Posted On: February 10, 2008

RESPA LAWSUIT ON ADMINISTRATIVE BROKERAGE COMMISSION (ABC) FEES

According to Kenneth R. Harney in his Washington Post article, Lawsuit Takes Aim at Junk Fees Administrative Brokerage Commission (ABC) fees have been charged by real estate brokerages across the United States and a RESPA class action lawsuit seeks to do away with this practice. Although HUD's RESPA division has not given guidance yet on whether they believe this practice is illegal or legal the general rule of thumb is that if a real estate brokerage does charge an ABC fee then they better document the services that were performed to demonstrate the fee they charged was legitimately earned.

If a brokerage just charges a $400.00 ABC fee on the borrower and admits they didn't perform any services to justify that amount then they could find themselves in deep trouble. The rule of thumb on ABC fees is that if one is charged by a real estate brokerage then the brokerage better account for what services were performed. An example of this would be the real estate brokerage charges an ABC to the borrower and the fee goes towards something like storage of documents and electronic scanning. There are several other examples of how to charge an ABC legitimately but if you don't do any of these functions then you could be held to be violating Section 8(b) under RESPA--the dangerous unearned fee provision.

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