An affiliated business arrangement established for the illegal purpose of collecting excessive fees from consumers and splitting them among participants is known as:

• A. A legitimate referral arrangement
• B. A sham affiliated business arrangement
• C. A disclosed affiliate arrangement
• D. A fee-sharing arrangement

Answer: (B)

A sham affiliated business arrangement is described here. It’s an arrangement that exists only on paper to extract excessive fees from consumers and split them among participants, with no real legitimate business purpose or service behind it. That misuse of an AfBA to disguise kickbacks and overcharges violates RESPA and related laws, making it illegal. In contrast, a legitimate referral arrangement or a disclosed affiliate arrangement involves real business purposes and proper disclosures to the borrower, and fee-sharing can be lawful when it's part of a bona fide relationship and clearly disclosed. But when the primary aim is to skim fees and distribute them illegally, it’s a sham.