On February 7, 2023, the CFPB issued an advisory opinion to protect Americans from double dealing on digital mortgage comparison-shopping platforms. According to the CFPB, companies operating these digital platforms appear to shoppers as if they provide objective lender comparisons, but may illegally refer people to only those lenders paying referral fees. The advisory opinion outlines how companies violate RESPA when they steer shoppers to lenders by using pay-to-play tactics rather than providing shoppers with comprehensive and objective information.
From CFPB Director Rohit Chopra’s statement:
“Given the rise in mortgage interest rates, it is even more important for homebuyers to shop and compare loan offers. We are working to ensure that online platforms are not manipulating their search results in order to coerce kickbacks from lenders.”
The RESPA prohibits companies and individuals, including digital comparison-shopping platforms, from receiving kickbacks and referral fees in connection with residential mortgage transactions. In light of the recent increases in mortgage interest rates, consumers are turning to websites and applications that promise to offer ranked lists of providers suitable to their individual needs. The CFPB issued the advisory option to assist law-abiding companies to comply with existing law by describing how they may violate RESPA, and potentially other laws, if they coerce payments from mortgage professionals, unlawfully steer consumers, or engage in other illegal referral activities. These illegal activities include the following:
Presenting one or more service providers in a non-neutral way. This happens when a platform’s operator presents lenders based on extracted referral payments rather than the shopper’s personal data or preferences or other objective criteria.
Biasing the platform’s internal formula to favor preferred providers. This include manipulating formulas to generate comparison options favoring higher-paying or preferred providers.
Read the CFPB’s news release here.
The full advisory opinion can be found here.