Wisconsin Real Estate Sales Practice Exam

Which federal legislation prohibits kickbacks in real estate transactions?

1. RESPA

2. TILA

3. HUD

4. FCRA

The correct answer is: RESPA

The correct answer is RESPA, which stands for the Real Estate Settlement Procedures Act. This federal legislation was enacted to protect consumers in the real estate transaction process by ensuring transparency in the costs associated with buying and selling real estate. A primary focus of RESPA is to prohibit kickbacks and referral fees that may increase the cost of settlement services unnecessarily. Kickbacks refer to the illegal practice where one party pays another party for the referral of business, potentially leading to inflated costs for consumers. By prohibiting these practices, RESPA aims to eliminate conflicts of interest and promote honesty among real estate service providers. This allows consumers to make more informed decisions and helps keep transaction costs more manageable. In contrast, the other legislation mentioned serves different purposes. TILA, or the Truth in Lending Act, aims to protect consumers in credit transactions by requiring clear disclosure of key terms and costs. HUD (Housing and Urban Development) is a federal agency that oversees housing programs but does not specifically prohibit kickbacks. The FCRA, or Fair Credit Reporting Act, is focused on the accuracy of consumer credit information and the privacy of financial information. Each of these laws plays an essential role in real estate and finance, but RESPA is specifically designed to address and prohibit kickbacks in real