The deal would provide refunds to buyers and sellers because the brokerage allegedly failed to disclose to customers that it had been paid by Home Security of America to promote HSA home warranties.
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Real estate brokerage Edina Realty will spend $3.5 million by the end of this month to resolve allegations that it took payments from home warranty companies to promote its products without disclosing the amounts paid to consumers. agreed to pay.
Minnesota Attorney General Keith Ellison announced the settlement on Tuesday, November 19th. The attorney general did not disclose that Edina received payments from Home Security of America (HSA) to promote HSA’s home warranties to Edina’s customers, and that the They claim that they were deprived of the right to connect. Make an informed decision as to whether or not to purchase such a warranty and mislead yourself into thinking that the warranty is for an Edina product.
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Law enforcement officials allege this violates Edina’s fiduciary duties of loyalty and disclosure to customers, the Minnesota Deceptive Trade Practices Act, and the Minnesota Consumer Fraud Act.
“Purchasing a home is the most expensive and important financial decision most Minnesotans will ever make,” Ellison said in a statement.
“Real estate agents like Edina are legally obligated to act in the best interests of their clients. After careful investigation, my firm has confirmed that Edina Realty The lawsuit alleges that the company breached its obligations by secretly accepting large payments from Of America and pushing home warranty contracts on unsuspecting customers.
“This settlement puts an end to these practices and recovers all secret payments that Edina received from HSA. Most importantly, today’s settlement puts an end to these practices and recovers all secret payments that Edina received from HSA. This money will be returned to the pockets of Edina customers who were misled into purchasing HSA coverage without being informed that Edina was receiving significant compensation.
Inman has reached out to Edina Realty for comment and will update this article if we receive a response. In the settlement agreement itself, Edina said he disputed the attorney general’s claims and denied breaking the law.
“Edina alleges that it has disclosed in writing to customers that it is advertising HSA home warranties in exchange for certain service fees and that this disclosure is signed by customers,” the agreement states. has been done.
According to the settlement, the intermediary “fully cooperated” with the attorney general’s investigation, and the HSA payments were made to the intermediary and not to the intermediary.
Under the agreement, Edina must pay $3.5 million by Nov. 25. That money will be used to provide first-year premium refunds to thousands of Edina buyer and seller customers who purchased HSA home warranties after July 1, 2018, and for the first year after purchasing the warranty. During the year, you filed a claim that was partially or completely denied, or you did not file a claim.
The attorney general cited the HSA website and said the current first-year premium for HSA home coverage for Minnesota residents is $545.
The agreement also requires Edina to terminate and cease entering into contractual relationships with third parties that pay Edina to promote products to Edina’s customers.
Broker also may not license its name or trademarks to any third party that sells services to Edina customers.
doug miller
Doug Miller, an attorney, real estate broker and executive director of the nonprofit Consumer Advocates in American Real Estate (CAARE), said Inman CAARE has been complaining about home warranties for more than a decade. .
“These products were the most complained about products on Angie’s list,” Miller told Inman in an email.
“When fiduciaries prey on their own customers, there have to be consequences.”
Frontdoor, the parent company of HSA Home Warranty, is a leading provider of home warranties in the United States, operating primarily under the American Home Shield brand.
American Home Shield agreed in 2012 to pay up to $26 million to resolve allegations that it paid illegal kickbacks to real estate brokers and brokers to sell its home warranties.
American Home Shield acquired HSA HomeWarranty in 2014, and Frontdoor also offers home warranties through its OneGuard and Landmark brands.
In addition to selling home warranties, Frontdoor also manages insurance claims and maintains a network of 16,000 contractors to process approximately 4 million requests for service annually.
“By offering financial protection against unplanned and costly home repairs, as well as the convenience of knowing your repairs are guaranteed by experienced professionals whose quality levels are continuously monitored, we We offer our customers an attractive value proposition,” the company said in its 2023 announcement. Annual report for investors.
Frontdoor says its technology platform “makes it easier for real estate agents to collaborate with us and, in turn, recommend our products to their customers.”
Editor’s note: This article has been updated with additional details about the HSA’s parent company. Inman Mortgage Editor Matt Carter contributed to this article.
Email Andrea V. Brambilla.
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