The CFPB published an Advisory Opinion on February 7, 2023, that sets forth the Bureau’s views on how RESPA Section 8 applies to Digital Mortgage Comparison-Shopping Platforms, including lead-generation websites. As explained further below, the Advisory Opinion focuses on ways in which the CFPB believes that such Platforms may be deemed to make referrals of settlement services in their interactions with consumers, interspersed with concerns about ways in which the CFPB believes that some such Platforms may be deceptive. Though the Advisory Opinion focuses on these platforms, its discussion of the underlying legal principles is expected to have implications for the CFPB’s interpretation and enforcement of RESPA Section 8 more broadly.
Digital Mortgage Comparison-Shopping Platforms (Platforms) are consumer-facing websites in which consumers provide their contact information, and sometimes additional mortgage-related information, which the Platform then uses (or purports to use) to facilitate a consumer’s comparison and selection of a settlement service provider. The Platform may also generate leads for settlement service providers.
The CFPB takes the position that if a Platform uses or presents information about settlement service providers in what the Bureau deems a “non-neutral” way, that has the effect of steering or otherwise affirmatively influencing a consumer’s selection of a settlement service provider, and thereby constitutes a “referral” under Regulation X’s broad definition. In the CFPB’s view, a “non-neutral” use or presentation of information involves presenting options to consumers based on criteria other than “neutral” criteria (such as APR, objective consumer satisfaction information, or other factors the consumer selects).
Under RESPA, even if the Platform’s presentation of settlement service providers is considered a referral, a Section 8(a) violation also requires a “thing of value” be given pursuant to an agreement or understanding. The Advisory Opinion focuses in this regard on financially-motivated unequal presentation of settlement service providers on Platforms (for example, where priority or emphasis is given to those who pay for such placement), but note that the CFPB takes the position that the “thing of value” can be any fee paid for participating in the Platform, even if all settlement service providers pay the same fee. Additionally, the Advisory Opinion suggests that, where there is a referral and a thing of value, it is likely that the facts will also establish an agreement or understanding through a pattern, practice, or course of conduct.
Although RESPA Section 8(c)(2) permits payment for goods actually furnished or services actually performed, the Advisory Opinion reiterates the longstanding position of the CFPB (and of HUD before it) that referrals are not compensable services under RESPA. Thus, if a Platform’s activities create a referral, as described above, the CFPB believes that any fees the Platform receives are, at least in part, not solely for compensable services. Additionally, the Advisory Opinion indicates that because “marketing” on a Platform is likely directed at a particular consumer, rather than to the general public, the CFPB believes that would constitute a referral, rather than a compensable service under Section 8(c)(2). However, if a Platform receives payments from settlement service providers to participate in the Platform, and the Platform neutrally uses and neutrally presents information to consumers, the Advisory Opinion suggests that would be compliant with RESPA Section 8 (absent any other facts that may call such compliance into question).
The Advisory Opinion discusses in detail HUD’s 1996 policy statement on computer loan origination systems (CLOs), the definition of which encompasses Platforms. The Advisory Opinion reiterates HUD’s position that CLOs receiving different fees from settlement service providers may be evidence of an illegal referral fee arrangement, while also stating that a RESPA Section 8 violation may be present even if all settlement service providers pay the same fee to participate on the Platform. Further, because the CFPB considers presenting a consumer with only one settlement service provider to be steering or affirmatively influencing a consumer, to comply with RESPA Section 8, Platforms should present consumers with a range of options. Indeed, the CFPB states that the more comparison options a consumer is given, the less likely it is that a Platform is steering consumers to certain settlement service providers.
The Advisory Opinion also provides a non-exhaustive list of examples of Platforms that would be found to be violating RESPA Section 8, including:
- presenting the highest paying settlement service providers as a “best match” for consumers;
- presenting options to consumers so that affiliates are ranked higher than non-affiliates; and
- “warm handoffs” when the settlement service provider who receives the lead is based on the provider immediately available rather than the provider most likely to meet the consumer’s needs.
The Advisory Opinion went into effect on February 13, 2023.