The state’s Department of Financial Services issued final regulations Wednesday aimed at stopping “unscrupulous practices” in the title insurance industry.

One of the finalized regulations clarify the rules around marketing expenses, including meals, entertainment and ancillary fees that title agents or title insurers may charge a customer at closing.

Another regulation finalized by the state agency requires title insurance companies and agents that generate a portion of their business from affiliations to function separately and independently from any other affiliates. Title insurance companies and agents must be able to accept business from other sources as well.

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2015 investigation


The regulations were born from a 2015 investigation by the department, which found that title insurance companies, real estate agents and others who order title insurance on behalf of clients spent millions of dollars on incentives to attorneys and real estate agents that officials charged to consumers as marketing costs, the DFS said in a press release. The incentives are a violation of the state’s anti-inducement provision of the state’s insurance law.

The finalized rules provide a list of prohibited expenditures, as well as a list of permitted ones. The prohibited expenditures include tickets to sporting events or concerts, gifts, outings or parties. Meals and beverages are prohibited unless they “are without regard to insured status or conditioned directly or indirectly on the referral of title
business, and offered with no expectation of, or obligation imposed upon, to refer, apply for or purchase insurance,” the regulation says.

Additionally, title insurance companies will also have to submit new rate applications to establish future rates that exclude all expenses that are prohibited in an effort to reduce the rates charged to customers.

The department’s Superintendent Maria Vullo said in a statement that the regulations “end the widespread practice of using meals and entertainment as inducement for title insurance business.”

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Fair closing costs


“New Yorkers can now rest assured that they will know exactly what they are paying for during the closing process and that they will pay only their fair closing costs,” Vullo said.

Robert Treuber, executive vice president of the New York State Land Title Association, which represents the industry, said in a statement to the New York Law Journal that the group provided input to the DFS over the new regulations, but the “end product does not serve the people of New York, despite its good intentions.”

The regulations, he added, will have “major fallout” for the title insurance industry and consumers.

“We believe the new regulations will force small, local title insurance companies to close, costing jobs and making the market ripe for take-over by multistate conglomerates, thereby reducing the options available to consumers,” Treuber said.

He added, “we understand and appreciate what DFS is trying to accomplish with these regulations, but disagree with the assertion that there will be any real benefit to consumers. The title industry is continuing to study the regulations and looks forward to engaging the DFS in future discussions regarding some of the elements of the regulations, including its interpretations.”

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Guidance to state chartered credit unions


Also this week, the department issued guidance to state chartered credit unions on setting methodology for evaluating the designation of a New York state chartered credit union as a low-income credit union, similar to federal credit unions. The guidance is in an effort to expand financial services to low-income individuals, the DFS said Thursday.

A state chartered credit union must show that a majority of its members make 80% of the average income of all wage earners, or their family income falls below 80% of the median U.S. household income, or that family or individual income is 80% or less than the median family or individual income for the metropolitan area in which the member resides or in the national metropolitan area, whichever is greater. The credit union then has to provide documentation that it satisfies the “80% test” to the department.

Josefa Velasquez is at staff writer for the New York Law Journal. Contact her at [email protected]. Twitter: @j__velasquez.

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Josefa Velasquez

Josefa Velasquez is a regulatory and Court of Appeals reporter for the New York Law Journal based in Albany, N.Y. Contact Josefa Velasquez at [email protected]. Twitter: @j__velasquez