The New York State Department of Financial Services (DFS) has announced new regulations aimed at reforming various title insurance industry practices, including practices involving title company and agency marketing expenditures and “inducements” (such as meals and entertainment) for the purpose of obtaining title insurance business. The regulations attempt to provide the title industry in New York with “clear” guidelines going forward. We are confirming, but it appears that certain of the new provisions may have already taken place, while others will take effect on December 18.
Linked here is a DFS press release describing the new measures. The new regulations are contained in the press release through two hyperlinks for those of you interested in reading them yourselves.
In a nutshell, the portion of the new regulations that relates to marketing expenditures would seem to prohibit title companies and agencies from paying for or providing the following, subject to certain exceptions (enumerated below):
The foregoing list is not intended to be all-inclusive, yet the list as promulgated is quite broad.
Notwithstanding the above limitations, certain expenses will be permitted so long as they are not conditioned (directly or indirectly) on the referral of title business, are not offered with the expectation of title business, and are “reasonable and customary, and not lavish or excessive.” These would include:
The regulations leave many unanswered questions, and reaction by the title industry to, and the fallout from these new changes, are still to be seen. For example, what effect do the new regulations have for title companies and agencies doing business in States other than New York? Does the list of proscribed expenditures apply to locales outside of New York State (e.g., a Giants game in New Jersey)? Can title companies still take tables at charitable events in New York, such as the annual Denver Hospital or Lincoln Center dinners, and fill the table with clients, potential clients, and others in the real estate industry (i.e., would the fact that the table falls within the “charitable contribution” exception cover such an activity)? What are the sanctions for violating the new regulations? Etc.
Morrison & Foerster’s New York Real Estate Group will continue to monitor the situation and advise accordingly. If you have any questions, please do not hesitate to reach out to any of our team members.