Attorney General Brian L. Schwalb today announced that Allied Title & Escrow, LLC (Allied), KVS Title, LLC (KVS), Modern Settlements, LLC (Modern), and Union Settlements, LLC (Union) will pay a combined $3,290,000 after an investigation by the Office of the Attorney General (OAG) revealed the widespread use of illegal kickback schemes in the title insurance market. As part of the scheme, title companies offered real estate agents discounted ownership interests and lucrative profit sharing in exchange for business referrals that boosted the companies’ revenues. These conflict of interest-plagued, anticompetitive arrangements limited District homebuyers’ ability to shop for the best price and service when purchasing title insurance and escrow services and hurt law-abiding competitors in the title insurance industry, in violation of the District’s Consumer Protection Procedures Act (CPPA).

“District residents are entitled to make fully informed decisions about how to spend their hard-earned money, especially when it comes to making the high stakes purchase of a home,” said Attorney General Schwalb. “These four companies violated the most fundamental principles of a free and fair marketplace: they exploited consumers, limited their choices, and hurt other businesses that play by the rules. Today, we’re exposing and putting an end to these elaborate and illegal kickback schemes.”

Required by most lenders for home loans, title insurance protects a lender and a homebuyer from defects in a title to property, such as a previous owner’s debts. Real estate agents commonly suggest title insurance companies to their clients. However, both federal and District law prohibit kickbacks and other forms of compensation for the referral of title insurance and escrow business. These laws ensure that real estate agents act in the best interests of their clients—rather than themselves—and help prevent closing costs and fees from becoming artificially inflated by anticompetitive practices. While federal law allows for certain affiliated business arrangements that meet specific requirements, District law is more stringent and does not have such an exception.

OAG’s investigations found that Allied, KVS, Modern, and Union violated District law by providing real estate agents exclusive, lucrative, and discounted investment opportunities either in the companies themselves or in shell entities they created to induce the real estate agents to make business referrals that generated increased revenues for the companies. In return for the referrals, the agents received kickbacks in the form of a split of the profits. Modern and Union were created for the explicit purpose of recruiting agents to refer title insurance business to them in return for a share of the profits. Allied and KVS created shell companies for the same purpose.

In addition to profits from referrals, Allied compensated real estate agents for participating in the scheme by organizing and hosting multiple parties on yachts in the Chesapeake Bay. These yacht parties rewarded the agents for referrals, sought to ensure their continued loyalty, and incentivized future referrals.

OAG’s investigation revealed that the financial incentives these companies provided to real estate agents led those agents to aggressively steer their homebuying clients to the companies in ways that reduced buyers’ ability to shop for the best price or service. This behavior inhibited competition in the District’s title insurance and escrow market, and it harmed other title companies that followed the law but lost business to the companies operating the unlawful schemes.

Under the terms of the agreements:

• Allied will pay $1.9 million to the District.
   
• KVS will pay $1 million to the District.
   
• Union will pay $325,000 to the District.
   
• Modern will pay $65,000 to the District.
   
• The District will devote up to $1.75 million from these settlements to restitution for affected consumers. OAG will share more information with homeowners in the coming months.
   
• All four companies agreed to end the practice of giving real estate agents consideration for the referral of title insurance business and will either cease their title insurance operations in the District or divest real estate agents from their ownership interests in the shell companies.

OAG appreciates KVS immediately ceasing its practices and cooperating with the investigation. Modern and Union were also cooperative with OAG’s investigation, and all four companies quickly agreed to end these practices before the investigation concluded.

OAG is continuing to investigate the issue of kickbacks across the title insurance industry to protect consumers, provide a level playing field for companies that follow the law, and ensure a competitive marketplace. 

Copies of the settlement agreements are available here for Allied, KVS, Union, and Modern.

These matters were handled by Assistant Attorneys Generals Marcia Hollingsworth, Emily Barth, Jorge Bonilla Lopez, and Lindsay Marks, Deputy Director of the Office of Consumer Protection Kevin Vermillion, and Director of the Office of Consumer Protection Adam Teitelbaum.

How to Report Unfair Business Practices

OAG protects DC residents from fraud, exploitation, and deceptive business practices by investigating and mediating consumer complaints, educating residents about their rights, and taking legal action against businesses and individuals that harm residents and break the law. Since January 2023, OAG has obtained nearly $50 million through enforcement actions and settlements on behalf of DC consumers.

To report scams, fraud, or unfair business practices, contact OAG’s Office of Consumer Protection:

Submit a complaint online at: https://oag.dc.gov/consumer-protection/submit-consumer-complaint
Call the consumer protection hotline at (202) 442-9828
Send a complaint via email to consumer.protection@dc.gov