The Consumer Financial Protection Bureau (CFPB) is putting mortgage comparison sites on notice, laying out scenarios regarding how certain platforms could be violating the Real Estate Settlement Procedures Act (RESPA) section 8.
If the mortgage comparison site “provides enhanced placement or otherwise steers consumers” to certain operators based on compensation, an operator is in violation of the RESPA section 8, according to CFPB’s advisory opinion published on Tuesday.
When the “non-neutral use or presentation of information has the effect of steering the consumer to use,” thus constituting referral activity, and when the operator receives a “payment or other thing of value” that is, at least in part, for the referral activity, a mortgage comparison site will be hit with a prohibited referral fee, the CFPB stated.
The term “thing of value” includes payments received by the operator under a contract agreement for the settlement service provider to participate on the platform in which referrals are being generated.
For example, an operator could provide the names and telephone numbers of all participating providers but only provide web links for a subset of higher-paying providers.
In other cases, the mortgage comparison site might list the lenders that pay more to the operator on the first page and rank them by mortgage rate. While the platform appears to have ranked all participants by interest rate, the second page would show other participants with the same or lower interest rates but are ranked lower because they pay less to the operator.
By non-neutrally using or presenting information on a mortgage comparison site, the operator is “putting a thumb on the scale,” the CFPB said.
“Consequently, the operator is no longer merely providing the most basic function of a digital mortgage comparison-shopping platform, which was identified in the Department of Housing and Urban Development (HUD) on computer loan origination systems (CLOs) policy statement – having information about the provider’s products made available to consumers for comparison with the products of other settlement service providers,” according to the advisory note.
Receiving payment for steering or otherwise influencing the consumer could also potentially implicate the Dodd-Frank Act‘s prohibition on unfair, deceptive, or abusive acts or practices (UDAAPs), the CFPB added.
Section 8 of RESPA, which became effective on June 20, 1975, was created with the intention to help consumers become better shoppers for settlement services and eliminate kickbacks and fees, which may increase the price of settlement services. The consequences of violating Section 8 include civil and criminal penalties.
