IBA Compliance Connection

Your go to source for compliance!

Is it legal for a bank to pay a referral fee for a commercial mortgage loan or an unsecured commercial loan? The fee would be paid by the bank and would not be part of the customer’s loan transaction. The person receiving the referral fee would not negotiate the loan and would be only introducing a potential customer to the bank.

—

by

admin

Yes, we believe a bank may pay a referral fee for a commercial loan, whether the loan is secured or unsecured.

We are not aware of any Illinois or federal law that would prohibit such an arrangement for a commercial loan. Although RESPA prohibits kickbacks for referrals of real estate settlement services related to consumer mortgage loans, these prohibitions do not apply to commercial loans (credit “primarily for business, commercial, or agricultural purposes”).  

For resources related to our guidance, please see:

  • 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.”)
  • RESPA, 12 USC 2606(a) (“This chapter does not apply to credit transactions involving extensions of credit— (1) primarily for business, commercial, or agricultural purposes; or (2) to government or governmental agencies or instrumentalities.”)