Compliance Advisor

Question: We are exploring a marketing campaign where we will give the customer a $35 Butterball turkey certificate when they borrow $1,000 or more. My question is I want to make 100% certain I can run a campaign that requires them to get a loan in order to receive the turkey certificate?

Answer: There are a couple of things to consider when contemplating a ‘loan incentive’ program like this.

Banks can’t promote or engage in lotteries with the exception of certain savings lotteries under the American Savings Promotion Act of 2014. Under federal law, a lottery consists of three essential elements: (1) the offering of a prize; (2) the distribution of the prize by chance; and (3) the furnishing of a consideration by the participant. An incentive is not a lottery if everyone that obtains a loan receives the (same) incentive because there is no element of chance.

If it is a mortgage loan, is an incentive a RESPA Section 8 violation against kickbacks? The answer to that is ‘No.’ A settlement service provider can give an applicant / borrower incentives provided it is not in connection with the referral of business to a settlement service provider.

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Q: Can a lender give a borrower an incentive, such as a chance to win a trip or rebate, for doing business with the lender?

A: RESPA does not prohibit a lender or other settlement provider from giving the borrower an incentive for doing business with it as long as the incentive is not based on the borrower referring business to the lender.

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