We recommend instituting safeguards addressing possible fair lending and UDAAP concerns, but we do not believe this practice would violate the RESPA prohibition of kickbacks for referrals of mortgage services.

The coupon program you described does raise some fair lending concerns, particularly because disseminating the coupons has the potential to have a “disparate impact” on a protected class (even if no one at the bank has any intent to discriminate). For example, if the coupons are distributed only at open houses for properties over a certain value, the coupons could disproportionately exclude a variety of protected classes. It would be prudent to inform the participating realtors about potential fair lending concerns and to require them to equally distribute the coupons to all potential buyers. We do think that making the coupons available to all customers in your bank lobby also would help mitigate these risks.

We do not believe that the use of these coupons would constitute an unfair, deceptive or abusive act or practice (UDAAP), provided that the text of the coupons is very clear and not misleading. However, the characterization of an act or practice as a UDAAP violation is highly subjective and sometimes unpredictable, and it would be prudent to remain sensitive to any possible UDAAP concerns raised by the coupons. We recommend carefully reviewing the exact coupons being used and monitoring their use throughout the duration of this marketing program (for example, are customers actually benefitting from the coupons, or is something in the fine print preventing their use?).

Also, we do not view the coupon program as violating RESPA’s kickback prohibition, which prohibits financial institutions from offering any “thing of value” to a realtor in exchange for a referral. A “thing of value” is broadly defined to include money, discounts, fees, and more. But the coupons are not a “thing of value” for the realtor — instead, they provide value to a future borrower. Additionally, from what you have told us, the coupons are not conditioned on a referral of mortgage business to your bank, provided that your marketing department does not select realtors for coupon distribution based on how much business they bring to your bank.

For resources related to our guidance, please see:

• Illinois Fairness in Lending Act, 815 ILCS 120/3 (No financial institution may “deny or vary the terms of a loan on the basis of the borrower’s race, gender, disability, or national origin.”)

• Illinois Human Rights Act, 775 ILCS 5/4-102 (“It shall be a civil rights violation for any financial institution, on the grounds of unlawful discrimination, to: . . . Deny any person any of the services normally offered by such an institution.”)

• Equal Credit Opportunity Act, 15 USC 1691 (“It shall be unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction (1) on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract); (2) because all or part of the applicant’s income derives from any public assistance program; . . .”)

• Consumer Financial Protection Act of 2010, 12 USC 5536(a) (“It shall be unlawful for (1) any covered person or service provider . . . (B) to engage in any unfair, deceptive, or abusive act or practice.”)

• Consumer Financial Protection Act of 2010, 12 USC 5531(b) (“The [Consumer Financial Protection] Bureau may prescribe rules applicable to a covered person or service provider identifying as unlawful unfair, deceptive, or abusive acts or practices in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. Rules under this section may include requirements for the purpose of preventing such acts or practices.”)

• FFIEC Interagency Fair Lending Procedures, page iv (“When a lender applies a racially or otherwise neutral policy or practice equally to all credit applicants, but the policy or practice disproportionately excludes or burdens certain persons on a prohibited basis, the policy or practice is described as having a ‘disparate impact.’ . . . The fact that a policy or practice creates a disparity on a prohibited basis is not alone proof of a violation. When an Agency finds that a lender’s policy or practice has a disparate impact, the next step is to seek to determine whether the policy or practice is justified by ‘business necessity.’”)

• Regulation X, 12 CFR 1024.14(b) (“No person shall give and no person shall accept any fee, kickback or other thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of a settlement service involving a federally related mortgage loan shall be referred to any person . . . A company may not pay any other company or the employees of any other company for the referral of settlement service business.”)

• Regulation X, 12 CFR 1024.14(d) (“Thing of value. This term is broadly defined in section 3(2) of RESPA (12 U.S.C. 2602(2)). It includes, without limitation, monies, things, discounts, salaries, commissions, fees, duplicate payments of a charge, stock, dividends, distributions of partnership profits, franchise royalties, credits representing monies that may be paid at a future date, the opportunity to participate in a money-making program, retained or increased earnings, increased equity in a parent or subsidiary entity, special bank deposits or accounts, special or unusual banking terms, services of all types at special or free rates, sales or rentals at special prices or rates, lease or rental payments based in whole or in part on the amount of business referred, trips and payment of another person’s expenses, or reduction in credit against an existing obligation. The term ‘payment’ is used throughout §§ 1024.14 and 1024.15 as synonymous with the giving or receiving of any ‘thing of value’ and does not require transfer of money.”)