SB 577 — Title Insurance Kickbacks Clarification (NC, 2025)
Status and procedural timeline
- Bill number: SB 577
- Title: Title Insurance Kickbacks Clarification
- Introduced / First reading: March 26, 2025 (Passed first reading)
- Effective date (as enacted): December 1, 2025 (applies to offenses committed on or after that date)
Purpose / intent
- To clarify and tighten the existing prohibition on paying or receiving kickbacks, rebates, commissions, or other unearned payments in connection with title insurance in real estate transactions, and to specify permissible exceptions and defenses.
Key provisions
- Broad prohibition (subsection (a)):
- No person or entity involved in a real estate sale or settlement (including sellers, real estate agents, attorneys, lenders) may pay or receive, directly or indirectly, any kickback, rebate, commission, or other payment related to issuance of title insurance.
- Prohibition also applies to title insurance companies, agencies, and agents.
- Criminal penalty (subsection (b)):
- Violation is a Class 2 misdemeanor; penalty may include a fine up to $5,000.
- Specified exception / safe-harbor (subsection (c)):
- The prohibition does not apply if ALL of the following conditions are met:
1. Payment is made either (i) solely because of ownership of stock in a “bona fide” title insurance company/agency/agent, or (ii) from an employer to a bona fide employee (including sales commissions).
- “Bona fide” title insurer/agency/agent is defined to mean an entity that makes underwriting decisions (issues policies, binders, endorsements) and maintains a separate staff and office for those underwriting functions.
2. The purchaser of title insurance is not required to use any particular title insurer/agency/agent (except as allowed under federal RESPA regulations, 12 U.S.C. §2607(c)(5)).
3. Either:
a. At the time of referral, the purchaser was furnished a written disclosure that meets RESPA’s disclosure requirements (12 U.S.C. §2607(c)(4)) describing the referring party’s affiliation with the title insurer/agent; or
b. The required disclosure was not provided but the failure was unintentional and resulted from a bona fide error despite procedures reasonably adapted to avoid that error. In that event the person/entity asserting this defense bears the burden of proof in any judicial or administrative proceeding.
- Scope: applies to direct and indirect payments and referrals.
Who is affected
- Real estate sellers, brokers/agents, attorneys, lenders, escrow/settlement service providers, title insurance companies, agencies and agents, and consumers purchasing title insurance.
- Enforcement actors: state regulators and criminal prosecutors applying G.S. 58‑27‑5 and related consumer protection/regulatory frameworks.
Practical impact / considerations
- Clarifies lawful vs. unlawful payments tied to title insurance, codifying conditions under which common business relationships (stock ownership, employer commissions) may be permissible.
- Imposes clear disclosure requirements tied to RESPA for permitted referrals; preserves a limited “bona fide error” defense but shifts burden of proof to the defendant asserting it.
- Creates criminal exposure (Class 2 misdemeanor) for noncompliance, with fines up to $5,000.
- Defines a narrow “bona fide” insurer/agent standard (underwriting authority and separate staff) to prevent routing of payments through entities that are not true underwriting/title companies.
Reference
- Amends / restates G.S. 58‑27‑5 (North Carolina statutes governing title insurance kickbacks).
