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Law Pro
Law Pro, Attorney
Category: Business Law
Satisfied Customers: 24870
Experience:  20 years experience in business law - sole proprietor, partnership, and corporations
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Business Law question. Referral fees. Good or bad idea for

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Business Law question. Referral fees. Good or bad idea for a small business? Most importantly, are they legal?
we are a very small financial services and we are wondering if we should offer referral fees to get noticed. Or maybe that is not the best way to get people to know about us? We do not do mortgages or real estate but every now and then we have client that we connect to those services. I see that many bigger firms are doing it without being considered a bribe.If we do it, what is the best way to approach it. Do companies advertise it directly or should it just be somewhere on the website? And if they approach someone in another company, do they need the owner's permission?
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What kind of financial services do you provide?
Customer: replied 4 years ago.

Hi Fred. We help business owners find loans

I think referral fees are great and we use them in the legal profession all the time. But you are clearly limited by statute as to what referral fees you can get.

However, you would have to be a licensed mortgage broker or licensed real estate agent/broker (pursuant to state law) AND such would have to be listed on a HUD1 pursuant to RESPA (federal law) to be able to get a referral fee.

So, unless those companies also have such working for them - they can't collect or be paid a referral fee.

In the legal profession - we are not legally allowed to fee split or pay anyone a finder's fee unless they are also a licensed attorney.

I'm not saying that some in the legal or other professions don't give "something" but it certainly can't be advertised or promoted.

So you could do this within your business practice for people referring customers to you for loans - but you would be limited to that legally.

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Customer: replied 4 years ago.

Thanks for your answer. So just to make sure I understand, if the loan is not real estate related I can give referral fees. But I'm wondering can the referral fee originate from signing up a client?

Thanks in advance!

It would depend on the type of loan - but I would think for most other loans you could.

But it would be dependent on the type of loan - no as to real estate certainly.
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