Bureau advisory opinion explains how digital mortgage comparison-shopping platforms might violate RESPA kickback prohibitions

Digital mortgage comparison-shopping platforms that give preferred placement or otherwise steer consumers to lenders based on the lenders’ compensation to the platforms are violating section 8 of the Real Estate Settlement Procedures Act (RESPA), the consumer financial protection agency said in an advisory opinion Tuesday.

The Consumer Financial Protection Bureau (CFPB) said it is illegal under RESPA for companies and individuals, including digital comparison-shopping platforms, to receive kickbacks and referral fees in connection with a transaction involving a residential mortgage or other real estate settlement service.

“Over the last year, mortgage interest rates have risen substantially. People looking for the best deal on mortgages or other settlement services often are turning to comparison-shopping platforms and mobile apps,” the bureau said in Tuesday’s release. “Many of the websites and applications claim to offer ranked lists of providers suitable to the individual consumer’s needs. After providing their personal data to an online site to get access or run a customized search, people reasonably expect a neutral and fair presentation of the providers that may best meet their mortgage or other settlement needs.”

The CFPB said its advisory opinion is aimed at helping law-abiding companies comply with the law. The opinion “does not create any new requirements, but rather offers clarity on how firms can navigate issues associated with digital mortgage comparison-shopping platforms,” the bureau said. The advisory opinion, it said, describes how such companies may violate RESPA and potentially other laws “if they coerce payments from mortgage professionals, unlawfully steer consumers, or engage in other illegal referral activities.”

It said such illegal activities include:

  • Presenting one or more service providers in a non-neutral way: The platform’s operator presents lenders based on extracted referral payments rather than the shopper’s personal data or preferences or other objective criteria. For example, the operator presents a lender as the best option because that lender pays the highest referral fee. However, the shopper is led to believe the lender was selected based on their shared personal data or preferences. In one variation, digital mortgage comparison-shopping platforms may receive payments from lenders to rotate them as the top presented option regardless of whether the highlighted lender is the best fit for the shopper.
  • Biasing the platform’s internal formula to favor preferred providers: The platform’s inputs or formula are manipulated to generate comparison options favoring higher-paying or preferred providers. For example, a platform’s formula is designed to steer shoppers to use providers in which the operator has a financial stake. In this case, the shopper is unaware that the platform’s formula was potentially designed to steer them away from non-preferred providers.

The advisory opinion will go into effect upon its publication in the Federal Register, the CFPB said.

Release: CFPB Issues Guidance to Protect Mortgage Borrowers from Pay-to-Play Digital Comparison-Shopping Platforms

Advisory opinion