Data Call reporting seriously.  Fully provide the information the report calls for.  Your livelihood depends on it as does the health of the title industry in Florida.

More information.  You can get the current Data Call forms from the Office of Insurance Regulation website and FLTA has also prepared webinars and other information to help you with your compliance with this law.

When a cyber security breach occurs whether hacking, spoofing, Business Email Compromise or other, alert the financial institutions followed by the FBI and local enforcement agencies. Be sure to log everything and use FLTA's Rapid Response Worksheet.

It is strongly encouraged to have a plan and assign roles ahead of time. Once an intrusion occurs every minute will count and each 24-hours that passes, the funds will be more difficult to recover.

On November 28, 2018, the Office of Insurance Regulation (OIR) hosted a workshop addressing the Agents' Data Call worksheet. The purpose was primarily for the public to provide input and comment for consideration to amend the Data Call. Following the workshop OIR opened a period of time for written responses to be received. 

With the help of member input received over recent months, several FLTA members and FLTA consultants worked tirelessly to draft a redline revision. As a result, an official submission was delivered to OIR for consideration this week.        

While many areas were reviewed for simplification or clarification, it was also recommended to omit certain areas. View the recommendations to stay in the know:

            Letter to OIR

            FLTA Redlined Data Call - Excel

From here, it is anticipated that OIR will consider the public submissions, draft their own revisions and then hold another public meeting for additional review and comment. The exact timing of this is not known at this time and these changes (should they be adopted) will not impact the current Data Call deadline of May 31, 2019 for 2018 data.  

After hosting it's first committee meeting of the year, the Cyber Security Committee warns of a new Phishing Scam focused on title agents. With the use of email spoofing a member received an email from what appeared to be a local municipality requesting a proposal for several services related to the sale of deed restricted town homes. After contacting the presumed sender it was verified they had not been the sender of the email. It is not known what the outcome could have been had a response been given.

The Committee stresses the importance of verifying.

ALTA Advocacy Update

The Financial Crimes Enforcement Network (FinCEN) announced Nov. 15 the issuance of revised Geographic Targeting Orders (GTOs) that require U.S. title insurance companies to identify the natural persons behind shell companies used in all-cash purchases of residential real estate.

The purchase amount threshold, which previously varied by city, is now set at $300,000 for each covered metropolitan area. FinCEN is also requiring that covered purchases using virtual currencies be reported. FinCEN also is dropping the confidentiality provision and removing GTO coverage for purchases by trusts. The extended GTOs run from Nov. 17 through May 15, 2019.

Covered areas include:

• Texas: Bexar, Tarrant and Dallas counties
• Florida: Miami-Dade, Broward and Palm Beach counties
• New York: Boroughs of Brooklyn, Queens, Bronx, Staten Island and Manhattan
• California: San Diego, Los Angeles, San Francisco, San Mateo and Santa Clara counties
• Hawaii: city and county of Honolulu
• Nevada: Clark County
• Washington: King County
• Massachusetts: Suffolk and Middlesex counties
• Illinois: Cook County

FinCEN reported that previous GTOs provided valuable data on the purchase of residential real estate by persons implicated, or allegedly involved, in various illicit enterprises including foreign corruption, organized crime, fraud, narcotics trafficking and other violations. Reissuing the GTOs will further assist in tracking illicit funds and other criminal or illicit activity, as well as inform FinCEN’s future regulatory efforts in this sector.

Today’s GTOs cover certain counties within the following major U.S. metropolitan areas: Boston; Chicago; Dallas-Fort Worth; Honolulu; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; and Seattle.

FinCEN praised the continued assistance and cooperation of the title insurance companies and ALTA in protecting the real estate markets from abuse by illicit actors.

A currency transaction report must be filed with FinCEN if these things occur:

• Location (deal occurs in one of the areas included in the GTOs)
• All-cash deal (no financing)
• Purchase price exceeds $300,000
• There’s a corporate buyer
• Purchase price paid via monetary instrument, wire transfer or virtual currencies

The report must include:

• Information about the identity of the individual primarily responsible for representing the buyer. The title company must obtain a record of the individual’s driver’s license, passport of other similar identification
• Date of closing of the covered transaction
• Total amount transferred in the form of a monetary instrument
• Total purchase price of the covered transaction
• Address of real property involved

If the purchase involved in the covered transaction is a limited liability company, the underwriter must provide the name, address and taxpayer identification number of all its members. Additionally, covered title companies must retain all records relating to compliance with the order for five years, store the records so they are accessible with a reasonable period of time and make the data available to FinCEN or other law enforcement or regulatory agency, upon request. Under the Bank Secrecy Act, covered businesses must retain all records relating to compliance with the GTOs for at least five years from the last day that the GTOs are effective (including any renewals).

ALTA has developed several tools to help members comply with the order.

Companies with questions can email FinCEN at FRC@FinCEN.gov.

We would like to update you on the status of events as it relates to ordinance 18-12 amending section 18-20.2 of the Miami | Dade County Code.

On November 8, 2018, the Miami Dade Board of County Commissioners passed an additional 120-day delay in implementing this ordinance allowing the Commissioner's office to continue to work with the real estate industry in search of a solution to meet the commission's needs. This shifts the implementation date to March 18, 2019. 

You may read the revised ordinance implementing the 120-day delay here.

This past Spring, the Florida Legislature passed several laws affecting Title and many supported by FLTA. Below are some of those laws going into effect this July. This is not to be a complete list. 

CS/HB 7087/ Taxation (Interspousal transfer and exemption from documentary stamp): Amends Florida Statute section 201.02. Real property being transferred due to a divorce is exempt by statute from documentary stamp taxes. Ironically, if one owns real property, gets married later, and wishes to add his or her new spouse to title, documentary stamp taxes would be required. There is no statutory exemption. An exemption for interspousal transfer from documentary stamp taxes was signed into law and creates an exemption for the above scenario.
Effective Date: July 1, 2018
Chapter No. 2018-118

CS/SB 512/ Homestead Waivers: Provides language which may be used to waive spousal homestead rights concerning devise restrictions, etc.
Effective Date: July 1, 2018
Chapter No. 2018-22

CS/HB 617/ Covenants and Restrictions (MRTA): Covenants and Restrictions; Authorizes certain parcel owners of a community not subject to HOA to use specified procedures to revive certain covenants or restrictions; revises interests & rights protected by filing for record within specified timeframe; revises & provides provisions relating to covenants and restrictions, including extinguishment, validity of notice, length of time certain covenants and restrictions are preserved, filing of notices, notice content requirements, requirements of property associations, & validity & enforceability.
Effective Date: July 1, 2018
Chapter No. 2018-55

CS/HB 631/ Possession of Real Property: Possession of Real Property; Authorizes person with superior right to possession of real property to recover possession by ejectment; provides that person entitled to possession of real property has cause of action to regain possession from another person who obtained possession of real property by forcible entry, unlawful entry, or unlawful detainer; prohibits local government from enacting or enforcing ordinance or rule based on customary use; provides an exception; creates, revises, & repeals related procedural provisions.
Effective Date: July 1, 2018
Chapter No. 2018-94

CS/HB 661/ Business Filings: Authorizes certain persons and entities to correct certain documents; provides that correction filed for certain reasons are not subject to department fee; requires department to send notice of filing of record through e-mail or send copy of document to mailing address of entity, representative, or agent; provides notice requirements for department if record changes entity's e-mail or mailing address.
Effective Date: July 1, 2018
Chapter No. 2018-58

CS/CS/HB 483/ Unfair Insurance Trade Practices: Revises types, value and frequency of advertising and promotional gifts that licensed insurers or their agents may give to insureds, prospective insureds, or others; authorizes such insurers or agents to make certain charitable donations on behalf of insureds or prospective insureds; prohibits title insurance agents, agencies, and insurers from giving insureds, prospective insureds, or others merchandise in excess of specified value; authorizes certain licensed insurers and agents to give specified complimentary services or discounted rates on specified services.
Effective Date: July 1, 2018
Chapter No. 2018-149

MIAMI - DADE ORDINANCE UPDATE EFFECTIVE DATE DELAYED TO MID-AUGUST 2018 We would like to take an opportunity to update you on the status of events as it relates to ordinance 18-12 amending section 18-20.2 of the Miami | Dade County Code. We are pleased to share the Board of County Commissioners has passed an additional 90-day delay in implementing this ordinance allowing the Commissioner's office to work with the Title and real estate industry in search of a solution to meet the commission's needs.  We would like to thank Commissioner Diaz, District 12, for his support and leadership in putting this delay forward. We, furthermore, very much look forward to working with the Commissioner and his team to come to mutual solution. You may read the revised ordinance implementing the 90-day delay here. It is important to note the Mayor does have a 10-day window to veto this milestone. We do not anticipate this taking place, however it is important to note. The FLTA team will keep you updated as we work to obtain additional information.