The Consumer Financial Protection Bureau (CFPB) has moved to curb digital mortgage comparison-shopping platforms from receiving referral fees, issuing an advisory opinion that outlines how companies violate the Real Estate Settlement Procedures Act (RESPA) when “they steer shoppers to lenders by using pay-to-play tactics rather than providing shoppers with comprehensive and objective information.” The advisory is a warning to digital marketing platforms of the potential consequences of business relationships with mortgage lenders. The CFPB has a direct sightline into the marketing activities of mortgage lenders though supervision and routine examinations, and has already put a target on digital marketing providers.

The CFPB’s advisory opinion describes how platform operations can violate Section 8 of RESPA by enhancing the placement of lenders or related service providers on the digital platforms, or by otherwise steering consumers to those lenders or service providers. in addition, the opinion provides illustrative examples.

“The game is sometimes rigged when companies that operate comparison-shopping platforms coerce payments to skew the offers presented to consumers instead of acting as fair referees,” said CFPB Director Rohit Chopra in a statement. “With digital mortgage comparison-shopping platforms, payments extracted from providers for steering shoppers are prohibited by the Real Estate Settlement Procedures Act (RESPA)—in contrast to payments for the service of including providers on a comparison-shopping platform that follows the law.”

The opinion builds on a long-standing U.S. Department of Housing and Urban Development (HUD) policy statement, issued in 1996, on what HUD then called computer loan origination systems (CLOs). “HUD used the CLO moniker as a blanket term for digital platforms that help consumers choose a product or service related to certain real estate transactions,” as described in Chopra’s statement. “Importantly, the policy statement clarified that referral fees paid to CLOs—referred to here as digital platforms—to unfairly advantage one company over another, which could increase closing and settlement costs, are illegal. The statement was issued under HUD’s authority to implement RESPA, which was passed by Congress in 1974 to ban kickbacks that increase mortgage costs and to ensure consumers are made aware of their settlement costs.”

The CFPB’s action to rein in the manipulation of digital mortgage comparison-shopping platforms is part of a broader all-of-government effort to end the illegal biasing of ostensibly neutral platforms. The CFPB previously took action to combat fake reviews on digital platforms in policy guidance, issued in March 2022, stating that companies posting fake reviews may violate the Consumer Financial Protection Act (CFPA) or other laws. In addition, the FTC brought an enforcement action and reached a settlement in February 2020 with an operator of a consumer loan comparison-shopping platform for allegedly deceptive conduct under the FTC Act, including paid steering of consumers to platform participants. According to Chopra, “If similar conduct is observed in the mortgage market, the CFPB will not hesitate to act.”

The CFPB also issued an interpretive rule in August 2022 to address digital marketing providers that commingle the targeting and delivery of advertisements to consumers with the provision of advertising “time or space.” The interpretive rule describes how “digital marketers that are involved in the identification or selection of prospective customers or the selection or placement of content to affect consumer behavior are typically service providers for purposes of the law,” as described in CFPB announcement on the interpretive rule. “Digital marketers acting as service providers can be held liable by the CFPB or other law enforcers for committing unfair, deceptive, or abusive acts or practices as well as other consumer financial protection violations.”

In addition, the CFPB notes that on February 1, 2023, the National Telecommunications and Information Administration (NTIA) called for changes to boost competition in mobile app markets. According to the report, “Similar to digital mortgage comparison-shopping platforms, mobile app stores act as marketplace platforms that are vulnerable to self-preferencing and manipulation. The NTIA recommended several policy changes, including requiring that the two main mobile app store operators, Apple and Google, cease self-preferencing their own apps by manipulating search or other ranking functionality or discriminating between their apps and similar competing apps.”

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