Ray Wenger at the Department of Financial Services has clarified the department’s interpretation of Fla. Stat. §626.112, which provides in pertinent part: 626.112 License and appointment required; agents, customer representatives, adjusters, insurance agencies, service representatives, managing general agents.— (8) No insurance agent, insurance agency, or other person licensed under the Insurance Code may pay any fee or other consideration to an unlicensed person other than an insurance agency for the referral of prospective purchasers to an insurance agent which is in any way dependent upon whether the referral results in the purchase of an insurance product. In his e-mail to one of the FLTA members, Ray explained: The Florida Statutes prohibit paying an unlicensed person for the sale of an insurance product. If the person is licensed then there is no problem. Or, the agency can pay bonuses or profit sharing based upon the overall success of the agency. So, if an agency had a good month, they may decide to issue a bonus to their employees in some amount that was based on the fact that income was good that month. However, the agency cannot issue a bonus check to an unlicensed person because the agency wrote “X” number of title insurance policies. Or, the agency should not be paying an unlicensed person a percentage of the money made from the sale of an insurance policy, etc. In other words, the unlicensed person may not be compensated for the agency writing an insurance policy. But, the unlicensed person can receive a profit sharing type of bonus based on the overall welfare of the agency, as long as it is not tied to the production of insurance policies or insurance premiums. Hope that helps. Ray Wenger Florida Department of Financial Services Bureau of Investigation - Title Section200 E Gaines Street Tallahassee FL 32399-0320 (850) 413-5697 (850) 488-5951 MyFloridaCFO/Agents Title@MyFloridaCFO There are four important points to note: (a) This e-mail is not an interpretation of the deceptive acts or practices statute §626.9541. As many of you will remember, the draft Unlawful Inducements rule under discussion last December (which will hopefully be resurrected in the near future) expressly provided that its prohibitions did not apply to “bona fide employees of a title agent or title agency or title insurer.” (b) Nor is this an interpretation of RESPA, which expressly permits payments to your own employees. See 24 CFR § 3500.14. (c) This provision probably does not apply to Title Insurers. See §627.776(2)(a). While the department does not agree, certain language of that provision might provide an arguable defense in any administrative prosecution of an agency for paying unlicensed persons. Discuss that with your legal counsel. (d) The Department may view a “per transaction” commission or one payable “only” out of the unregulated closing services fee as a disingenuous attempt to skirt the statutory prohibition. Any payment to an unlicensed person measured against the number of transactions, the size of the transactions, or the revenue from specific transactions attributable to that person or generally, is going to be closely scrutinized under the current law. While we don’t agree that how Title Agencies choose to compensate and incentivize their true employees was the “evil” the Florida legislature was attempting to address in this section, it is the Department’s interpretation and one they are enforcing. Recognizing that this dramatically affects how our members incentivize our marketing personnel, FLTA will be working with Ray and the Department to further clarify the parameters of this interpretation and permissible ways of incentivizing and compensating your marketing staff.
Posted on: Tue, 17 Sep 2013 20:18:56 +0000
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