Settlement of lawsuit by American Home Shield addresses important broker compensation, RESPA issues
In the wake of U.S. District Court approval of a class action lawsuit settlement agreement, American Home Shield officials said they were pleased that the court confirmed the compliancy of the company’s new broker compensation practices featured in its ProConnect program. In addition, the settlement fully released brokers and agents from any past liability for compensation by American Home Shield for home warranty sales in transactions covered by the Real Estate Settlement Procedures Act (RESPA).
“This ruling supports our position that our broker compensation program, ProConnect, is in compliance with RESPA guidelines and regulations,” said American Home Shield president and COO Dave Crawford. “We are pleased to receive this validation of what we consider to be the best and most compliant program in the industry. It’s great news, not only for us, but for the thousands of real estate professionals we work with across the country. ”
In his Final Approval Order, issued December 8, 2011, Judge R. David Proctor wrote that American Home Shield’s new broker compensation practices, which are featured in the company’s ProConnect program, are appropriate under RESPA and two HUD interpretations issued in 2010, stating that “[t]he business practices outlined in the Settlement make clear that AHS will not pay a Real Estate Professional for referring business to AHS. Instead, any payments to Real Estate Professionals will be for compensable services.”
Crawford said that, with many real estate professionals expressing concern over RESPA-related class action risks and costs, it was important to note that American Home Shield stands behind the propriety of not only of its new ProConnect program, but its previous compensation programs as well.
“The settlement is significant on many fronts, including the fact that it contains a release of past liability for real estate professionals who were compensated by us in RESPA-covered transactions,” he said. “We felt it was important to eliminate exposure for those who have done business with us.
“There’s been so much uncertainty and misinformation circulating in the industry, and we believe this settlement provides a clear, confident statement about our business practices.”
As the industry leader, American Home Shield developed its ProConnect program after consultation with industry experts, attorneys and real estate professionals with the express intent of providing a RESPA-compliant product, ensuring that brokers and agents could feel confident offering warranties to their customers in an environment of tighter regulations.
The 2008 Abney v. American Home Shield lawsuit alleged that the company violated the Real Estate Settlement Procedures Act through its compensation of real estate brokers in connection with the sale and marketing of home warranties. American Home Shield vigorously denied the allegations made in the lawsuit, and opted to settle the suit due to the potential expenses in defending the case. Details on the settlement are available at www.abneyclassaction.com.
About American Home Shield
American Home Shield helped found the home warranty industry in 1971 and remains an industry leader, servicing 1.4 million customers across 49 states. In addition to its core focus on home protection plans, the company recently introduced a preventative maintenance product in more than 40 states across the country. The Memphis-based company operates three customer service centers, employs over 1,700 employees and has a national contractor network made up of over 10,000 independent home-service contractors. American Home Shield is part of the ServiceMaster family of brands, one of the world’s largest and most versatile service networks. The company’s brands include TruGreen, Terminix, American Home Shield, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec.
With a global network of more than 6,900 company-owned, franchise and licensed locations, Memphis-based ServiceMaster is one of the world’s largest residential and commercial service networks. The company’s high profile brands are TruGreen, Terminix, American Home Shield, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec. Through approximately 24,000 corporate associates and a franchise network that independently employs over 31,000 additional people, the ServiceMaster family of brands serves more than 8.2 million customers every year. Our brands hold market-leading positions in residential and commercial lawn, tree and shrub care, termite and pest control, home warranties, furniture repair, home inspections, residential and commercial cleaning and disaster restoration. Go to www.servicemaster.com for more information about ServiceMaster or follow us at twitter.com/ServiceMaster or facebook.com/TheServiceMasterCo.