IBA Compliance Connection

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A bank employee’s husband works for an auto dealer in town. He occasionally refers auto loans to our bank. We do not compensate or encourage these referrals. The employee enters auto loans into our system, but she does not have any sales goals or incentives. Does that create a conflict of interest or other issues?

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We are not aware of any laws or regulations that would prohibit your employee’s husband from referring loans to your bank, given that neither your employee nor her husband receives compensation for these referrals. RESPA’s prohibition of kickbacks would not apply, as the loans are not secured by real estate and no compensation is changing hands.

We do recommend that you check your bank’s ethics policy or code of conduct, but it is unlikely that this situation would raise any issues, again because no compensation is changing hands.

Resources Relied On For Answer

  • RESPA, 12 USC 2607(a) (“No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.”)