Breaking News December 19, 2017: The NYSDFS today issued a statement delaying the implementation of certain aspects of Regulation 208, namely the prohibition on inducements being given in return for business. We’re not sure what a one month delay will do for firms in terms of compliance, but here is the statement…
DFS Statement Regarding 11 NYCRR 228
Given the important consumer protections and impact of the necessary reforms of the title insurance industry that DFS has implemented pursuant to Regulation 208, DFS recognizes that a longer implementation period may be necessary to ensure full compliance. Accordingly, DFS will commence enforcement of Section 228.2, Prohibition on Inducements for Future Title Insurance Business on February 1, 2018.
New York State Title Insurance Industry – Beginning December 18, 2017, ‘The Times They Are A-Changin”
For some attorney’s, developers and mortgage providers in New York who may have gotten used to watching games from Madison Square Garden’s Celebrity Row after having dinner at American Cut courtesy of their title insurance provider, those times appear to be quickly coming to an end!
In essence, after December 18, 2017, marketing and business prospecting tools that many title insurance providers in New York have utilized for many years will will now be prohibited and business will need to be obtained the old fashioned way…by earning it!
Earning it through the quality of the work provided to clients!
In-other-words, exactly how Hallmark Abstract Service has been earning the opportunity to gain our clients trust and loyalty since we opened our doors in 2008!
In addition, at some point in the near future (speculation is potentially June 2018) title insurance premiums will decline by 5%.
Beginning December 18th, The Following Will Now Be Violations Of New York State Department of Financial Services (NYSDFS) Regulation 208!
For the title insurance industry in New York State, unless there is a stay provided by the New York State Department of Financial Services (NYSDFS), serious changes in terms of allowable charges and the types of marketing that a title firm can do will both be curtailed.
Some of these changes, such as limitations on the mark-ups that firms are allowed to apply to ancillary or ‘junk fees’, will serve the consumer well as there are some players in the industry who have at times charged unreasonable amounts (commercial real estate deals are exempt from this one stipulation of Regulation 208).
Other items soon to be prohibited, however, appear to be basic marketing tools that exist in every business and industry. By this I mean taking a client or prospect out for lunch.
Marketing and Business Development
Consider this ‘non-exhaustive list of prohibited inducements and permissible marketing expenses’. Some can certainly be excessive and should be stopped, while others represent normal business development activities in most every industry.
What Are Title Insurance Underwriters And Title Insurance Agents In New York No Longer Allowed To Do?
‘DFS Insurance Regulation 208 identifies a non-exhaustive list of prohibited inducements and permissible marketing expenses. Section 228.2 of the regulation essentially repeats the anti-inducement provision found in Section 6409(d) of New York’s title insurance laws, prohibiting a title insurance corporation or title insurance agent from “pay[ing] or giv[ing] any consideration or valuable thing . . . as an inducement for, or as compensation for, any title insurance business, including future title insurance business, and maintaining existing title insurance business, regardless of whether provided as a quid pro quo for specific business.” To the extent the “valuable thing” is directed to any person or entity that acts as an agent, representative, attorney, or employee of the owner or mortgagee of real property, the regulation specifically prohibits a title insurance agency or title insurance company from providing any payment, expense, compensation or benefit associated with the following:‘ (Source)
Prohibited Marketing and Business Development Activities For Title Insurance Firms:
- Meals and beverages
- Entertainment, including tickets to shows or sporting events
- Gifts, including cash or gift cards
- Outings, such as vacations, golf trips, shopping trips or trips to country clubs
- Parties and open houses
- Providing assistance with business expenses of another person
- Use of premises, unless for a fair rental fee
- Paying fees or charges of any professional representing an insured in a transaction
- Providing free non-title services
Acceptable Marketing and Business Development Activities For Title Insurance Firms:
What can title insurance companies still do as long as expenditures are not lavish or excessive, terms which are extremely subjective?
- Incredibly political contributions are still permitted! You can’t take a client or prospect out for lunch, but you can ply a politician with campaign contributions. In our opinion prohibit one, prohibit the other.
- A promotional item or advertising of de minimis value with the company logo on it. What, you may ask, is the allowable de minimis value? In-other-words a dollar amount that may be de minimis in the minds of an underwriter such as First American is likely not the same amount that would be considered de minimis to Hallmark Abstract Service.
- Charitable contributions will still be allowed.
- CLE open to any attorney, not only real estate attorney’s.
- Periodic title insurance-related events with more than 25 people attending who are all from unaffiliated organizations.
- Marketing events as long as they are open to the general public.
Closers for both residential and commercial real estate deals will now be prohibited from accepting any gratuities from buyers or the attorney for the buyer if DFS Regulation 208 stands as it is written now!
If they accept one, it will be the title insurance firm that sent them at-risk for fine, forfeiture of license or both!
If you have any thoughts or comments on Regulation 208 or any aspect of the title insurance industry in New York, please contact Hallmark Abstract Service President Michael Haltman at firstname.lastname@example.org or at (646) 741-6101.
Michael Haltman, President
Hallmark Abstract Service