This is an archived article that was published on sltrib.com in 2015, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
The ease with which a bill with an innocuous title breezed through the Utah Legislature masked the five-year on-and-off controversy that has dogged the Title and Escrow Commission, accused of using its powers to improperly investigate, prosecute and punish large out-of-state competitors.
SB143, Title and Escrow Modifications, was whisked through the Senate Business and Labor Committee in seven minutes with sponsor Sen. Curt Bramble, R-Provo, saying that all interested parties had signed off. Then it zipped through the Senate in less than two minutes with a 24-0 vote, and went through the final vote in the House of 72-0 after spending only seven minutes in the House Business and Labor Committee.
The bill, now awaiting the governor's signature, would remove the Title and Escrow Commission's power to impose penalties and also repeal its authority to conduct hearings and make rules related to judging a company or person for possible violations of Utah law.
Bramble told senators it represented a "hard-fought compromise" between local title companies and national ones with offices in Utah.
The Utah Land Title Association, which represents title insurers, had successfully argued for removal of portions of the original proposed bill and then supported the final version approved by the Legislature. Wade Taylor, president of the Land Title Association, said the group supported the bill because it clarified the relationship of the industry-dominated Title and Escrow Commission to the Utah Insurance Department, which has regulatory powers over the title industry.
"This bill resolved that question" of which entity has the final say in matters of investigations and fines, Taylor said, clarifying that the "ultimate decision" rests with the Insurance Department commissioner.
The ease of passage belies a contentious history of accusations that the Title and Escrow Commission was being used by local interests to protect themselves from outside competition — actions that this year's bill and legislation two years ago sought to rein in.
Despite its relative obscurity, the Title and Escrow Commission serves in an important area of many consumers' lives: purchasing a home, the biggest financial commitment most people will make. Title insurance provides a financial backstop against defective property titles that could cloud ownership or even void a sale. Escrow is the process where money is held and then disbursed to the proper parties as part of a property sale, for most people the largest chunk of money they will be involved with in their lifetimes.
Title insurance agents market title and escrow services to real estate agents, builders and mortgage professionals who steer borrowers to the title agents to purchase the policies. That relationship creates the incentives to churn up business by adding inducements.
Beginning in 1998, the industry was tapped for fees to fund a full-time state employee to investigate abuses. Attorney Peter Stevens was the first hired to do that.
"The practice of kickbacks, rebating, funding the catering of open houses and holiday parties, paying for sporting events, other entertainment, vacations, cellphones to cars, was so out of control that the industry drafted a marketing rule to prohibit the predatory practices" of several large underwriters and agents, said Stevens in testimony to a legislative committee.
Then in 2005, the Title and Escrow Commission was created by the Legislature in response to industry wanting more influence in regulatory actions, which largely stem from complaints by other industry players. In the beginning, the commission was dominated by local title agents.
In 2010, a company known as LSI Title Insurance Agency of Utah, a division of Lender Processing Services Inc., of Jacksonville, Fla., became the target of local agents.
The minutes of the Title and Escrow Commission's meeting Aug. 9, 2010, show that members complained that some companies were "taking business out of state."
Complaints were raised by commission members, including Canyon Anderson, an owner of Backman Title, which is aligned with giant First American Title Co. There were allegations that LSI's fees were 50 percent to 70 percent lower than other companies and that LSI was not properly licensed and used notaries for unauthorized tasks.
"LSI has caused a lot of companies to go under or come close because of the rates and services that they are offering," the minutes say, reflecting the discussion at the meeting.
Stevens, who had resigned as assistant Insurance Department commissioner in 2003, eventually became LSI's attorney. He asserted that LSI had complied with all Utah laws and was properly licensed. The company was targeted, Stevens alleged, because Backman Title and First American had lost a large client — Bank of America and its foreclosure unit ReconTrust — to LSI, according to an ethics complaint Stevens filed with the Utah attorney general's office.
The Department of Insurance investigated LSI and, in October of 2011, reached an agreement to settle the case for a $6,000 fine.
But in November, the Title and Escrow Commission declined to concur in the settlement and requested additional information from the Insurance Department. That prompted the assistant attorney general to advise the commission to remind members that they did not have investigatory powers and no authority to seek more information on the LSI probe.
The commission persisted. Believing the Insurance Department had ignored a large number of violations in agreeing to a $6,000 fine, it voted unanimously to impose a fine of $250,000.
LSI filed a complaint alleging bias and the Insurance commissioner, Neal Gooch, removed the Title and Escrow Commission from the case.
Eventually, in February 2013, under its new commissioner, Todd Kiser, LSI agreed to a $100,000 fine without admitting or denying violations.
The rumble led to a compromise in the 2013 legislative session in the form of HB47, which included provisions to make the commission more balanced, changing the makeup from four title agents to two agents and two underwriters, as well as one member of the public.
Another bill that year, HB256, reauthorized all administrative rules with one exception: It stripped the Title and Escrow Commission of any powers to investigate possible violations and impose its own penalties.
Still, the commission later proposed two rules that critics complained were new attacks on national title agencies and exceeded the commission's rule-making powers within Utah law.
Bramble in 2014 told members of the Business and Labor Interim Committee that the Administrative Rules Oversight Committee asked him to step in and take a look at the Title and Escrow Commission's actions in proposing new rules that went beyond its authority under the revisions to Utah law.
"The reason this issue is before this committee is a proposed rule was heard twice ... and the committee believed the proposed rule put forward by the Title and Escrow Commission went well beyond what the statute gave authority for and referred this issue back to this committee," Bramble said.
This year, Bramble sponsored and pushed through SB143, which says that while seeking concurrence from the commission on what penalties should be imposed, the Insurance commissioner has the ultimate regulator power to investigate and impose penalties.
Rep. Curt Webb, R-Logan, who also works in the title industry, earlier had spoken out about alleged attacks by national companies on local ones.
"We felt they were trying to neuter our laws," Webb said in an interview, but he carried Bramble's bill in the House and supported its passage.
The issues echo an ongoing dispute between the California technology/insurance broker company Zenefits and the Insurance Department over accusations that the department is acting to protect local health insurance brokers from competition. The department says it is just enforcing the law, and a bill to clarify that Zenefits and others like it can operate legally here was on Friday pending in the House.