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

• A. A sham affiliated business arrangement.
• B. A legitimate referral arrangement.
• C. A standard closing-cost scheme.
• D. A permissible fee-sharing agreement.

Answer: (A)

This situation hinges on recognizing an affiliated business arrangement that has no legitimate purpose beyond extracting extra fees. When an AfBA exists solely to collect excessive charges from consumers and to divide those funds among the participants, there’s no real service being provided in exchange for the money. That makes it a sham—an arrangement that is meant to disguise kickbacks and improper compensation rather than serve a true business necessity. In contrast, a legitimate referral setup would have a genuine service, proper disclosure, and reasonable, transparent fees. A standard closing-cost scheme or a permissible fee-sharing agreement implies legitimate services and compliance with rules around disclosures and fair pricing, not deception or illegal profit.