Real Estate Settlement Procedures Act (Regulation X); Digital Mortgage Comparison-Shopping Platforms and Related Payments to Operators, 9162-9170 [2023-02910]
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Federal Register / Vol. 88, No. 29 / Monday, February 13, 2023 / Rules and Regulations
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BILLING CODE 6450–01–P
BUREAU OF CONSUMER FINANCIAL
PROTECTION
12 CFR Part 1024
Real Estate Settlement Procedures Act
(Regulation X); Digital Mortgage
Comparison-Shopping Platforms and
Related Payments to Operators
Bureau of Consumer Financial
Protection.
ACTION: Advisory opinion.
AGENCY:
The Consumer Financial
Protection Bureau (CFPB) is issuing this
Advisory Opinion to address the
applicability of the Real Estate
Settlement Procedures Act (RESPA)
section 8 to operators of certain digital
technology platforms that enable
consumers to comparison shop for
mortgages and other real estate
settlement services, including platforms
that generate potential leads for the
platform participants through
consumers’ interaction with the
platform (Digital Mortgage ComparisonShopping Platforms). Generally, this
Advisory Opinion describes how an
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operator of a Digital Mortgage
Comparison-Shopping Platform violates
RESPA section 8 if the platform
provides enhanced placement or
otherwise steers consumers to platform
participants based on compensation the
platform operator receives from those
participants rather than based on
neutral criteria. More specifically, this
Advisory Opinion states that an
operator of a Digital Mortgage
Comparison-Shopping Platform receives
a prohibited referral fee in violation of
RESPA section 8 when: the Digital
Mortgage Comparison-Shopping
Platform non-neutrally uses or presents
information about one or more
settlement service providers
participating on the platform; that nonneutral use or presentation of
information has the effect of steering the
consumer to use, or otherwise
affirmatively influences the selection of,
those settlement service providers, thus
constituting referral activity; and the
operator receives a payment or other
thing of value that is, at least in part, for
that referral activity. Furthermore, if an
operator of a Digital Mortgage
Comparison-Shopping Platform receives
a higher fee for including one settlement
service provider compared to what it
receives for including other settlement
service providers participating on the
same platform, that can be evidence of
an illegal referral fee arrangement absent
other facts indicating that the payment
is not for enhanced placement or other
form of steering.
DATES: This advisory opinion is
effective on February 13, 2023.
FOR FURTHER INFORMATION CONTACT:
Brandy Hood, Joan Kayagil, or Michael
G. Silver, Senior Counsels, Office of
Regulations, at (202) 435–7700 or
https://reginquiries.consumerfinance.
gov/. If you require this document in an
alternative electronic format, please
contact CFPB_Accessibility@cfpb.gov.
SUPPLEMENTARY INFORMATION: The
Bureau is issuing this Advisory Opinion
through the procedures for its Advisory
Opinions Policy.1 Please review those
procedures for more information.
I. Advisory Opinion
A. Background
1. RESPA Section 8
The Real Estate Settlement Procedures
Act (RESPA) 2 provides a series of
protections for consumers who are
engaged in the process of buying a
home, applying for or closing on a
mortgage, making escrow payments, or
1 85
2 12
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purchasing other services associated
with most residential real estate
transactions.3 RESPA section 8(a) 4
provides that no person 5 shall give and
no person shall accept any fee,
kickback, or thing of value 6 pursuant to
any agreement or understanding,7 oral
or otherwise, that business incident to
or a part of a real estate settlement
service 8 involving a federally related
mortgage loan 9 shall be referred 10 to
any person. While RESPA section 8(a)
prohibits referral fees, RESPA section
8(c) provides that bona fide payments
for goods or facilities provided or
services rendered (which do not include
payments for referral fees) are not
prohibited by RESPA section 8.11
RESPA and its implementing
Regulation X 12 have been in effect for
nearly a half century. One of the reasons
for RESPA’s enactment in 1974 was
congressional concern over excessive
settlement costs. Congress found that
‘‘significant reforms in the real estate
settlement process are needed to insure
that consumers throughout the Nation
. . . are protected from unnecessarily
3 See generally 12 U.S.C. 2601 et seq. and
Regulation X, 12 CFR part 1024. Certain RESPA and
Regulation X provisions address mortgage servicing
and escrow issues (e.g., 12 U.S.C. 2605), which are
not the subject of this Advisory Opinion.
4 12 U.S.C. 2607(a). Regulation X, 12 CFR
1024.14(b), implements RESPA section 8(a)’s
prohibition.
5 See 12 U.S.C. 2602(5) (statutory definition of
‘‘person’’).
6 See 12 CFR 1024.14(d) (regulatory definition of
‘‘thing of value’’).
7 See 12 CFR 1024.14(e) (regulatory definition of
‘‘agreement or understanding’’).
8 See 12 CFR 1024.2(b) (defining settlement
service as ‘‘any service provided in connection with
a prospective or actual settlement’’ and providing
15 non-exhaustive examples). The regulatory
definition is based on the broad statutory definition
of settlement services in 12 U.S.C. 2602(3).
9 12 U.S.C. 2602(1). As the TILA–RESPA
Integrated Disclosure rule summarized, a federally
related mortgage loan ‘‘is broadly defined to
encompass virtually any purchase money or
refinance loan, with the exception of temporary
financing, that is ‘secured by a first or subordinate
lien on residential real property (including
individual units of condominiums and
cooperatives) designed principally for the
occupancy of from one to four families.’ ’’ 78 FR
79730, 79736 (Dec. 31, 2013) (quoting 12 U.S.C.
2602(1)). The term federally related mortgage loan
also includes certain other loans, such as reverse
mortgages and home equity loans and lines of
credit, that meet the other criteria of the definition.
10 See 12 CFR 1024.14(f) (regulatory definition of
‘‘referral’’).
11 12 U.S.C. 2607(c)(2) (‘‘Nothing in this section
shall be construed as prohibiting . . . the payment
to any person of a bona fide salary or compensation
or other payment for goods or facilities actually
furnished or for services actually performed’’);
accord 12 CFR 1024.14(g)(1)(iv) (‘‘Section 8 of
RESPA permits . . . [a] payment to any person of
a bona fide salary or compensation or other
payment for goods or facilities actually furnished or
for services actually performed. . . .’’).
12 12 CFR part 1024.
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high settlement charges caused by
certain abusive practices that have
developed in some areas of the
country.’’ 13 Among the RESPA statutory
purposes is the ‘‘elimination of
kickbacks or referral fees that tend to
increase unnecessarily the costs of
certain settlement services.’’ 14
Congressional committee reports noted
that kickbacks for the referral of
settlement service business were a
common practice in the real estate
industry and cited payments for
referrals of settlement services as a
factor in the inflated prices for those
services.15
Further, Congress in 1983 amended
RESPA to permit what are now called
affiliated business arrangements subject
to certain conditions.16 In doing so,
Congress recognized that settlement
service providers engage in reverse
competition for their business—that is,
they do not compete for a consumer’s
business directly, but rather compete for
and almost exclusively rely on referrals
from, e.g., real estate brokers or
lenders—and that this dynamic can
have deleterious effects on consumers
and markets beyond higher settlement
costs.17 One court, citing the legislative
and regulatory history concerning the
affiliated business arrangement
provisions, noted that ‘‘RESPA’s
overarching goal’’ was to ‘‘mitigat[e]
13 12
U.S.C. 2601(a).
U.S.C. 2601(b)(2).
15 See H.R. Rep. No. 93–1177, at 7 (1974) and S.
Rep. No. 93–866, at 6 (1974) (providing examples
where the payment or other thing of value
furnished by the person to whom the settlement
business is referred tended to increase the cost of
settlement services without providing any benefits
to the homebuyer, and noting that ‘‘[w]hile the
making of such payments may heretofore have been
necessary from a competitive standpoint in order to
obtain or retain business, and in some areas may
even be permitted by state law, it is the intention
of [this] section . . . to prohibit such payments,
kickbacks, rebates, or unearned commissions’’).
16 Housing and Urban-Rural Recovery Act of
1983, Public Law 98–181, section 461, 97 Stat.
1155, 1230 (1983) (codified as amended at 12 U.S.C.
2607(c)(4)).
17 As explained in a House Committee Report:
‘‘[T]he advice of a person making the referral may
lose its impartiality and may not be based on his
professional evaluation of the quality of service
provided if the referror or his associates have a
financial interest in the company being
recommended.’’ H.R. Rep. No. 97–532, at 52 (1982).
The 1983 RESPA amendments addressed questions
following RESPA’s enactment about ‘‘the legality of
more sophisticated transactions where . . . there
was a less obvious causal link between the referral
and the payment.’’ Minter v. Wells Fargo Bank,
N.A., 274 FRD. 525, 536 (D. Md. 2011). This arose
most frequently within the context of what were
then called ‘‘controlled business arrangements’’
where ‘‘one provider of one settlement service
maintained an enhanced relationship with a second
provider of a different settlement service, through
which each service provider captured the clients of
the other.’’ Id.
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market-distorting practices.’’ 18
Consistent with the notion that RESPA
section 8 addresses consumer harms
beyond settlement cost increases,
Regulation X provides that a RESPA
section 8 violation can occur even if the
consumer’s settlement costs do not
increase.19
2. Digital Mortgage ComparisonShopping Platforms
RESPA section 8 applies broadly, and
in many circumstances covers conduct
by persons who connect settlement
service providers to consumers who
may be interested in purchasing a home,
applying for a mortgage, or otherwise
using a settlement service provider in a
RESPA-covered transaction. This may
include selling the consumer’s contact
information (i.e., leads) to settlement
service providers. Leads are increasingly
sold through a variety of digital
platforms and related business
agreements.
In particular, some digital platforms
are structured as consumer-facing
websites or online applications that
allow consumers to search for and
compare options for mortgages or other
settlement services.20 These digital
platforms—in some cases called ‘‘online
marketplaces’’—can facilitate a
consumer’s choice among alternative
products or settlement service providers
and may be operated by settlement
service providers or third parties.21
Through their interaction with these
digital platforms, consumers often
provide their contact information to set
up an account, and sometimes they may
provide additional information that is
18 Id. at 538–39; see also Baehr v. Creig Northrop
Team, 953 F.3d 244, 253–56 & n.7 (4th Cir. 2020)
(finding that ‘‘deprivation of impartial and fair
competition between settlement services providers’’
was not sufficient to confer standing on a private
litigant under RESPA section 8’s statutory purposes
in absence of increased settlement costs, but noting
that increased settlement costs were not a
requirement for a statutory violation and that
governmental entities are not bound to the same
standing constraints as private litigants).
19 See 12 CFR 1024.14(g)(2) (‘‘The fact that the
transfer of the thing of value does not result in an
increase in any charge made by the person giving
the thing of value is irrelevant in determining
whether the act is prohibited.’’).
20 See Rory Van Loo, Rise of the Digital Regulator,
66 Duke L.J. 1267, 1281 (2017) (describing how
‘‘digital intermediaries’’ can list mortgage options
from specific financial institutions, permit
consumers to use mortgage calculators, or allow
consumers to input information to generate a
response as to whether they should refinance).
21 See Miriam Cross, Bank comparison sites recast
themselves, with celeb help and new services, Am.
Banker (Aug. 9, 2022) (describing how ‘‘[o]nline
marketplaces have revamped their branding or
adapted their strategy over the course of the
pandemic to maintain financial institution
partnerships and meet new customer needs’’ and
noting that ‘‘[b]anks and lenders are closely
intertwined with these platforms’’).
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typically part of a mortgage application
or fill out an online long form. The
platform operator then purports to use
the consumer’s information to help the
consumer compare a range of options to
find a suitable lender or other
settlement service provider that the
consumer can contact. The platforms
typically will generate leads for the
participating lender or other settlement
service provider by facilitating the
consumer’s click-through to the website
of the participating provider, selling the
consumer’s contact information to the
provider, or both. The comparison
information may be presented to the
consumer viewing the platform in a
static or interactive format. In the latter
case, the platform may give consumers
the ability to sort the options or
rankings based on different criteria or to
customize the presentation of options or
rankings based on factors they can select
(sometimes after default options or
rankings are presented). Digital
platforms may also combine online
marketplace and lead generation
activities with other services, such as
advertising to consumers.
This Advisory Opinion focuses on
digital platforms that include
information or features that enable
consumers to comparison shop options
for mortgages and other settlement
services, including those platforms that
generate potential leads for the platform
participants through consumers’
interaction with the platform (Digital
Mortgage Comparison-Shopping
Platforms). Digital Mortgage
Comparison-Shopping Platforms
generally are covered by a 1996 policy
statement issued by the Department of
Housing and Urban Development (HUD)
on ‘‘computer loan origination
systems,’’ or CLOs (HUD CLO Policy
Statement),22 which the CFPB has
applied, as relevant, since 2011, when
Congress transferred responsibility for
RESPA to the CFPB from HUD.23
22 HUD, RESPA Statement of Policy 1996–1,
Regarding Computer Loan Origination Systems
(CLOs), 61 FR 29255 (June 7, 1996). The HUD CLO
Policy Statement was issued as part of a broader set
of HUD regulations and interpretations that
addressed employer-to-employee payments. See 61
FR 29238 (June 7, 1996). Because some of these
regulations and interpretations were never
finalized, see 61 FR 58472 (Nov. 15, 1996), certain
aspects of the HUD CLO Policy Statement not
relevant to this Advisory Opinion—for example,
section 4, addressing ‘‘Payments of Commissions or
Bonuses to Employees’’—were not made effective
by HUD and would not be applied by the CFPB. See
id. at 58473.
23 See 12 U.S.C. 5581(b)(7). When the CFPB
assumed jurisdiction over the enumerated
consumer laws in the Dodd-Frank Act on the
designated transfer date, it issued a rule identifying
the enforceable rules and orders from transferor
agencies. The preamble to that rule explained that
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3. HUD CLO Policy Statement
The HUD CLO Policy Statement
defined a CLO as ‘‘a computer system
that is used by or on behalf of a
consumer to facilitate a consumer’s
choice among alternative products or
settlement service providers in
connection with a particular RESPAcovered real estate transaction’’ and
gave seven examples of CLO system
functions.24 The description of CLOs in
the HUD CLO Policy Statement was
‘‘not meant to be restrictive or
exhaustive’’ and ‘‘merely attempt[ed] to
describe existing practices of service
providers,’’ and the HUD CLO Policy
Statement elaborated that with the ‘‘use
of technology evolving so rapidly,’’ it is
difficult ‘‘to provide guidance on future
unspecified practices in the abstract.’’ 25
Based on the HUD CLO Policy
Statement’s description of CLOs, which
expressly left room for platform
evolution, Digital Mortgage ComparisonShopping Platforms are a type of CLO.26
Further, for clarity, this Advisory
Opinion sometimes refers to the person
that receives payment from participants
on a Digital Mortgage ComparisonShopping Platform as the ‘‘Operator.’’ 27
‘‘official commentary, guidance, and policy
statements’’ previously issued by transferor
agencies with exclusive rulemaking authority over
the law in question, including RESPA, ‘‘will be
applied by the CFPB pending further CFPB action.’’
76 FR 43569, 43570 (July 21, 2011) (Transfer of
Authorities Rule). The CFPB also wrote that it ‘‘will
seek over time to improve the clarity and
uniformity of guidance regarding the laws it will
administer as necessary . . . to facilitate
compliance with the Federal consumer financial
laws.’’ Id. Although the CFPB considers this
Advisory Opinion to be ‘‘further CFPB action’’ as
such term was used in the Transfer of Authorities
Rule, this Advisory Opinion is intended to
supplement the HUD CLO Policy Statement, rather
than supersede it. The CFPB will continue to apply
the HUD CLO Policy Statement, as relevant,
pending further CFPB action.
24 61 FR 29255, 29256 (June 7, 1996) (‘‘Such a
computer system: (1) may provide information
concerning products or services; (2) may pre-qualify
a prospective borrower; (3) may provide consumers
with an opportunity to select ancillary settlement
services; (4) may provide prospective borrowers
with information regarding the rates and terms of
loan products for a particular property in order for
the borrower to choose a loan product; (5) may
collect and transmit information concerning the
borrower, the property, and other information on a
mortgage loan application for evaluation by a lender
or lenders; (6) may provide loan origination,
processing, and underwriting services, including
but not limited to, the taking of loan applications,
obtaining verifications and appraisals, and
communicating with the borrower and lender; and
(7) may make a funding decision.’’).
25 Id.
26 The CFPB recognizes that the platforms will
continue to evolve as technology and business
arrangements continue to evolve. Thus, similar to
the HUD CLO Policy Statement’s approach when
defining the term CLO, the CFPB intends the term
Digital Mortgage Comparison-Shopping Platform to
be flexible and non-exhaustive.
27 For purposes of this Advisory Opinion, a
payment or other thing of value would be
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The HUD CLO Policy Statement noted
that settlement service providers ‘‘may
pay CLOs a reasonable fee for services
provided by the CLO to the settlement
service provider, such as, having
information about the provider’s
products made available to consumers
for comparison with the products of
other settlement service providers.’’ 28
Moreover, ‘‘if a CLO lists only one
settlement service provider and only
presents basic information to the
consumer on the provider’s products,
then there would appear to be no or
nominal compensable services provided
by the CLO to either the settlement
service provider or the consumer, only
a referral’’; thus, ‘‘any payment by the
settlement service provider for the CLO
listing could be considered a referral fee
in violation of section 8 of RESPA.’’ 29
The HUD CLO Policy Statement,
further, noted that ‘‘favoring one
settlement service provider over others
may be affirmatively influencing the
selection of a settlement service
provider’’ and that ‘‘if one lender always
appears at the top of any listing of
mortgage products and there is no real
difference in interest rates and charges
between the products of that lender and
other lenders on a particular listing,
then this may be a non-neutral
presentation of information which
affirmatively influences the selection of
a settlement service provider.’’ 30 The
HUD CLO Policy Statement also noted
that the statement ‘‘should not be read
to discourage CLOs from assisting
consumers in determining which
products are most advantageous to
them’’ and that if, for example, ‘‘a CLO
consistently ranks lenders and their
mortgage products on the basis of some
factor relevant to the borrower’s choice
of product, such as APR [annual
percentage rate] calculated to include all
charges and to account for the expected
tenure of the buyer, HUD would
consider this practice as a neutral
display of information.’’ 31
The HUD CLO Policy Statement
further noted that ‘‘if a CLO charges
different fees to different settlement
considered to be received from a settlement service
provider participating on a Digital Mortgage
Comparison-Shopping Platform even if it is
provided to the Operator by another person on
behalf of the participating provider, rather than
directly by the participating provider.
28 61 FR 29255, 29257 (June 7, 1996).
29 Id. at 29256. Depending on the facts and
circumstances, such a payment could also violate
RESPA section 8(b), which prohibits splitting
charges made or received for settlement services,
except for services actually performed, in
connection with a federally related mortgage loan.
See 12 U.S.C. 2607(b), 12 CFR 1024.14(c).
30 61 FR 29255, 29258 (June 7, 1996).
31 Id.
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service providers in similar situations,
an incentive may exist for the CLO to
steer the consumer to the settlement
service provider paying the highest
fees,’’ which could lead to RESPA
violations.32 HUD’s concern over 26
years ago about steering was both
compelling and prescient. Based on the
evolution of business arrangements and
technology platforms, the CFPB’s
market monitoring, and regulator
activity, the CFPB understands that
operators of Digital Mortgage
Comparison-Shopping Platforms and
participating settlement service
providers in some cases may be
engaging in activities that violate
RESPA section 8.
In this Advisory Opinion, the CFPB is
addressing, as a general matter, certain
circumstances in which payments
received by Operators from settlement
service providers for participating on
Digital Mortgage Comparison-Shopping
Platforms violate RESPA section 8. This
Advisory Opinion also identifies
additional, illustrative examples of
Digital Mortgage Comparison-Shopping
Platforms that involve RESPA section 8
violations. The CFPB, finally, briefly
discusses the potential applicability of
other consumer-protection laws and
regulations.
B. Scope of Coverage
This Advisory Opinion applies to any
‘‘person’’ to which RESPA section 8’s
prohibitions apply. RESPA defines
‘‘person’’ to include individuals,
corporations, associations, partnerships,
and trusts.33 RESPA does not apply to
extensions of credit to government or
governmental agencies or
instrumentalities.34 It also does not
apply to extensions of credit primarily
for business, commercial, or agricultural
purposes.35
C. Legal Analysis
1. Interpretation of RESPA Section 8
An operator of a Digital Mortgage
Comparison-Shopping Platform receives
a prohibited referral fee in violation of
RESPA section 8 when: (1) the Digital
Mortgage Comparison-Shopping
Platform non-neutrally uses or presents
information about one or more
settlement service providers
participating on the platform; (2) that
non-neutral use or presentation of
information has the effect of steering the
consumer to use, or otherwise
32 Id.
at 29257.
U.S.C. 2602(5).
34 12 U.S.C. 2606(a)(2).
35 12 U.S.C. 2606(a)(1). Regulation X, 12 CFR
1024.5, provides additional limits on the coverage
of RESPA.
33 12
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affirmatively influences the selection of,
those settlement service providers, thus
constituting referral activity; and (3) the
Operator receives a payment or other
thing of value that is, at least in part, for
that referral activity. By non-neutrally
using or presenting information, the
Operator impedes the consumer’s ability
to engage in meaningful comparison of
options and, instead, preferences certain
options over others or presents options
for reasons other than presenting them
based on neutral criteria such as APR,
objective consumer satisfaction
information, or factors the consumer
selects for themselves to rank or sort the
settlement service providers on the
platform.36 In these instances, the
payment received by the Operator for
such preferences or presentation of
options is not merely for compensable
services; instead, it is, at least in part,
for referral activity.37 Further, when the
Operator receives a higher fee for
including one settlement service
provider than it receives for including
other settlement service providers
participating on the same platform, that
can be evidence of an illegal referral fee
arrangement, absent other facts
indicating that the payment is not for
enhanced placement or other form of
steering; see further explanation and
illustrative examples below.
36 See 61 FR 29255, 29258 (June 7, 1996).
Although these are examples of information that
Operators may be using or presenting with regard
to Digital Mortgage Comparison-Shopping Platforms
in today’s market, the Bureau emphasizes that this
Advisory Opinion implicates the manner in which
an Operator uses and presents information, not
what information an Operator must or must not use
or present. Moreover, the CFPB notes that
presenting comparable options based on neutral
criteria (e.g., listing lenders with the lowest to
highest APR in ascending order) would be a neutral
presentation of information.
37 The CFPB is aware that some Digital Mortgage
Comparison-Shopping Platforms contain certain
disclosures addressing how the participating
settlement service providers’ information is used
and presented. While it may be a best practice for
an Operator to disclose clearly and prominently
how it is using and presenting the information of
platform participants—for compliance with the
prohibition on unfair, deceptive, or abusive acts or
practices (UDAAPs), 12 U.S.C. 5531, 5536(a)(1)(B),
or for other reasons—a disclosure would not, absent
other facts, turn a directed action that has the effect
of affirmatively influencing into one that does not.
Unlike RESPA section 8(c)(4)—where giving a
disclosure along with meeting other specified
conditions would allow for referrals to be made and
a return on an ownership interest or franchise
relationship to be received under the ambit of an
affiliated business arrangement—a disclosure does
not cure what would otherwise be a RESPA section
8(a) or 8(b) violation. See HUD RESPA Statement
of Policy 1999–1 Regarding Lender Payments to
Mortgage Brokers, 64 FR 10080, 10087 (Mar. 1,
1999) (‘‘[D]isclosure alone does not make illegal
fees legal under RESPA.’’).
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a. RESPA Section 8(a)
When a Digital Mortgage ComparisonShopping Platform Operator nonneutrally uses or presents information
and that has the effect of steering the
consumer to use, or otherwise
affirmatively influences the selection of,
a settlement service provider, the
Operator is making a referral. Under
Regulation X, the term ‘‘referral’’ is
defined as ‘‘any oral or written action
directed to a person which has the effect
of affirmatively influencing the
selection by any person of a provider of
a settlement service or business incident
to or part of a settlement service when
such person will pay for such settlement
service or business incident thereto or
pay a charge attributable in whole or in
part to such settlement service or
business.’’ 38 Steering is a form of
referral because it is an action directed
to a person 39 that exerts affirmative
influence.40
The Operator can steer or otherwise
affirmatively influence the consumer to
select certain platform participants by
non-neutrally using information to
generate the comparison options. Nonneutral use of information involves
manipulation or biasing of the inputs or
formula that the Operator employs to
generate the comparison options before
they are presented to the consumer.
This can happen in a variety of ways.
For example, some Digital Mortgage
Comparison-Shopping Platforms allow
consumers to generate comparison
options based on purportedly objective
criteria specified by the Operator (e.g.,
lower interest rate, superior customer
38 12 CFR 1024.14(f)(1). To qualify as a ‘‘referral,’’
the oral or written action at issue need not be
directed to a person that is a consumer. Rather, it
might be directed to a variety of persons, such as
appraisers, real estate agents, title companies and
agents, lenders, mortgage brokers, or other
companies that provide information in connection
with settlements, such as credit reports and flood
determinations. See 12 CFR 1024.14(b) and (f).
39 Based on the CFPB’s understanding of how
consumers interact with Digital Mortgage
Comparison-Shopping Platforms in the market
today, the Operator will typically take action that
is ‘‘directed to a person.’’ For example, if the
consumer makes a request of the platform to run a
search of comparison options, sort the comparison
options into different categories, or use the
consumer’s preferences to generate or refine the
comparison options, the Operator’s response to the
consumer’s request is an action ‘‘directed to a
person,’’ i.e., the consumer. 12 CFR 1024.14(f)(1).
40 See Wilborn v. New Century Mortg. Corp., No.
C 08–5044 JL, 2009 WL 10695188, at *6 (N.D. Cal.
Apr. 29, 2009) (noting that RESPA section 8 in
general ensures that ‘‘fees or commissions are not
kickbacks for steering business to a particular
lender’’); Paul Barron et al., 1 Fed. Reg. of Real
Estate & Mortgage Lending section 2:51 (4th ed.
Sept. 2022 update) (treatise excerpt explaining that
the HUD CLO Policy Statement reflects HUD’s
concern that ‘‘i[f] there is steering, the implication
is that the settlement service provider to whom the
consumer is steered is paying a referral fee’’).
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service). In this scenario, the Operator
would non-neutrally use information if
it were to set the formula to boost the
rankings of lenders who pay more to
participate on the platform by, behind
the scenes, excluding or placing low
weight on the purportedly objective
comparison criteria that would
otherwise favor the lower-paying
provider. Another example involves a
platform that seeks—and purports to
incorporate into the formula used to
generate comparison results—the
consumer’s preferences regarding the
factors that are most important to them
in choosing a settlement service
provider. In that scenario, the Operator
could manipulate the formula to favor
certain participating providers by
declining to honor the consumer’s
preferences or unwarrantedly placing
weight on inaccurate information about
the provider (e.g., giving credit in the
formula to a lender for more favorable
interest rates that the Operator knows
are outdated, which ensures that lender
will have a higher ranking under the
formula).
The Operator also can steer or
otherwise exert affirmative influence by
non-neutrally presenting information
about comparison options to the
consumer while the consumer is
interacting with a Digital Mortgage
Comparison-Shopping Platform.41 The
Operator could do this in several ways,
including through subtle actions that
bias the presentation for the consumer.
For example, an Operator could provide
the names and telephone numbers of all
participating providers but only provide
weblinks for a subset of higher-paying
providers. Alternatively, the Operator
might list the lenders that pay more to
the Operator on the first page and rank
them by interest rate—so the platform
appears to have ranked all participants
by that factor—while at the same time
showing on the second page other
participants with the same or lower
interest rates but that pay less to the
Operator. Another example is if an
Operator: permits a consumer to
generate a presentation of ranked lender
options; receives a higher fee if the
consumer clicks on the top-ranked
41 The CFPB emphasizes that the distinction
between non-neutral use and presentation of
information is not binary. For example, Digital
Mortgage Comparison-Shopping Platforms with
more interactive elements—where consumers can
sort options by different categories, indicate
preferences which will affect the generation of
comparison options, or generate multiple sets of
comparison options—will involve both the use and
presentation of information, often in rapid
succession. The distinction is intended to elucidate
the legal interpretation rather than suggest that
there is a rigid delineation as an operational or
practical matter.
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lender compared with the other lenders;
and segregates and highlights
prominently the top-ranked option but
presents the other options in very small
font requiring the consumer to scroll
down.42 Another example is if the
Operator labels a lender that appears
within, and at or near the top of, the
platform’s rankings as a ‘‘sponsored
lender,’’ ‘‘featured lender,’’ or similar
phrase because the lender has paid for
enhanced placement, but nonetheless
designs the platform and displays the
lender in a manner that implies the
lender earned its placement within the
platform’s rankings based on neutral
criteria. Alternatively, the Operator
could list the same participant who has
paid for enhanced placement multiple
times in the rankings, using either the
same name or an affiliated name.
Another example would be where a
consumer visits a Digital Mortgage
Comparison-Shopping Platform and
runs an initial search of comparison
options which yields a ‘‘top-ranked
lender’’ and other lenders, but when
revisiting the platform, the consumer
only sees that ‘‘top-ranked’’ lender
based on the Operator and lender’s
agreement to show only that lender
when the consumer revisits the
platform. This action prevents the
consumer from using the platform for
comparison shopping based on neutral
criteria and boosts the likelihood the
consumer will choose that lender over
other options.
Through all these actions, the
Operator non-neutrally presents
information to increase the odds that the
consumer will select the lender who
pays more, as opposed to other options
that are similarly suitable or even better
for the consumer. The HUD CLO Policy
Statement recognized that these types of
non-neutral presentations (which it
sometimes called ‘‘non-neutral
displays’’) of information on a CLO
platform may constitute a referral.43 The
illustrative examples in section I.C.2 of
this Advisory Opinion highlight other
ways in which an Operator nonneutrally uses or presents information.
By non-neutrally using or presenting
information on a Digital Mortgage
Comparison-Shopping Platform, the
Operator is putting a thumb on the
scale. Consequently, the Operator is no
longer merely providing the most basic
function of a Digital Mortgage
Comparison-Shopping Platform, which
was identified in the HUD CLO Policy
Statement—‘‘having information about
the provider’s products made available
to consumers for comparison with the
42 See
43 See
61 FR 29255, 29257 (June 7, 1996).
id. at 29258.
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products of other settlement service
providers.’’ 44 Instead, the Operator is
receiving payment for steering or
otherwise affirmatively influencing the
consumer, which constitutes a referral.
This activity could also potentially
implicate the Dodd-Frank Act’s
prohibition on unfair, deceptive, or
abusive acts or practices (UDAAPs).45
In addition to the element of referral,
a RESPA section 8(a) violation occurs
when two other elements are present: a
thing of value, and an agreement or
understanding. Thing of value is
defined in Regulation X broadly and
non-exhaustively.46 The term ‘‘thing of
value’’ would include payments
received by the Operator under a
contractual agreement for the settlement
service provider to participate on the
platform where referrals are being
generated for the settlement service
provider. Furthermore, if the settlement
service provider receives enhanced,
non-neutral placement on a Digital
Mortgage Comparison-Shopping
Platform, there presumably would be an
express agreement or understanding to
pay for that enhanced placement. Even
if there is not such an express agreement
or understanding for the enhanced
placement, because the Operator is
providing the participating settlement
service providers with access to a
Digital Mortgage Comparison-Shopping
Platform that non-neutrally uses or
presents information and results in
steering or other affirmative influence
(as discussed above), it is likely that an
agreement or understanding for referrals
can be established under Regulation X
through a pattern, practice, or course of
conduct.47
44 Id.
at 29257.
U.S.C. 5531, 5536(a)(1)(B).
46 See 12 CFR 1024.14(d); see also Edwards v.
First Am. Corp., 798 F.3d 1172, 1179 (9th Cir. 2015)
(‘‘[A]n exchange of a ‘thing of value’ is used as
synonymous with a payment and does not require
a transfer of money.’’).
47 See 12 CFR 1024.14(e). Where the elements of
a RESPA section 8 violation are otherwise satisfied,
it is no defense that a Digital Mortgage ComparisonShopping Platform’s non-neutral use or
presentation of information was allegedly the
product of a complex algorithm. Operators are
expected to know whether their platform uses or
presents information in a non-neutral manner, even
if the platform may employ complex algorithms in
using or presenting the information. See generally
Consumer Financial Protection Circular 2022–03,
Adverse Action Notification Requirements in
Connection with Credit Decisions Based on
Complex Algorithms, 87 FR 35864 (June 14, 2022)
(‘‘A creditor cannot justify noncompliance with
ECOA and Regulation B’s requirements based on
the mere fact that the technology it employs to
evaluate applications is too complicated or opaque
to understand.’’). Moreover, when structuring or
implementing a contractual agreement to
participate on a Digital Mortgage ComparisonShopping Platform that results in steering or other
affirmative influence based on non-neutral criteria,
45 12
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b. RESPA Section 8(c)(2)
RESPA section 8(c)(2) provides that
section 8 of RESPA does not prohibit
‘‘the payment to any person of a bona
fide salary or compensation or other
payment for goods or facilities actually
furnished or for services actually
performed.’’ 48 Regulation X further
clarifies RESPA section 8(c)(2). It
provides that ‘‘[i]f the payment of a
thing of value bears no reasonable
relationship to the market value of the
goods or services provided, then the
excess is not for services or goods
actually performed or provided.’’ 49
Regulation X also provides that ‘‘[t]he
value of a referral (i.e., the value of any
additional business obtained thereby) is
not to be taken into account in
determining whether the payment
exceeds the reasonable value of such
goods, facilities or services.’’ 50
Moreover, under Regulation X, ‘‘[t]he
fact that the transfer of the thing of
value does not result in an increase in
any charge made by the person giving
the thing of value is irrelevant in
determining whether the act is
prohibited.’’ 51
RESPA section 8(c)(2) does not
provide a defense to payment of referral
fees because referrals are not
compensable services under RESPA.52
As described above, when (1) a Digital
Mortgage Comparison-Shopping
Platform non-neutrally uses or presents
information about one or more
settlement service providers
participating on the platform, (2) that
non-neutral use or presentation of
information has the effect of steering the
consumer to use, or otherwise
affirmatively influences the selection of,
those settlement service providers, thus
constituting referral activity, and (3) the
Operator receives a payment or other
thing of value that is, at least in part, for
that referral activity, the Operator is
receiving a payment that is not merely
for compensable services. Consequently,
settlement service providers likely would know that
the Operator is non-neutrally using or presenting
information.
48 12 U.S.C. 2607(c)(2); accord 12 CFR
1024.14(g)(1)(iv).
49 12 CFR 1024.14(g)(2); see also O’Sullivan v.
Countrywide Home Loans, Inc., 319 F.3d 732, 739
(5th Cir. 2003) (explaining that this provision ‘‘was
promulgated for the purpose of assisting courts in
ferreting out kickbacks disguised as legitimate
payments for goods and services in complex real
estate settlement transactions’’).
50 12 CFR 1024.14(g)(2).
51 Id.
52 See HUD, Real Estate Settlement Procedures
Act (RESPA): Home Warranty Companies’
Payments to Real Estate Brokers and Agents, 75 FR
36271 (June 25, 2010) (distinguishing where home
warranty companies could legally pay real estate
brokers for services versus where such payments
were non-compensable referral fees).
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the Operator is not only providing what
the HUD CLO Policy Statement
described as a CLO operator’s
compensable service of ‘‘having
information about the provider’s
products made available to consumers
for comparison with the products of
other settlement service providers’’ 53 or
other compensable services. Rather, as
described above, the Operator is being
paid, at least in part, for conduct that
has the effect of steering or otherwise
affirmatively influencing the consumer
to select a provider on the platform. Yet,
Regulation X does not permit the value
of the referral to be taken into account
when determining the reasonable value
of the services under RESPA section
8(c)(2).54
In contrast, an Operator that receives
payment from settlement service
providers for their participation on a
Digital Mortgage Comparison-Shopping
Platform that both neutrally uses and
neutrally presents information is
receiving payment for compensable
services,55 and thus would be compliant
with RESPA section 8, assuming no
other facts were present that would call
such RESPA section 8 compliance into
question.56
c. HUD CLO Policy Statement
The HUD CLO Policy Statement, as
noted above, cautioned that differential
payments by settlement service
providers (e.g., lenders) participating on
CLO platforms create steering incentives
that could lead to RESPA violations.57
When examining the fees received by an
Operator from similarly situated
settlement service providers that
53 61
FR 29255, 29257 (June 7, 1996).
CFR 1024.14(g)(2).
55 As noted above, an example of a neutral
presentation of information would be a platform
that lists participating lenders with the lowest to
highest APR in ascending order. See supra note 36.
56 Similarly, advertising arrangements where
actual services are being provided and reasonable
payment is being received are compensable services
under RESPA section 8 depending on the facts and
circumstances. See 12 U.S.C. 2607(c)(2). Cf. CFPB
Real Estate Settlement Procedures Act FAQs,
RESPA Section 8: Marketing Services Agreements
(MSAs), no. 2, https://www.consumerfinance.gov/
compliance/compliance-resources/mortgageresources/real-estate-settlement-procedures-act/
real-estate-settlement-procedures-act-faqs/
(explaining that ‘‘[w]hether a particular activity is
a referral or a marketing service is a fact-specific
question,’’ and noting that a marketing service, in
contrast to a referral, ‘‘is not directed to a person’’
but instead ‘‘is generally targeted at a wide
audience’’—e.g., ‘‘placing advertisements . . . in
widely circulated media’’ such as ‘‘a newspaper, a
trade publication, or a website’’).
57 61 FR 29255, 29257 (June 7, 1996). As noted
above, the CFPB has applied the HUD CLO Policy
Statement since the CFPB’s designated transfer date
under the Dodd-Frank Act, and the CFPB will
continue to apply the HUD CLO Policy Statement,
as relevant, pending further CFPB Action. See supra
note 23.
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participate on the same Digital Mortgage
Comparison-Shopping Platform, a fee
differential can be evidence of an illegal
referral fee arrangement. The reason is
commonsensical. If the Operator
receives a higher fee from one
settlement service provider than another
for participating on the same Digital
Mortgage Comparison-Shopping
Platform, and if the higher-paying
settlement service provider is, in fact,
also receiving enhanced placement on
the platform, then it is reasonable to
infer that the settlement service
provider is paying for the enhanced
placement on the platform rather than
merely the compensable service of
‘‘having information about the
provider’s products made available to
consumers for comparison with the
products of other settlement service
providers’’ 58 or other compensable
services. The higher charge paid by
some providers thus can be ‘‘evidence of
a violation of section 8,’’ 59 absent other
facts indicating that the payment is not
for enhanced placement or other form of
steering.
Notwithstanding the CLO Policy
Statement’s language about differential
fees, if (1) a Digital Mortgage
Comparison-Shopping Platform’s nonneutral use or presentation of
information has the effect of steering the
consumer to use, or otherwise
affirmatively influences the selection of,
one or more settlement service
providers participating on the platform,
and therefore constitutes referral
activity, and (2) the Operator receives a
payment for including participating
settlement service providers on the
platform that is, at least in part, for
those referrals, then the Operator’s
actions would violate RESPA section 8
even if the Operator were to receive the
same fee from each provider (or from
some, but not all, providers). Although
the HUD CLO Policy Statement noted
the potential for steering and described
how a RESPA violation could occur if
different settlement service providers
were paying different fees for
participating on the same CLO system,60
the HUD CLO Policy Statement did not
identify that scenario as the only
problematic one under RESPA section 8
with respect to CLOs.61 By steering the
58 Id.
59 12 CFR 1024.14(g)(2) (providing that fees in
excess of reasonable market value can be evidence
of a RESPA section 8 violation).
60 See 61 FR 29255, 29257 (June 7, 1996).
61 The CFPB also emphasizes that there is no
‘‘market’’ value to be ascribed to a referral, since a
referral is not compensable under RESPA section 8.
See 12 CFR 1024.14(g)(2) (‘‘The value of a referral
(i.e., the value of any additional business obtained
thereby) is not to be taken into account in
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consumer to particular settlement
service providers, even where the fees
paid by those providers are the same as
one another, the Operator is providing
a different—and non-compensable—
service from those identified as
compensable under the HUD CLO
Policy Statement, including ‘‘having
information about the provider’s
products made available to consumers
for comparison with the products of
other settlement service providers.’’ 62
See sections I.C.2.b and I.C.2.e below for
examples illustrating where a Digital
Mortgage Comparison-Shopping
Platform refers consumers to
participating settlement service
providers and where the Operator
receives illegal referral fees, even if
those fees do not differ among the
participating providers.
The HUD CLO Policy Statement also
noted that no compensable services
would be present if a CLO were to list
only one settlement service provider
and only present basic information to
the consumer on the provider’s
products.63 As noted above, the HUD
CLO Policy Statement described as
compensable services a CLO operator’s
‘‘having information about the
provider’s products made available to
consumers for comparison with the
products of other settlement service
providers.’’ 64 For these particular CLO
services to be compensable, a range of
options must be presented to the
consumer. RESPA section 8 does not
require a particular numerical
threshold, but in general, presenting a
greater number of comparison options
rather than fewer makes it less likely
that the Operator is steering the
consumer to one or more settlement
service providers.
2. Examples of Digital Mortgage
Comparison-Shopping Platforms
Violating RESPA Section 8
Below are examples of Digital
Mortgage Comparison-Shopping
Platforms where, based on the
interpretation above, the CFPB would
find that there is a RESPA section 8
violation. The CFPB emphasizes that
these examples are illustrative and nonexhaustive.
a. Pay To Play and Steering to Highest
Bidder
In an example of conduct that would
violate RESPA section 8, assume the
Operator permits the consumer to input
determining whether the payment exceeds the
reasonable value of such goods, facilities or
services.’’).
62 61 FR 29255, 29257 (June 7, 1996).
63 Id. at 29256.
64 Id. at 29257.
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relevant information on the Digital
Mortgage Comparison-Shopping
Platform to aid in the consumer’s search
for mortgage options (e.g., location,
anticipated loan amount, credit score)
and represents that the platform will use
the information to identify the ‘‘best
match.’’ Assume further that the
platform presents a purported ‘‘best
match’’ lender to the consumer, or ranks
the lenders, but skews the results of the
comparison function to ensure that the
‘‘best match’’ is the highest bidding
lender participating on the platform.
Such conduct would violate RESPA
section 8 because here, the Operator
non-neutrally uses information to
preference the highest bidding lender,
resulting in the Operator steering the
consumer to that lender. The Operator’s
actions imply an endorsement by
leading the consumer to believe that the
Operator did an analysis behind the
scenes (possibly driven by an algorithm)
to determine the most suitable lender
for the consumer—which thereby
influences the consumer to select that
lender.65 Furthermore, for the reasons
described in section I.C.1.b above, the
Operator is not merely receiving a bona
fide payment for services under RESPA
section 8(c)(2). The CFPB notes that this
example could also potentially
implicate the prohibition against
UDAAPs, particularly if the Digital
Mortgage Comparison-Shopping
Platform were to contain
misrepresentations about the accuracy
of the information on the platform
(including about the objectivity of the
rankings).66 Deceptive
misrepresentations could serve to
accentuate the affirmative influence
noted above.
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b. Payments Only From and Promotion
of Lenders Who Rotate in Top Spot
A variation of the previous scenario
involves a Digital Mortgage ComparisonShopping Platform that allows
65 An endorsement is an example of an action that
exerts ‘‘affirmative influenc[e]’’ within the meaning
of 12 CFR 1024.14(f)(1)’s definition of ‘‘referral.’’
See NewDay Fin., LLC, File No. 2015–CFPB–0004,
at 6–8 (Feb. 10, 2015) (consent order), https://
files.consumerfinance.gov/f/201502_cfpb_consentorder_newday-financial.pdf.
66 See Fed. Trade Comm’n, Policy Statement on
Deception (Oct. 14, 1983), https://www.ftc.gov/
legal-library/browse/ftc-policy-statement-deception.
The CFPB notes that in 2020, the Federal Trade
Commission (FTC) finalized a settlement with the
operator of a consumer loan comparison website,
LendEDU. The FTC found that, among other
deceptive conduct, LendEDU misled consumers to
believe its website provided objective product
information, when in fact it offered higher rankings
and ratings to companies that paid for placement.
Shop Tutors, Inc., No. 182–3180 (F.T.C. May 21,
2020) (complaint), https://www.ftc.gov/system/files/
documents/cases/c-4719_182_3180_lendedu_
complaint.pdf (FTC LendEDU Matter).
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consumers to input information about
their needs and then to generate lender
rankings, but where all lenders
participating on the platform take turns
appearing in the top spot randomly or
based on a predetermined schedule, i.e.,
the rankings do not reflect a tailoring to
the consumer’s needs based on their
inputted information. Moreover, assume
that the Operator is paid by only the
lender appearing in the top spot or that
lenders pay in advance for the
opportunity to appear in the top spot
randomly or based on the
predetermined schedule. This example
involves a referral because a consumer
would reasonably perceive that, after
entering information about their needs
and using the platform to call up a
ranking of participating lenders, the
lender appearing in the top spot would
be the one determined by the Operator
to be best suited to the consumer’s
needs, not the lender who is next in a
round robin. For reasons similar to
those described in section I.C.1.b, the
Operator is not merely receiving a bona
fide payment for services under RESPA
section 8(c)(2), and this scenario
likewise would also raise UDAAP
concerns. The payment would be
considered a referral fee even if it does
not differ from the payments made by
other lenders participating in the round
robin.
c. Preferencing Platform Participants
That Are Affiliates
In another scenario, assume that a
Digital Mortgage Comparison-Shopping
Platform is designed and operated in a
manner that steers consumers to use
settlement service providers that are
affiliates of the Operator. For example,
assume that a mortgage lender develops
a Digital Mortgage ComparisonShopping Platform permitting
consumers to search information about
and view rankings of comparable
mortgage brokers and that the platform
includes both affiliated and nonaffiliated mortgage brokers. However,
the mortgage lender/Operator
manipulates the application of the
ranking criteria so that its affiliated
mortgage brokers appear higher than the
non-affiliated mortgage brokers. The
Operator receives payment for the
higher ranking of affiliated mortgage
brokers. In this scenario, the Operator’s
receipt of payments from the affiliated
mortgage brokers for the higher ranking
would violate RESPA section 8. A
platform that preferences affiliated
settlement service providers nonneutrally uses or presents information.
Therefore, the Operator is affirmatively
influencing the consumer’s selection of
the providers on the platform and is
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referring the consumer, and the
Operator is receiving payment for the
preferential treatment, i.e., the referral.
This fact scenario may also implicate
the RESPA section 8(c)(4) provisions
regarding affiliated business
arrangements.67 Whether a particular
arrangement is an affiliated business
arrangement would depend on various
factors, including the nature of the
relationship between the parties and
whether the Operator is ‘‘in a position
to refer [settlement service] business.’’ 68
In theory, the Operator could follow the
conditions for affiliated business
arrangements and then claim that the
platform is permissible under RESPA
section 8. However, other than
payments separately permitted under
RESPA section 8(c), the only ‘‘thing of
value’’ persons in an affiliated business
arrangement may receive is a return on
ownership interest (or franchise
relationship).69 In the scenario
described above, the Operator would be
receiving a thing of value other than
payments separately permitted under
RESPA section 8(c) or a return on an
ownership interest (or franchise
relationship).70 Furthermore, for reasons
similar to the other examples, that
payment would not be merely for
compensable services under RESPA
section 8(c)(2). Thus, the RESPA
affiliated business arrangement
provisions would not permit this
arrangement.
d. Additional Services That Promote
Platform Participant
In another example, assume an
Operator designs a Digital Mortgage
Comparison-Shopping Platform that
gathers the consumer’s contact
information and permits the consumer
to generate a ranking of lender options
based on criteria selected by the
consumer. The ranking reflects neutral
use and display of information. Assume,
further, that the Operator also contracts
with one of the participating lenders
67 12 U.S.C. 2607(c)(4)(A)–(C); 12 CFR
1024.15(b)(1)–(3).
68 See 12 U.S.C. 2602(7) (definition of affiliated
business arrangement); 12 CFR 1024.15(c)
(definition of ‘‘[p]erson who is in a position to refer
settlement service business’’).
69 12 U.S.C. 2607(c)(4)(C); 12 CFR 1024.15(b)(3).
70 Variations of this example—such as where the
Operator receives no payment from the affiliated
mortgage broker for being listed on the platform but
receives indirect compensation because the
Operator’s preferential treatment generated
additional business for the affiliate—may also
violate RESPA section 8 depending on the
circumstances. See, e.g., 12 CFR 1024.15(b)(3)(ii)
through (iv) (describing exclusions from the
meaning of ‘‘a return on an ownership interest’’ and
when returns on ownership interests or franchise
relationships under an affiliated business
arrangement are not bona fide).
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(which is not necessarily the top-ranked
lender) to promote that lender by
sending a text message or email to any
consumer who uses the platform to
generate a ranking of lender options,
encouraging the consumer to submit an
application to that lender because it
would be a good fit for the consumer’s
needs. The promotional activity by the
Operator undermines the platform’s
neutral presentation of information by
steering the consumer to use a particular
provider soon after the consumer had
searched for comparison information.
The Operator’s promotional activity,
either by itself or when combined with
the effect of the Operator’s action in
presenting the comparison options to
the consumer, affirmatively influences
the consumer’s selection of that lender
and is a referral. For the reasons
described in section I.C.1.b above,
payment in exchange for the
promotional activity is not merely a
payment for compensable services
under RESPA section 8(c)(2).71
e. Warm Handoff
In another example, assume the
Operator of a Digital Mortgage
Comparison-Shopping Platform presents
comparison information on multiple
lenders and uses an online long form to
gather detailed information from a
consumer who is browsing the platform.
The consumer’s information relates to
the consumer’s particular borrowing
needs, such as credit score and target
loan amount. Soon thereafter, the
Operator calls the consumer to offer an
immediate phone or live chat transfer
to, or callback from, a lender
participating on the platform and tells
the consumer that they will be ‘‘in good
hands’’ with that lender. However, the
lender that receives the lead is merely
the first lender to respond to the
Operator’s push notification alerting a
network of lenders that a consumer is
available for an immediate transfer,
rather than a lender the Operator
identified as meeting the consumer’s
needs based on the consumer’s inputted
information. The sequence of events
described above is one variation of a
lead generation practice that industry
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71 Regulation
X provides that when a person in
a position to refer settlement service business
receives a payment for providing additional
settlement services as part of a real estate
transaction, such payment must be for services that
are actual, necessary, and distinct from the primary
services provided by such person. 12 CFR
1024.14(g)(3); see also 12 CFR 1024.15(c) (‘‘person
who is in a position to refer settlement service
business’’ includes mortgage brokers). In this
example, the Operator, who may be a mortgage
broker, is providing a promotional ‘‘service’’ that is
not actual, necessary, and distinct from the
Operator’s comparison function (i.e., its primary
service).
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stakeholders sometimes call a ‘‘warm
handoff’’ or ‘‘live transfer.’’ 72 Through
its enforcement activity, the CFPB has
identified other examples of so-called
‘‘warm handoff’’ or ‘‘live transfer’’
activity that led to RESPA section 8
violations.73
In this example, the Operator’s
actions convey to the consumer an
implied endorsement of the lender
when the Operator tells the consumer
that they will be ‘‘in good hands’’ with
that lender. Further, regardless of the
specific words used when the transfer
occurs, a consumer who inputs detailed
information to the Operator
immediately before a transfer to a lender
would reasonably infer that the
consumer is being connected to the
lender that best meets their needs.
Moreover, the first lender to respond to
the push notification receives the lead
exclusively; HUD identified exclusivity
as a relevant factor in determining
whether a referral arrangement is
present.74 Therefore, the Operator’s
actions exert affirmative influence and
constitute a referral. An Operator that
receives payment for a warm handoff is
not merely receiving payment for a
compensable service, for the reasons
described in section I.C.1.b above. The
payment also would be considered a
referral fee even if it does not differ
among the providers participating in the
warm transfer process.
3. Other Applicable Laws
The design, operation, and payments
associated with Digital Mortgage
Comparison-Shopping Platforms may
implicate other Federal and State laws
and regulations. As noted above, if an
Operator makes false or misleading
representations about the objectivity or
veracity of the information presented on
the platform, it may violate the DoddFrank Act prohibition on UDAAPs.75
Operators may also be subject to laws
and regulations that include, without
72 Variations of this example, including where the
Operator makes a ‘‘warm handoff’’ of a consumer
to a lender that is not displayed to the consumer
on the platform, may also violate RESPA section 8.
73 See, e.g., Planet Home Lending, LLC, File No.
2017–CFPB–0007, at 4–5 (Jan. 31, 2017) (consent
order) (Planet Home Order), https://
files.consumerfinance.gov/f/documents/201701_
cfpb_PlanetHomeLending-consent-order.pdf.
74 See HUD, Real Estate Settlement Procedures
Act (RESPA): Home Warranty Companies’
Payments to Real Estate Brokers and Agents
Interpretive Rule: Response to Public Comments, 75
FR 74620, 74621 (Dec. 1, 2010).
75 12 U.S.C. 5531, 5536(a)(1)(B); see also FTC
LendEDU Matter; CFPB Bulletin 2022–05: Unfair
and Deceptive Acts or Practices That Impede
Consumer Reviews, 87 FR 17143 (Mar. 28, 2022);
Consumer Financial Protection Circular 2022–02:
Deceptive Representations Involving the FDIC’s
Name or Logo or Deposit Insurance, 87 FR 35866
(June 14, 2022).
PO 00000
Frm 00065
Fmt 4700
Sfmt 4700
9169
limitation, 12 CFR part 1026 (Regulation
Z); 12 CFR part 1008 (Regulation H) and
State laws regarding licensing of
mortgage originators; State laws
imposing restrictions on referral fees
and unearned fees; 76 12 CFR part 1002
(Regulation B), which implements the
Equal Credit Opportunity Act; and the
Telemarketing Sales Rule.77 Additional
laws and regulations that may apply
include the Federal Trade Commission
Act,78 the Telephone Consumer
Protection Act,79 and applicable Federal
and State privacy laws. The CFPB’s
enforcement activity has also focused on
the applicability of the Fair Credit
Reporting Act in lead generation
scenarios involving trigger leads.80
II. Regulatory Matters
This Advisory Opinion is an
interpretive rule issued under the
CFPB’s authority to interpret RESPA
and Regulation X, including under
section 1022(b)(1) of the Consumer
Financial Protection Act of 2010, which
authorizes guidance as may be
necessary or appropriate to enable the
CFPB to administer and carry out the
purposes and objectives of Federal
consumer financial laws.81
By operation of RESPA section 19(b),
no provision of RESPA or the laws of
any State imposing any liability applies
to any act done or omitted in good faith
in conformity with this interpretive
rule, notwithstanding that after such act
or omission has occurred, the
interpretive rule is amended, rescinded,
or determined by judicial or other
authority to be invalid for any reason.82
The CFPB has determined that this
Advisory Opinion does not impose any
new or revise any existing
recordkeeping, reporting, or disclosure
requirements on covered entities or
members of the public that would be
collections of information requiring
approval by the Office of Management
and Budget under the Paperwork
Reduction Act.83
Pursuant to the Congressional Review
Act,84 the CFPB will submit a report
containing this interpretive rule and
other required information to the United
76 See generally 1 Barron 2:59 (‘‘Prohibition
against referral fees and unearned fees—State
prohibitions against referral fees and unearned
fees’’).
77 16 CFR part 310, which was issued under the
Telemarketing and Consumer Fraud and Abuse
Prevention Act, 15 U.S.C. 6101 et seq.
78 15 U.S.C. 41 et seq.; see also FTC LendEDU
Matter.
79 47 U.S.C. 227.
80 See Planet Home Order, at 6–7.
81 12 U.S.C. 5512(b)(1); see also 12 U.S.C. 2617(a).
82 12 U.S.C. 2617(b); see also 12 CFR 1024.4.
83 44 U.S.C. 3501 through 3521.
84 5 U.S.C. 801 et seq.
E:\FR\FM\13FER1.SGM
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9170
Federal Register / Vol. 88, No. 29 / Monday, February 13, 2023 / Rules and Regulations
States Senate, the United States House
of Representatives, and the Comptroller
General of the United States prior to the
rule’s published effective date. The
Office of Information and Regulatory
Affairs has designated this interpretive
rule as not a ‘‘major rule’’ as defined by
5 U.S.C. 804(2).
Rohit Chopra,
Director, Consumer Financial Protection
Bureau.
[FR Doc. 2023–02910 Filed 2–10–23; 8:45 am]
BILLING CODE 4810–AM–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2020–1078; Project
Identifier AD–2020–00716–A; Amendment
39–22324; AD 2023–02–17]
RIN 2120–AA64
Airworthiness Directives; Textron
Aviation Inc. (Type Certificate
Previously Held by Cessna Aircraft
Company) Airplanes
Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule.
AGENCY:
The FAA is adopting a new
airworthiness directive (AD) for all
Textron Aviation Inc. (type certificate
previously held by Cessna Aircraft
Company) (Textron) Model 210N, 210R,
P210N, P210R, T210N, T210R, 177,
177A, 177B, 177RG, and F177RG
airplanes. This AD was prompted by the
in-flight break-up of a Model T210M
airplane in Australia, due to fatigue
cracking that initiated at a corrosion pit,
and subsequent corrosion reports on
other Model 210- and 177-series
airplanes. This AD requires visual and
eddy current inspections of the carrythru spar lower cap for corrosion,
cracking, and damage; corrective action
if necessary; application of a protective
coating and corrosion inhibiting
compound (CIC); and reporting the
inspection results to the FAA. The FAA
is issuing this AD to address the unsafe
condition on these products.
DATES: This AD is effective March 20,
2023.
The Director of the Federal Register
approved the incorporation by reference
of certain publications listed in this AD
as of March 20, 2023.
ADDRESSES:
AD Docket: You may examine the AD
docket at regulations.gov by searching
for and locating Docket No. FAA–2020–
khammond on DSKJM1Z7X2PROD with RULES
SUMMARY:
VerDate Sep<11>2014
16:19 Feb 10, 2023
Jkt 259001
1078; or in person at Docket Operations
between 9 a.m. and 5 p.m., Monday
through Friday, except Federal holidays.
The AD docket contains this final rule,
any comments received, and other
information. The address for Docket
Operations is U.S. Department of
Transportation, Docket Operations, M–
30, West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue SE,
Washington, DC 20590.
• For service information identified
in this final rule, contact Textron
Aviation Inc., One Cessna Boulevard,
Wichita, KS 67215; phone: (316) 517–
6061; email: structures@txtav.com;
website: support.cessna.com.
• You may view this service
information at the FAA, Airworthiness
Products Section, Operational Safety
Branch, 901 Locust, Kansas City, MO
64106. For information on the
availability of this material at the FAA,
call (817) 222–5110. It is also available
at regulations.gov by searching for and
locating Docket No. FAA–2020–1078.
FOR FURTHER INFORMATION CONTACT:
Bobbie Kroetch, Aviation Safety
Engineer, Wichita ACO Branch, FAA,
1801 Airport Road, Wichita, KS 67209;
phone: (316) 946–4155; email:
bobbie.kroetch@faa.gov or WichitaCOS@faa.gov.
SUPPLEMENTARY INFORMATION:
Background
The FAA issued a notice of proposed
rulemaking (NPRM) to amend 14 CFR
part 39 by adding an AD that would
apply to all Textron Model 210N, 210R,
P210N, P210R, T210N, T210R, 177,
177A, 177B, 177RG, and F177RG
airplanes. The NPRM published in the
Federal Register on May 11, 2021 (86
FR 25812).
The NPRM was prompted by a report
that, on May 26, 2019, a Textron Model
T210M airplane experienced an in-flight
breakup while performing low-altitude
aerial survey operations in Australia.
The carry-thru spar failed and resulted
in wing separation and loss of control of
the airplane. A visual examination of
the fracture surface identified fatigue
cracking that initiated at a corrosion pit.
The FAA issued an airworthiness
concern sheet (ACS) on June 27, 2019,
advising owners and operators of the
accident and requesting relevant
information about the fleet.
Following the ACS, the FAA received
reports of widespread and severe
corrosion of the carry-thru spar. Earlier
Model 210G, T210G, 210H, T210H,
210J, T210J, 210K, T210K, 210L, T210L,
210M, and T210M airplanes
experienced the most widespread and
severe corrosion, and the FAA issued
PO 00000
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Fmt 4700
Sfmt 4700
AD 2020–03–16, Amendment 39–21029
(85 FR 10043, February 21, 2020) (AD
2020–03–16) as an immediately adopted
rule (Final Rule; Request for Comments)
to address the unsafe condition on those
airplanes.
The FAA also received reports of
corrosion on later Model 210N, P210N,
T210N, 210R, P210R, and T210R
airplanes and Model 177-series
airplanes. On Model 210N, P210N,
T210N, 210R, P210R, and T210R
airplanes, the upper surface of the carrythru spar is covered by fuselage skin
and is not exposed to the environment.
This removes the leak paths at the skin
splices common to the earlier Model
210-series airplanes and reduces the
potential for moisture intrusion.
Additionally, the later Model 210-series
airplanes were manufactured with zinc
chromate primer applied to all carrythru spars. However, the later Model
210-series airplanes were also delivered
with foam installed along the carry-thru
spar lower cap. The foam traps moisture
against the lower surface of the carrythru spar cap, which can aid in the
development of corrosion.
The Model 177-series airplanes share
a similar carry-thru spar design with the
earlier Model 210-series airplanes: The
upper surface of the carry-thru spars are
exposed, and the carry-thru spars might
not have been delivered with zinc
chromate primer applied. Although
Model 177-series airplanes were not
delivered with foam padding installed
on the lower surface of the carry-thru
spar, corrosion has been reported on the
carry-thru spar lower cap for these
airplanes. Corrosion of the carry-thru
spar lower cap can lead to fatigue
cracking or reduced structural strength
of the carry-thru spar, which, if not
addressed, could result in wing
separation and loss of control of the
airplane.
In the NPRM, the FAA proposed to
require visual and eddy current
inspections of the carry-thru spar lower
cap for corrosion, cracking, and damage;
corrective action if necessary;
application of a protective coating and
CIC; and reporting the inspection results
to the FAA. The FAA is issuing this AD
to address the unsafe condition on these
products.
Discussion of Final Airworthiness
Directive
Comments
The FAA received comments from
124 commenters. The majority of
comments were from individuals.
Organizations submitting comments
included the Aircraft Owners and Pilots
Association (AOPA), Aviation Plus LLC,
E:\FR\FM\13FER1.SGM
13FER1
]]>Agencies
[Federal Register Volume 88, Number 29 (Monday, February 13, 2023)]
[Rules and Regulations]
[Pages 9162-9170]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-02910]
=======================================================================
-----------------------------------------------------------------------
BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Part 1024
Real Estate Settlement Procedures Act (Regulation X); Digital
Mortgage Comparison-Shopping Platforms and Related Payments to
Operators
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Advisory opinion.
-----------------------------------------------------------------------
SUMMARY: The Consumer Financial Protection Bureau (CFPB) is issuing
this Advisory Opinion to address the applicability of the Real Estate
Settlement Procedures Act (RESPA) section 8 to operators of certain
digital technology platforms that enable consumers to comparison shop
for mortgages and other real estate settlement services, including
platforms that generate potential leads for the platform participants
through consumers' interaction with the platform (Digital Mortgage
Comparison-Shopping Platforms). Generally, this Advisory Opinion
describes how an operator of a Digital Mortgage Comparison-Shopping
Platform violates RESPA section 8 if the platform provides enhanced
placement or otherwise steers consumers to platform participants based
on compensation the platform operator receives from those participants
rather than based on neutral criteria. More specifically, this Advisory
Opinion states that an operator of a Digital Mortgage Comparison-
Shopping Platform receives a prohibited referral fee in violation of
RESPA section 8 when: the Digital Mortgage Comparison-Shopping Platform
non-neutrally uses or presents information about one or more settlement
service providers participating on the platform; that non-neutral use
or presentation of information has the effect of steering the consumer
to use, or otherwise affirmatively influences the selection of, those
settlement service providers, thus constituting referral activity; and
the operator receives a payment or other thing of value that is, at
least in part, for that referral activity. Furthermore, if an operator
of a Digital Mortgage Comparison-Shopping Platform receives a higher
fee for including one settlement service provider compared to what it
receives for including other settlement service providers participating
on the same platform, that can be evidence of an illegal referral fee
arrangement absent other facts indicating that the payment is not for
enhanced placement or other form of steering.
DATES: This advisory opinion is effective on February 13, 2023.
FOR FURTHER INFORMATION CONTACT: Brandy Hood, Joan Kayagil, or Michael
G. Silver, Senior Counsels, Office of Regulations, at (202) 435-7700 or
https://reginquiries.consumerfinance.gov/. If you require this document
in an alternative electronic format, please contact
[email protected].
SUPPLEMENTARY INFORMATION: The Bureau is issuing this Advisory Opinion
through the procedures for its Advisory Opinions Policy.\1\ Please
review those procedures for more information.
---------------------------------------------------------------------------
\1\ 85 FR 77987 (Dec. 3, 2020).
---------------------------------------------------------------------------
I. Advisory Opinion
A. Background
1. RESPA Section 8
The Real Estate Settlement Procedures Act (RESPA) \2\ provides a
series of protections for consumers who are engaged in the process of
buying a home, applying for or closing on a mortgage, making escrow
payments, or purchasing other services associated with most residential
real estate transactions.\3\ RESPA section 8(a) \4\ provides that no
person \5\ shall give and no person shall accept any fee, kickback, or
thing of value \6\ pursuant to any agreement or understanding,\7\ oral
or otherwise, that business incident to or a part of a real estate
settlement service \8\ involving a federally related mortgage loan \9\
shall be referred \10\ to any person. While RESPA section 8(a)
prohibits referral fees, RESPA section 8(c) provides that bona fide
payments for goods or facilities provided or services rendered (which
do not include payments for referral fees) are not prohibited by RESPA
section 8.\11\
---------------------------------------------------------------------------
\2\ 12 U.S.C. 2601 et seq.
\3\ See generally 12 U.S.C. 2601 et seq. and Regulation X, 12
CFR part 1024. Certain RESPA and Regulation X provisions address
mortgage servicing and escrow issues (e.g., 12 U.S.C. 2605), which
are not the subject of this Advisory Opinion.
\4\ 12 U.S.C. 2607(a). Regulation X, 12 CFR 1024.14(b),
implements RESPA section 8(a)'s prohibition.
\5\ See 12 U.S.C. 2602(5) (statutory definition of ``person'').
\6\ See 12 CFR 1024.14(d) (regulatory definition of ``thing of
value'').
\7\ See 12 CFR 1024.14(e) (regulatory definition of ``agreement
or understanding'').
\8\ See 12 CFR 1024.2(b) (defining settlement service as ``any
service provided in connection with a prospective or actual
settlement'' and providing 15 non-exhaustive examples). The
regulatory definition is based on the broad statutory definition of
settlement services in 12 U.S.C. 2602(3).
\9\ 12 U.S.C. 2602(1). As the TILA-RESPA Integrated Disclosure
rule summarized, a federally related mortgage loan ``is broadly
defined to encompass virtually any purchase money or refinance loan,
with the exception of temporary financing, that is `secured by a
first or subordinate lien on residential real property (including
individual units of condominiums and cooperatives) designed
principally for the occupancy of from one to four families.' '' 78
FR 79730, 79736 (Dec. 31, 2013) (quoting 12 U.S.C. 2602(1)). The
term federally related mortgage loan also includes certain other
loans, such as reverse mortgages and home equity loans and lines of
credit, that meet the other criteria of the definition.
\10\ See 12 CFR 1024.14(f) (regulatory definition of
``referral'').
\11\ 12 U.S.C. 2607(c)(2) (``Nothing in this section shall be
construed as prohibiting . . . the payment to any person of a bona
fide salary or compensation or other payment for goods or facilities
actually furnished or for services actually performed''); accord 12
CFR 1024.14(g)(1)(iv) (``Section 8 of RESPA permits . . . [a]
payment to any person of a bona fide salary or compensation or other
payment for goods or facilities actually furnished or for services
actually performed. . . .'').
---------------------------------------------------------------------------
RESPA and its implementing Regulation X \12\ have been in effect
for nearly a half century. One of the reasons for RESPA's enactment in
1974 was congressional concern over excessive settlement costs.
Congress found that ``significant reforms in the real estate settlement
process are needed to insure that consumers throughout the Nation . . .
are protected from unnecessarily
[[Page 9163]]
high settlement charges caused by certain abusive practices that have
developed in some areas of the country.'' \13\ Among the RESPA
statutory purposes is the ``elimination of kickbacks or referral fees
that tend to increase unnecessarily the costs of certain settlement
services.'' \14\ Congressional committee reports noted that kickbacks
for the referral of settlement service business were a common practice
in the real estate industry and cited payments for referrals of
settlement services as a factor in the inflated prices for those
services.\15\
---------------------------------------------------------------------------
\12\ 12 CFR part 1024.
\13\ 12 U.S.C. 2601(a).
\14\ 12 U.S.C. 2601(b)(2).
\15\ See H.R. Rep. No. 93-1177, at 7 (1974) and S. Rep. No. 93-
866, at 6 (1974) (providing examples where the payment or other
thing of value furnished by the person to whom the settlement
business is referred tended to increase the cost of settlement
services without providing any benefits to the homebuyer, and noting
that ``[w]hile the making of such payments may heretofore have been
necessary from a competitive standpoint in order to obtain or retain
business, and in some areas may even be permitted by state law, it
is the intention of [this] section . . . to prohibit such payments,
kickbacks, rebates, or unearned commissions'').
---------------------------------------------------------------------------
Further, Congress in 1983 amended RESPA to permit what are now
called affiliated business arrangements subject to certain
conditions.\16\ In doing so, Congress recognized that settlement
service providers engage in reverse competition for their business--
that is, they do not compete for a consumer's business directly, but
rather compete for and almost exclusively rely on referrals from, e.g.,
real estate brokers or lenders--and that this dynamic can have
deleterious effects on consumers and markets beyond higher settlement
costs.\17\ One court, citing the legislative and regulatory history
concerning the affiliated business arrangement provisions, noted that
``RESPA's overarching goal'' was to ``mitigat[e] market-distorting
practices.'' \18\ Consistent with the notion that RESPA section 8
addresses consumer harms beyond settlement cost increases, Regulation X
provides that a RESPA section 8 violation can occur even if the
consumer's settlement costs do not increase.\19\
---------------------------------------------------------------------------
\16\ Housing and Urban-Rural Recovery Act of 1983, Public Law
98-181, section 461, 97 Stat. 1155, 1230 (1983) (codified as amended
at 12 U.S.C. 2607(c)(4)).
\17\ As explained in a House Committee Report: ``[T]he advice of
a person making the referral may lose its impartiality and may not
be based on his professional evaluation of the quality of service
provided if the referror or his associates have a financial interest
in the company being recommended.'' H.R. Rep. No. 97-532, at 52
(1982). The 1983 RESPA amendments addressed questions following
RESPA's enactment about ``the legality of more sophisticated
transactions where . . . there was a less obvious causal link
between the referral and the payment.'' Minter v. Wells Fargo Bank,
N.A., 274 FRD. 525, 536 (D. Md. 2011). This arose most frequently
within the context of what were then called ``controlled business
arrangements'' where ``one provider of one settlement service
maintained an enhanced relationship with a second provider of a
different settlement service, through which each service provider
captured the clients of the other.'' Id.
\18\ Id. at 538-39; see also Baehr v. Creig Northrop Team, 953
F.3d 244, 253-56 & n.7 (4th Cir. 2020) (finding that ``deprivation
of impartial and fair competition between settlement services
providers'' was not sufficient to confer standing on a private
litigant under RESPA section 8's statutory purposes in absence of
increased settlement costs, but noting that increased settlement
costs were not a requirement for a statutory violation and that
governmental entities are not bound to the same standing constraints
as private litigants).
\19\ See 12 CFR 1024.14(g)(2) (``The fact that the transfer of
the thing of value does not result in an increase in any charge made
by the person giving the thing of value is irrelevant in determining
whether the act is prohibited.'').
---------------------------------------------------------------------------
2. Digital Mortgage Comparison-Shopping Platforms
RESPA section 8 applies broadly, and in many circumstances covers
conduct by persons who connect settlement service providers to
consumers who may be interested in purchasing a home, applying for a
mortgage, or otherwise using a settlement service provider in a RESPA-
covered transaction. This may include selling the consumer's contact
information (i.e., leads) to settlement service providers. Leads are
increasingly sold through a variety of digital platforms and related
business agreements.
In particular, some digital platforms are structured as consumer-
facing websites or online applications that allow consumers to search
for and compare options for mortgages or other settlement services.\20\
These digital platforms--in some cases called ``online marketplaces''--
can facilitate a consumer's choice among alternative products or
settlement service providers and may be operated by settlement service
providers or third parties.\21\ Through their interaction with these
digital platforms, consumers often provide their contact information to
set up an account, and sometimes they may provide additional
information that is typically part of a mortgage application or fill
out an online long form. The platform operator then purports to use the
consumer's information to help the consumer compare a range of options
to find a suitable lender or other settlement service provider that the
consumer can contact. The platforms typically will generate leads for
the participating lender or other settlement service provider by
facilitating the consumer's click-through to the website of the
participating provider, selling the consumer's contact information to
the provider, or both. The comparison information may be presented to
the consumer viewing the platform in a static or interactive format. In
the latter case, the platform may give consumers the ability to sort
the options or rankings based on different criteria or to customize the
presentation of options or rankings based on factors they can select
(sometimes after default options or rankings are presented). Digital
platforms may also combine online marketplace and lead generation
activities with other services, such as advertising to consumers.
---------------------------------------------------------------------------
\20\ See Rory Van Loo, Rise of the Digital Regulator, 66 Duke
L.J. 1267, 1281 (2017) (describing how ``digital intermediaries''
can list mortgage options from specific financial institutions,
permit consumers to use mortgage calculators, or allow consumers to
input information to generate a response as to whether they should
refinance).
\21\ See Miriam Cross, Bank comparison sites recast themselves,
with celeb help and new services, Am. Banker (Aug. 9, 2022)
(describing how ``[o]nline marketplaces have revamped their branding
or adapted their strategy over the course of the pandemic to
maintain financial institution partnerships and meet new customer
needs'' and noting that ``[b]anks and lenders are closely
intertwined with these platforms'').
---------------------------------------------------------------------------
This Advisory Opinion focuses on digital platforms that include
information or features that enable consumers to comparison shop
options for mortgages and other settlement services, including those
platforms that generate potential leads for the platform participants
through consumers' interaction with the platform (Digital Mortgage
Comparison-Shopping Platforms). Digital Mortgage Comparison-Shopping
Platforms generally are covered by a 1996 policy statement issued by
the Department of Housing and Urban Development (HUD) on ``computer
loan origination systems,'' or CLOs (HUD CLO Policy Statement),\22\
which the CFPB has applied, as relevant, since 2011, when Congress
transferred responsibility for RESPA to the CFPB from HUD.\23\
---------------------------------------------------------------------------
\22\ HUD, RESPA Statement of Policy 1996-1, Regarding Computer
Loan Origination Systems (CLOs), 61 FR 29255 (June 7, 1996). The HUD
CLO Policy Statement was issued as part of a broader set of HUD
regulations and interpretations that addressed employer-to-employee
payments. See 61 FR 29238 (June 7, 1996). Because some of these
regulations and interpretations were never finalized, see 61 FR
58472 (Nov. 15, 1996), certain aspects of the HUD CLO Policy
Statement not relevant to this Advisory Opinion--for example,
section 4, addressing ``Payments of Commissions or Bonuses to
Employees''--were not made effective by HUD and would not be applied
by the CFPB. See id. at 58473.
\23\ See 12 U.S.C. 5581(b)(7). When the CFPB assumed
jurisdiction over the enumerated consumer laws in the Dodd-Frank Act
on the designated transfer date, it issued a rule identifying the
enforceable rules and orders from transferor agencies. The preamble
to that rule explained that ``official commentary, guidance, and
policy statements'' previously issued by transferor agencies with
exclusive rulemaking authority over the law in question, including
RESPA, ``will be applied by the CFPB pending further CFPB action.''
76 FR 43569, 43570 (July 21, 2011) (Transfer of Authorities Rule).
The CFPB also wrote that it ``will seek over time to improve the
clarity and uniformity of guidance regarding the laws it will
administer as necessary . . . to facilitate compliance with the
Federal consumer financial laws.'' Id. Although the CFPB considers
this Advisory Opinion to be ``further CFPB action'' as such term was
used in the Transfer of Authorities Rule, this Advisory Opinion is
intended to supplement the HUD CLO Policy Statement, rather than
supersede it. The CFPB will continue to apply the HUD CLO Policy
Statement, as relevant, pending further CFPB action.
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[[Page 9164]]
3. HUD CLO Policy Statement
The HUD CLO Policy Statement defined a CLO as ``a computer system
that is used by or on behalf of a consumer to facilitate a consumer's
choice among alternative products or settlement service providers in
connection with a particular RESPA-covered real estate transaction''
and gave seven examples of CLO system functions.\24\ The description of
CLOs in the HUD CLO Policy Statement was ``not meant to be restrictive
or exhaustive'' and ``merely attempt[ed] to describe existing practices
of service providers,'' and the HUD CLO Policy Statement elaborated
that with the ``use of technology evolving so rapidly,'' it is
difficult ``to provide guidance on future unspecified practices in the
abstract.'' \25\ Based on the HUD CLO Policy Statement's description of
CLOs, which expressly left room for platform evolution, Digital
Mortgage Comparison-Shopping Platforms are a type of CLO.\26\ Further,
for clarity, this Advisory Opinion sometimes refers to the person that
receives payment from participants on a Digital Mortgage Comparison-
Shopping Platform as the ``Operator.'' \27\
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\24\ 61 FR 29255, 29256 (June 7, 1996) (``Such a computer
system: (1) may provide information concerning products or services;
(2) may pre-qualify a prospective borrower; (3) may provide
consumers with an opportunity to select ancillary settlement
services; (4) may provide prospective borrowers with information
regarding the rates and terms of loan products for a particular
property in order for the borrower to choose a loan product; (5) may
collect and transmit information concerning the borrower, the
property, and other information on a mortgage loan application for
evaluation by a lender or lenders; (6) may provide loan origination,
processing, and underwriting services, including but not limited to,
the taking of loan applications, obtaining verifications and
appraisals, and communicating with the borrower and lender; and (7)
may make a funding decision.'').
\25\ Id.
\26\ The CFPB recognizes that the platforms will continue to
evolve as technology and business arrangements continue to evolve.
Thus, similar to the HUD CLO Policy Statement's approach when
defining the term CLO, the CFPB intends the term Digital Mortgage
Comparison-Shopping Platform to be flexible and non-exhaustive.
\27\ For purposes of this Advisory Opinion, a payment or other
thing of value would be considered to be received from a settlement
service provider participating on a Digital Mortgage Comparison-
Shopping Platform even if it is provided to the Operator by another
person on behalf of the participating provider, rather than directly
by the participating provider.
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The HUD CLO Policy Statement noted that settlement service
providers ``may pay CLOs a reasonable fee for services provided by the
CLO to the settlement service provider, such as, having information
about the provider's products made available to consumers for
comparison with the products of other settlement service providers.''
\28\ Moreover, ``if a CLO lists only one settlement service provider
and only presents basic information to the consumer on the provider's
products, then there would appear to be no or nominal compensable
services provided by the CLO to either the settlement service provider
or the consumer, only a referral''; thus, ``any payment by the
settlement service provider for the CLO listing could be considered a
referral fee in violation of section 8 of RESPA.'' \29\ The HUD CLO
Policy Statement, further, noted that ``favoring one settlement service
provider over others may be affirmatively influencing the selection of
a settlement service provider'' and that ``if one lender always appears
at the top of any listing of mortgage products and there is no real
difference in interest rates and charges between the products of that
lender and other lenders on a particular listing, then this may be a
non-neutral presentation of information which affirmatively influences
the selection of a settlement service provider.'' \30\ The HUD CLO
Policy Statement also noted that the statement ``should not be read to
discourage CLOs from assisting consumers in determining which products
are most advantageous to them'' and that if, for example, ``a CLO
consistently ranks lenders and their mortgage products on the basis of
some factor relevant to the borrower's choice of product, such as APR
[annual percentage rate] calculated to include all charges and to
account for the expected tenure of the buyer, HUD would consider this
practice as a neutral display of information.'' \31\
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\28\ 61 FR 29255, 29257 (June 7, 1996).
\29\ Id. at 29256. Depending on the facts and circumstances,
such a payment could also violate RESPA section 8(b), which
prohibits splitting charges made or received for settlement
services, except for services actually performed, in connection with
a federally related mortgage loan. See 12 U.S.C. 2607(b), 12 CFR
1024.14(c).
\30\ 61 FR 29255, 29258 (June 7, 1996).
\31\ Id.
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The HUD CLO Policy Statement further noted that ``if a CLO charges
different fees to different settlement service providers in similar
situations, an incentive may exist for the CLO to steer the consumer to
the settlement service provider paying the highest fees,'' which could
lead to RESPA violations.\32\ HUD's concern over 26 years ago about
steering was both compelling and prescient. Based on the evolution of
business arrangements and technology platforms, the CFPB's market
monitoring, and regulator activity, the CFPB understands that operators
of Digital Mortgage Comparison-Shopping Platforms and participating
settlement service providers in some cases may be engaging in
activities that violate RESPA section 8.
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\32\ Id. at 29257.
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In this Advisory Opinion, the CFPB is addressing, as a general
matter, certain circumstances in which payments received by Operators
from settlement service providers for participating on Digital Mortgage
Comparison-Shopping Platforms violate RESPA section 8. This Advisory
Opinion also identifies additional, illustrative examples of Digital
Mortgage Comparison-Shopping Platforms that involve RESPA section 8
violations. The CFPB, finally, briefly discusses the potential
applicability of other consumer-protection laws and regulations.
B. Scope of Coverage
This Advisory Opinion applies to any ``person'' to which RESPA
section 8's prohibitions apply. RESPA defines ``person'' to include
individuals, corporations, associations, partnerships, and trusts.\33\
RESPA does not apply to extensions of credit to government or
governmental agencies or instrumentalities.\34\ It also does not apply
to extensions of credit primarily for business, commercial, or
agricultural purposes.\35\
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\33\ 12 U.S.C. 2602(5).
\34\ 12 U.S.C. 2606(a)(2).
\35\ 12 U.S.C. 2606(a)(1). Regulation X, 12 CFR 1024.5, provides
additional limits on the coverage of RESPA.
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C. Legal Analysis
1. Interpretation of RESPA Section 8
An operator of a Digital Mortgage Comparison-Shopping Platform
receives a prohibited referral fee in violation of RESPA section 8
when: (1) the Digital Mortgage Comparison-Shopping Platform non-
neutrally uses or presents information about one or more settlement
service providers participating on the platform; (2) that non-neutral
use or presentation of information has the effect of steering the
consumer to use, or otherwise
[[Page 9165]]
affirmatively influences the selection of, those settlement service
providers, thus constituting referral activity; and (3) the Operator
receives a payment or other thing of value that is, at least in part,
for that referral activity. By non-neutrally using or presenting
information, the Operator impedes the consumer's ability to engage in
meaningful comparison of options and, instead, preferences certain
options over others or presents options for reasons other than
presenting them based on neutral criteria such as APR, objective
consumer satisfaction information, or factors the consumer selects for
themselves to rank or sort the settlement service providers on the
platform.\36\ In these instances, the payment received by the Operator
for such preferences or presentation of options is not merely for
compensable services; instead, it is, at least in part, for referral
activity.\37\ Further, when the Operator receives a higher fee for
including one settlement service provider than it receives for
including other settlement service providers participating on the same
platform, that can be evidence of an illegal referral fee arrangement,
absent other facts indicating that the payment is not for enhanced
placement or other form of steering; see further explanation and
illustrative examples below.
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\36\ See 61 FR 29255, 29258 (June 7, 1996). Although these are
examples of information that Operators may be using or presenting
with regard to Digital Mortgage Comparison-Shopping Platforms in
today's market, the Bureau emphasizes that this Advisory Opinion
implicates the manner in which an Operator uses and presents
information, not what information an Operator must or must not use
or present. Moreover, the CFPB notes that presenting comparable
options based on neutral criteria (e.g., listing lenders with the
lowest to highest APR in ascending order) would be a neutral
presentation of information.
\37\ The CFPB is aware that some Digital Mortgage Comparison-
Shopping Platforms contain certain disclosures addressing how the
participating settlement service providers' information is used and
presented. While it may be a best practice for an Operator to
disclose clearly and prominently how it is using and presenting the
information of platform participants--for compliance with the
prohibition on unfair, deceptive, or abusive acts or practices
(UDAAPs), 12 U.S.C. 5531, 5536(a)(1)(B), or for other reasons--a
disclosure would not, absent other facts, turn a directed action
that has the effect of affirmatively influencing into one that does
not. Unlike RESPA section 8(c)(4)--where giving a disclosure along
with meeting other specified conditions would allow for referrals to
be made and a return on an ownership interest or franchise
relationship to be received under the ambit of an affiliated
business arrangement--a disclosure does not cure what would
otherwise be a RESPA section 8(a) or 8(b) violation. See HUD RESPA
Statement of Policy 1999-1 Regarding Lender Payments to Mortgage
Brokers, 64 FR 10080, 10087 (Mar. 1, 1999) (``[D]isclosure alone
does not make illegal fees legal under RESPA.'').
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a. RESPA Section 8(a)
When a Digital Mortgage Comparison-Shopping Platform Operator non-
neutrally uses or presents information and that has the effect of
steering the consumer to use, or otherwise affirmatively influences the
selection of, a settlement service provider, the Operator is making a
referral. Under Regulation X, the term ``referral'' is defined as ``any
oral or written action directed to a person which has the effect of
affirmatively influencing the selection by any person of a provider of
a settlement service or business incident to or part of a settlement
service when such person will pay for such settlement service or
business incident thereto or pay a charge attributable in whole or in
part to such settlement service or business.'' \38\ Steering is a form
of referral because it is an action directed to a person \39\ that
exerts affirmative influence.\40\
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\38\ 12 CFR 1024.14(f)(1). To qualify as a ``referral,'' the
oral or written action at issue need not be directed to a person
that is a consumer. Rather, it might be directed to a variety of
persons, such as appraisers, real estate agents, title companies and
agents, lenders, mortgage brokers, or other companies that provide
information in connection with settlements, such as credit reports
and flood determinations. See 12 CFR 1024.14(b) and (f).
\39\ Based on the CFPB's understanding of how consumers interact
with Digital Mortgage Comparison-Shopping Platforms in the market
today, the Operator will typically take action that is ``directed to
a person.'' For example, if the consumer makes a request of the
platform to run a search of comparison options, sort the comparison
options into different categories, or use the consumer's preferences
to generate or refine the comparison options, the Operator's
response to the consumer's request is an action ``directed to a
person,'' i.e., the consumer. 12 CFR 1024.14(f)(1).
\40\ See Wilborn v. New Century Mortg. Corp., No. C 08-5044 JL,
2009 WL 10695188, at *6 (N.D. Cal. Apr. 29, 2009) (noting that RESPA
section 8 in general ensures that ``fees or commissions are not
kickbacks for steering business to a particular lender''); Paul
Barron et al., 1 Fed. Reg. of Real Estate & Mortgage Lending section
2:51 (4th ed. Sept. 2022 update) (treatise excerpt explaining that
the HUD CLO Policy Statement reflects HUD's concern that ``i[f]
there is steering, the implication is that the settlement service
provider to whom the consumer is steered is paying a referral
fee'').
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The Operator can steer or otherwise affirmatively influence the
consumer to select certain platform participants by non-neutrally using
information to generate the comparison options. Non-neutral use of
information involves manipulation or biasing of the inputs or formula
that the Operator employs to generate the comparison options before
they are presented to the consumer. This can happen in a variety of
ways. For example, some Digital Mortgage Comparison-Shopping Platforms
allow consumers to generate comparison options based on purportedly
objective criteria specified by the Operator (e.g., lower interest
rate, superior customer service). In this scenario, the Operator would
non-neutrally use information if it were to set the formula to boost
the rankings of lenders who pay more to participate on the platform by,
behind the scenes, excluding or placing low weight on the purportedly
objective comparison criteria that would otherwise favor the lower-
paying provider. Another example involves a platform that seeks--and
purports to incorporate into the formula used to generate comparison
results--the consumer's preferences regarding the factors that are most
important to them in choosing a settlement service provider. In that
scenario, the Operator could manipulate the formula to favor certain
participating providers by declining to honor the consumer's
preferences or unwarrantedly placing weight on inaccurate information
about the provider (e.g., giving credit in the formula to a lender for
more favorable interest rates that the Operator knows are outdated,
which ensures that lender will have a higher ranking under the
formula).
The Operator also can steer or otherwise exert affirmative
influence by non-neutrally presenting information about comparison
options to the consumer while the consumer is interacting with a
Digital Mortgage Comparison-Shopping Platform.\41\ The Operator could
do this in several ways, including through subtle actions that bias the
presentation for the consumer. For example, an Operator could provide
the names and telephone numbers of all participating providers but only
provide weblinks for a subset of higher-paying providers.
Alternatively, the Operator might list the lenders that pay more to the
Operator on the first page and rank them by interest rate--so the
platform appears to have ranked all participants by that factor--while
at the same time showing on the second page other participants with the
same or lower interest rates but that pay less to the Operator. Another
example is if an Operator: permits a consumer to generate a
presentation of ranked lender options; receives a higher fee if the
consumer clicks on the top-ranked
[[Page 9166]]
lender compared with the other lenders; and segregates and highlights
prominently the top-ranked option but presents the other options in
very small font requiring the consumer to scroll down.\42\ Another
example is if the Operator labels a lender that appears within, and at
or near the top of, the platform's rankings as a ``sponsored lender,''
``featured lender,'' or similar phrase because the lender has paid for
enhanced placement, but nonetheless designs the platform and displays
the lender in a manner that implies the lender earned its placement
within the platform's rankings based on neutral criteria.
Alternatively, the Operator could list the same participant who has
paid for enhanced placement multiple times in the rankings, using
either the same name or an affiliated name. Another example would be
where a consumer visits a Digital Mortgage Comparison-Shopping Platform
and runs an initial search of comparison options which yields a ``top-
ranked lender'' and other lenders, but when revisiting the platform,
the consumer only sees that ``top-ranked'' lender based on the Operator
and lender's agreement to show only that lender when the consumer
revisits the platform. This action prevents the consumer from using the
platform for comparison shopping based on neutral criteria and boosts
the likelihood the consumer will choose that lender over other options.
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\41\ The CFPB emphasizes that the distinction between non-
neutral use and presentation of information is not binary. For
example, Digital Mortgage Comparison-Shopping Platforms with more
interactive elements--where consumers can sort options by different
categories, indicate preferences which will affect the generation of
comparison options, or generate multiple sets of comparison
options--will involve both the use and presentation of information,
often in rapid succession. The distinction is intended to elucidate
the legal interpretation rather than suggest that there is a rigid
delineation as an operational or practical matter.
\42\ See 61 FR 29255, 29257 (June 7, 1996).
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Through all these actions, the Operator non-neutrally presents
information to increase the odds that the consumer will select the
lender who pays more, as opposed to other options that are similarly
suitable or even better for the consumer. The HUD CLO Policy Statement
recognized that these types of non-neutral presentations (which it
sometimes called ``non-neutral displays'') of information on a CLO
platform may constitute a referral.\43\ The illustrative examples in
section I.C.2 of this Advisory Opinion highlight other ways in which an
Operator non-neutrally uses or presents information.
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\43\ See id. at 29258.
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By non-neutrally using or presenting information on a Digital
Mortgage Comparison-Shopping Platform, the Operator is putting a thumb
on the scale. Consequently, the Operator is no longer merely providing
the most basic function of a Digital Mortgage Comparison-Shopping
Platform, which was identified in the HUD CLO Policy Statement--
``having information about the provider's products made available to
consumers for comparison with the products of other settlement service
providers.'' \44\ Instead, the Operator is receiving payment for
steering or otherwise affirmatively influencing the consumer, which
constitutes a referral. This activity could also potentially implicate
the Dodd-Frank Act's prohibition on unfair, deceptive, or abusive acts
or practices (UDAAPs).\45\
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\44\ Id. at 29257.
\45\ 12 U.S.C. 5531, 5536(a)(1)(B).
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In addition to the element of referral, a RESPA section 8(a)
violation occurs when two other elements are present: a thing of value,
and an agreement or understanding. Thing of value is defined in
Regulation X broadly and non-exhaustively.\46\ The term ``thing of
value'' would include payments received by the Operator under a
contractual agreement for the settlement service provider to
participate on the platform where referrals are being generated for the
settlement service provider. Furthermore, if the settlement service
provider receives enhanced, non-neutral placement on a Digital Mortgage
Comparison-Shopping Platform, there presumably would be an express
agreement or understanding to pay for that enhanced placement. Even if
there is not such an express agreement or understanding for the
enhanced placement, because the Operator is providing the participating
settlement service providers with access to a Digital Mortgage
Comparison-Shopping Platform that non-neutrally uses or presents
information and results in steering or other affirmative influence (as
discussed above), it is likely that an agreement or understanding for
referrals can be established under Regulation X through a pattern,
practice, or course of conduct.\47\
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\46\ See 12 CFR 1024.14(d); see also Edwards v. First Am. Corp.,
798 F.3d 1172, 1179 (9th Cir. 2015) (``[A]n exchange of a `thing of
value' is used as synonymous with a payment and does not require a
transfer of money.'').
\47\ See 12 CFR 1024.14(e). Where the elements of a RESPA
section 8 violation are otherwise satisfied, it is no defense that a
Digital Mortgage Comparison-Shopping Platform's non-neutral use or
presentation of information was allegedly the product of a complex
algorithm. Operators are expected to know whether their platform
uses or presents information in a non-neutral manner, even if the
platform may employ complex algorithms in using or presenting the
information. See generally Consumer Financial Protection Circular
2022-03, Adverse Action Notification Requirements in Connection with
Credit Decisions Based on Complex Algorithms, 87 FR 35864 (June 14,
2022) (``A creditor cannot justify noncompliance with ECOA and
Regulation B's requirements based on the mere fact that the
technology it employs to evaluate applications is too complicated or
opaque to understand.''). Moreover, when structuring or implementing
a contractual agreement to participate on a Digital Mortgage
Comparison-Shopping Platform that results in steering or other
affirmative influence based on non-neutral criteria, settlement
service providers likely would know that the Operator is non-
neutrally using or presenting information.
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b. RESPA Section 8(c)(2)
RESPA section 8(c)(2) provides that section 8 of RESPA does not
prohibit ``the payment to any person of a bona fide salary or
compensation or other payment for goods or facilities actually
furnished or for services actually performed.'' \48\ Regulation X
further clarifies RESPA section 8(c)(2). It provides that ``[i]f the
payment of a thing of value bears no reasonable relationship to the
market value of the goods or services provided, then the excess is not
for services or goods actually performed or provided.'' \49\ Regulation
X also provides that ``[t]he value of a referral (i.e., the value of
any additional business obtained thereby) is not to be taken into
account in determining whether the payment exceeds the reasonable value
of such goods, facilities or services.'' \50\ Moreover, under
Regulation X, ``[t]he fact that the transfer of the thing of value does
not result in an increase in any charge made by the person giving the
thing of value is irrelevant in determining whether the act is
prohibited.'' \51\
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\48\ 12 U.S.C. 2607(c)(2); accord 12 CFR 1024.14(g)(1)(iv).
\49\ 12 CFR 1024.14(g)(2); see also O'Sullivan v. Countrywide
Home Loans, Inc., 319 F.3d 732, 739 (5th Cir. 2003) (explaining that
this provision ``was promulgated for the purpose of assisting courts
in ferreting out kickbacks disguised as legitimate payments for
goods and services in complex real estate settlement
transactions'').
\50\ 12 CFR 1024.14(g)(2).
\51\ Id.
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RESPA section 8(c)(2) does not provide a defense to payment of
referral fees because referrals are not compensable services under
RESPA.\52\ As described above, when (1) a Digital Mortgage Comparison-
Shopping Platform non-neutrally uses or presents information about one
or more settlement service providers participating on the platform, (2)
that non-neutral use or presentation of information has the effect of
steering the consumer to use, or otherwise affirmatively influences the
selection of, those settlement service providers, thus constituting
referral activity, and (3) the Operator receives a payment or other
thing of value that is, at least in part, for that referral activity,
the Operator is receiving a payment that is not merely for compensable
services. Consequently,
[[Page 9167]]
the Operator is not only providing what the HUD CLO Policy Statement
described as a CLO operator's compensable service of ``having
information about the provider's products made available to consumers
for comparison with the products of other settlement service
providers'' \53\ or other compensable services. Rather, as described
above, the Operator is being paid, at least in part, for conduct that
has the effect of steering or otherwise affirmatively influencing the
consumer to select a provider on the platform. Yet, Regulation X does
not permit the value of the referral to be taken into account when
determining the reasonable value of the services under RESPA section
8(c)(2).\54\
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\52\ See HUD, Real Estate Settlement Procedures Act (RESPA):
Home Warranty Companies' Payments to Real Estate Brokers and Agents,
75 FR 36271 (June 25, 2010) (distinguishing where home warranty
companies could legally pay real estate brokers for services versus
where such payments were non-compensable referral fees).
\53\ 61 FR 29255, 29257 (June 7, 1996).
\54\ 12 CFR 1024.14(g)(2).
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In contrast, an Operator that receives payment from settlement
service providers for their participation on a Digital Mortgage
Comparison-Shopping Platform that both neutrally uses and neutrally
presents information is receiving payment for compensable services,\55\
and thus would be compliant with RESPA section 8, assuming no other
facts were present that would call such RESPA section 8 compliance into
question.\56\
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\55\ As noted above, an example of a neutral presentation of
information would be a platform that lists participating lenders
with the lowest to highest APR in ascending order. See supra note
36.
\56\ Similarly, advertising arrangements where actual services
are being provided and reasonable payment is being received are
compensable services under RESPA section 8 depending on the facts
and circumstances. See 12 U.S.C. 2607(c)(2). Cf. CFPB Real Estate
Settlement Procedures Act FAQs, RESPA Section 8: Marketing Services
Agreements (MSAs), no. 2, https://www.consumerfinance.gov/compliance/compliance-resources/mortgage-resources/real-estate-settlement-procedures-act/real-estate-settlement-procedures-act-faqs/ (explaining that ``[w]hether a particular activity is a
referral or a marketing service is a fact-specific question,'' and
noting that a marketing service, in contrast to a referral, ``is not
directed to a person'' but instead ``is generally targeted at a wide
audience''--e.g., ``placing advertisements . . . in widely
circulated media'' such as ``a newspaper, a trade publication, or a
website'').
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c. HUD CLO Policy Statement
The HUD CLO Policy Statement, as noted above, cautioned that
differential payments by settlement service providers (e.g., lenders)
participating on CLO platforms create steering incentives that could
lead to RESPA violations.\57\ When examining the fees received by an
Operator from similarly situated settlement service providers that
participate on the same Digital Mortgage Comparison-Shopping Platform,
a fee differential can be evidence of an illegal referral fee
arrangement. The reason is commonsensical. If the Operator receives a
higher fee from one settlement service provider than another for
participating on the same Digital Mortgage Comparison-Shopping
Platform, and if the higher-paying settlement service provider is, in
fact, also receiving enhanced placement on the platform, then it is
reasonable to infer that the settlement service provider is paying for
the enhanced placement on the platform rather than merely the
compensable service of ``having information about the provider's
products made available to consumers for comparison with the products
of other settlement service providers'' \58\ or other compensable
services. The higher charge paid by some providers thus can be
``evidence of a violation of section 8,'' \59\ absent other facts
indicating that the payment is not for enhanced placement or other form
of steering.
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\57\ 61 FR 29255, 29257 (June 7, 1996). As noted above, the CFPB
has applied the HUD CLO Policy Statement since the CFPB's designated
transfer date under the Dodd-Frank Act, and the CFPB will continue
to apply the HUD CLO Policy Statement, as relevant, pending further
CFPB Action. See supra note 23.
\58\ Id.
\59\ 12 CFR 1024.14(g)(2) (providing that fees in excess of
reasonable market value can be evidence of a RESPA section 8
violation).
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Notwithstanding the CLO Policy Statement's language about
differential fees, if (1) a Digital Mortgage Comparison-Shopping
Platform's non-neutral use or presentation of information has the
effect of steering the consumer to use, or otherwise affirmatively
influences the selection of, one or more settlement service providers
participating on the platform, and therefore constitutes referral
activity, and (2) the Operator receives a payment for including
participating settlement service providers on the platform that is, at
least in part, for those referrals, then the Operator's actions would
violate RESPA section 8 even if the Operator were to receive the same
fee from each provider (or from some, but not all, providers). Although
the HUD CLO Policy Statement noted the potential for steering and
described how a RESPA violation could occur if different settlement
service providers were paying different fees for participating on the
same CLO system,\60\ the HUD CLO Policy Statement did not identify that
scenario as the only problematic one under RESPA section 8 with respect
to CLOs.\61\ By steering the consumer to particular settlement service
providers, even where the fees paid by those providers are the same as
one another, the Operator is providing a different--and non-
compensable--service from those identified as compensable under the HUD
CLO Policy Statement, including ``having information about the
provider's products made available to consumers for comparison with the
products of other settlement service providers.'' \62\ See sections
I.C.2.b and I.C.2.e below for examples illustrating where a Digital
Mortgage Comparison-Shopping Platform refers consumers to participating
settlement service providers and where the Operator receives illegal
referral fees, even if those fees do not differ among the participating
providers.
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\60\ See 61 FR 29255, 29257 (June 7, 1996).
\61\ The CFPB also emphasizes that there is no ``market'' value
to be ascribed to a referral, since a referral is not compensable
under RESPA section 8. See 12 CFR 1024.14(g)(2) (``The value of a
referral (i.e., the value of any additional business obtained
thereby) is not to be taken into account in determining whether the
payment exceeds the reasonable value of such goods, facilities or
services.'').
\62\ 61 FR 29255, 29257 (June 7, 1996).
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The HUD CLO Policy Statement also noted that no compensable
services would be present if a CLO were to list only one settlement
service provider and only present basic information to the consumer on
the provider's products.\63\ As noted above, the HUD CLO Policy
Statement described as compensable services a CLO operator's ``having
information about the provider's products made available to consumers
for comparison with the products of other settlement service
providers.'' \64\ For these particular CLO services to be compensable,
a range of options must be presented to the consumer. RESPA section 8
does not require a particular numerical threshold, but in general,
presenting a greater number of comparison options rather than fewer
makes it less likely that the Operator is steering the consumer to one
or more settlement service providers.
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\63\ Id. at 29256.
\64\ Id. at 29257.
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2. Examples of Digital Mortgage Comparison-Shopping Platforms Violating
RESPA Section 8
Below are examples of Digital Mortgage Comparison-Shopping
Platforms where, based on the interpretation above, the CFPB would find
that there is a RESPA section 8 violation. The CFPB emphasizes that
these examples are illustrative and non-exhaustive.
a. Pay To Play and Steering to Highest Bidder
In an example of conduct that would violate RESPA section 8, assume
the Operator permits the consumer to input
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relevant information on the Digital Mortgage Comparison-Shopping
Platform to aid in the consumer's search for mortgage options (e.g.,
location, anticipated loan amount, credit score) and represents that
the platform will use the information to identify the ``best match.''
Assume further that the platform presents a purported ``best match''
lender to the consumer, or ranks the lenders, but skews the results of
the comparison function to ensure that the ``best match'' is the
highest bidding lender participating on the platform. Such conduct
would violate RESPA section 8 because here, the Operator non-neutrally
uses information to preference the highest bidding lender, resulting in
the Operator steering the consumer to that lender. The Operator's
actions imply an endorsement by leading the consumer to believe that
the Operator did an analysis behind the scenes (possibly driven by an
algorithm) to determine the most suitable lender for the consumer--
which thereby influences the consumer to select that lender.\65\
Furthermore, for the reasons described in section I.C.1.b above, the
Operator is not merely receiving a bona fide payment for services under
RESPA section 8(c)(2). The CFPB notes that this example could also
potentially implicate the prohibition against UDAAPs, particularly if
the Digital Mortgage Comparison-Shopping Platform were to contain
misrepresentations about the accuracy of the information on the
platform (including about the objectivity of the rankings).\66\
Deceptive misrepresentations could serve to accentuate the affirmative
influence noted above.
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\65\ An endorsement is an example of an action that exerts
``affirmative influenc[e]'' within the meaning of 12 CFR
1024.14(f)(1)'s definition of ``referral.'' See NewDay Fin., LLC,
File No. 2015-CFPB-0004, at 6-8 (Feb. 10, 2015) (consent order),
https://files.consumerfinance.gov/f/201502_cfpb_consent-order_newday-financial.pdf.
\66\ See Fed. Trade Comm'n, Policy Statement on Deception (Oct.
14, 1983), https://www.ftc.gov/legal-library/browse/ftc-policy-statement-deception. The CFPB notes that in 2020, the Federal Trade
Commission (FTC) finalized a settlement with the operator of a
consumer loan comparison website, LendEDU. The FTC found that, among
other deceptive conduct, LendEDU misled consumers to believe its
website provided objective product information, when in fact it
offered higher rankings and ratings to companies that paid for
placement. Shop Tutors, Inc., No. 182-3180 (F.T.C. May 21, 2020)
(complaint), https://www.ftc.gov/system/files/documents/cases/c-4719_182_3180_lendedu_complaint.pdf (FTC LendEDU Matter).
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b. Payments Only From and Promotion of Lenders Who Rotate in Top Spot
A variation of the previous scenario involves a Digital Mortgage
Comparison-Shopping Platform that allows consumers to input information
about their needs and then to generate lender rankings, but where all
lenders participating on the platform take turns appearing in the top
spot randomly or based on a predetermined schedule, i.e., the rankings
do not reflect a tailoring to the consumer's needs based on their
inputted information. Moreover, assume that the Operator is paid by
only the lender appearing in the top spot or that lenders pay in
advance for the opportunity to appear in the top spot randomly or based
on the predetermined schedule. This example involves a referral because
a consumer would reasonably perceive that, after entering information
about their needs and using the platform to call up a ranking of
participating lenders, the lender appearing in the top spot would be
the one determined by the Operator to be best suited to the consumer's
needs, not the lender who is next in a round robin. For reasons similar
to those described in section I.C.1.b, the Operator is not merely
receiving a bona fide payment for services under RESPA section 8(c)(2),
and this scenario likewise would also raise UDAAP concerns. The payment
would be considered a referral fee even if it does not differ from the
payments made by other lenders participating in the round robin.
c. Preferencing Platform Participants That Are Affiliates
In another scenario, assume that a Digital Mortgage Comparison-
Shopping Platform is designed and operated in a manner that steers
consumers to use settlement service providers that are affiliates of
the Operator. For example, assume that a mortgage lender develops a
Digital Mortgage Comparison-Shopping Platform permitting consumers to
search information about and view rankings of comparable mortgage
brokers and that the platform includes both affiliated and non-
affiliated mortgage brokers. However, the mortgage lender/Operator
manipulates the application of the ranking criteria so that its
affiliated mortgage brokers appear higher than the non-affiliated
mortgage brokers. The Operator receives payment for the higher ranking
of affiliated mortgage brokers. In this scenario, the Operator's
receipt of payments from the affiliated mortgage brokers for the higher
ranking would violate RESPA section 8. A platform that preferences
affiliated settlement service providers non-neutrally uses or presents
information. Therefore, the Operator is affirmatively influencing the
consumer's selection of the providers on the platform and is referring
the consumer, and the Operator is receiving payment for the
preferential treatment, i.e., the referral.
This fact scenario may also implicate the RESPA section 8(c)(4)
provisions regarding affiliated business arrangements.\67\ Whether a
particular arrangement is an affiliated business arrangement would
depend on various factors, including the nature of the relationship
between the parties and whether the Operator is ``in a position to
refer [settlement service] business.'' \68\ In theory, the Operator
could follow the conditions for affiliated business arrangements and
then claim that the platform is permissible under RESPA section 8.
However, other than payments separately permitted under RESPA section
8(c), the only ``thing of value'' persons in an affiliated business
arrangement may receive is a return on ownership interest (or franchise
relationship).\69\ In the scenario described above, the Operator would
be receiving a thing of value other than payments separately permitted
under RESPA section 8(c) or a return on an ownership interest (or
franchise relationship).\70\ Furthermore, for reasons similar to the
other examples, that payment would not be merely for compensable
services under RESPA section 8(c)(2). Thus, the RESPA affiliated
business arrangement provisions would not permit this arrangement.
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\67\ 12 U.S.C. 2607(c)(4)(A)-(C); 12 CFR 1024.15(b)(1)-(3).
\68\ See 12 U.S.C. 2602(7) (definition of affiliated business
arrangement); 12 CFR 1024.15(c) (definition of ``[p]erson who is in
a position to refer settlement service business'').
\69\ 12 U.S.C. 2607(c)(4)(C); 12 CFR 1024.15(b)(3).
\70\ Variations of this example--such as where the Operator
receives no payment from the affiliated mortgage broker for being
listed on the platform but receives indirect compensation because
the Operator's preferential treatment generated additional business
for the affiliate--may also violate RESPA section 8 depending on the
circumstances. See, e.g., 12 CFR 1024.15(b)(3)(ii) through (iv)
(describing exclusions from the meaning of ``a return on an
ownership interest'' and when returns on ownership interests or
franchise relationships under an affiliated business arrangement are
not bona fide).
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d. Additional Services That Promote Platform Participant
In another example, assume an Operator designs a Digital Mortgage
Comparison-Shopping Platform that gathers the consumer's contact
information and permits the consumer to generate a ranking of lender
options based on criteria selected by the consumer. The ranking
reflects neutral use and display of information. Assume, further, that
the Operator also contracts with one of the participating lenders
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(which is not necessarily the top-ranked lender) to promote that lender
by sending a text message or email to any consumer who uses the
platform to generate a ranking of lender options, encouraging the
consumer to submit an application to that lender because it would be a
good fit for the consumer's needs. The promotional activity by the
Operator undermines the platform's neutral presentation of information
by steering the consumer to use a particular provider soon after the
consumer had searched for comparison information. The Operator's
promotional activity, either by itself or when combined with the effect
of the Operator's action in presenting the comparison options to the
consumer, affirmatively influences the consumer's selection of that
lender and is a referral. For the reasons described in section I.C.1.b
above, payment in exchange for the promotional activity is not merely a
payment for compensable services under RESPA section 8(c)(2).\71\
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\71\ Regulation X provides that when a person in a position to
refer settlement service business receives a payment for providing
additional settlement services as part of a real estate transaction,
such payment must be for services that are actual, necessary, and
distinct from the primary services provided by such person. 12 CFR
1024.14(g)(3); see also 12 CFR 1024.15(c) (``person who is in a
position to refer settlement service business'' includes mortgage
brokers). In this example, the Operator, who may be a mortgage
broker, is providing a promotional ``service'' that is not actual,
necessary, and distinct from the Operator's comparison function
(i.e., its primary service).
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e. Warm Handoff
In another example, assume the Operator of a Digital Mortgage
Comparison-Shopping Platform presents comparison information on
multiple lenders and uses an online long form to gather detailed
information from a consumer who is browsing the platform. The
consumer's information relates to the consumer's particular borrowing
needs, such as credit score and target loan amount. Soon thereafter,
the Operator calls the consumer to offer an immediate phone or live
chat transfer to, or callback from, a lender participating on the
platform and tells the consumer that they will be ``in good hands''
with that lender. However, the lender that receives the lead is merely
the first lender to respond to the Operator's push notification
alerting a network of lenders that a consumer is available for an
immediate transfer, rather than a lender the Operator identified as
meeting the consumer's needs based on the consumer's inputted
information. The sequence of events described above is one variation of
a lead generation practice that industry stakeholders sometimes call a
``warm handoff'' or ``live transfer.'' \72\ Through its enforcement
activity, the CFPB has identified other examples of so-called ``warm
handoff'' or ``live transfer'' activity that led to RESPA section 8
violations.\73\
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\72\ Variations of this example, including where the Operator
makes a ``warm handoff'' of a consumer to a lender that is not
displayed to the consumer on the platform, may also violate RESPA
section 8.
\73\ See, e.g., Planet Home Lending, LLC, File No. 2017-CFPB-
0007, at 4-5 (Jan. 31, 2017) (consent order) (Planet Home Order),
https://files.consumerfinance.gov/f/documents/201701_cfpb_PlanetHomeLending-consent-order.pdf.
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In this example, the Operator's actions convey to the consumer an
implied endorsement of the lender when the Operator tells the consumer
that they will be ``in good hands'' with that lender. Further,
regardless of the specific words used when the transfer occurs, a
consumer who inputs detailed information to the Operator immediately
before a transfer to a lender would reasonably infer that the consumer
is being connected to the lender that best meets their needs. Moreover,
the first lender to respond to the push notification receives the lead
exclusively; HUD identified exclusivity as a relevant factor in
determining whether a referral arrangement is present.\74\ Therefore,
the Operator's actions exert affirmative influence and constitute a
referral. An Operator that receives payment for a warm handoff is not
merely receiving payment for a compensable service, for the reasons
described in section I.C.1.b above. The payment also would be
considered a referral fee even if it does not differ among the
providers participating in the warm transfer process.
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\74\ See HUD, Real Estate Settlement Procedures Act (RESPA):
Home Warranty Companies' Payments to Real Estate Brokers and Agents
Interpretive Rule: Response to Public Comments, 75 FR 74620, 74621
(Dec. 1, 2010).
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3. Other Applicable Laws
The design, operation, and payments associated with Digital
Mortgage Comparison-Shopping Platforms may implicate other Federal and
State laws and regulations. As noted above, if an Operator makes false
or misleading representations about the objectivity or veracity of the
information presented on the platform, it may violate the Dodd-Frank
Act prohibition on UDAAPs.\75\ Operators may also be subject to laws
and regulations that include, without limitation, 12 CFR part 1026
(Regulation Z); 12 CFR part 1008 (Regulation H) and State laws
regarding licensing of mortgage originators; State laws imposing
restrictions on referral fees and unearned fees; \76\ 12 CFR part 1002
(Regulation B), which implements the Equal Credit Opportunity Act; and
the Telemarketing Sales Rule.\77\ Additional laws and regulations that
may apply include the Federal Trade Commission Act,\78\ the Telephone
Consumer Protection Act,\79\ and applicable Federal and State privacy
laws. The CFPB's enforcement activity has also focused on the
applicability of the Fair Credit Reporting Act in lead generation
scenarios involving trigger leads.\80\
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\75\ 12 U.S.C. 5531, 5536(a)(1)(B); see also FTC LendEDU Matter;
CFPB Bulletin 2022-05: Unfair and Deceptive Acts or Practices That
Impede Consumer Reviews, 87 FR 17143 (Mar. 28, 2022); Consumer
Financial Protection Circular 2022-02: Deceptive Representations
Involving the FDIC's Name or Logo or Deposit Insurance, 87 FR 35866
(June 14, 2022).
\76\ See generally 1 Barron 2:59 (``Prohibition against referral
fees and unearned fees--State prohibitions against referral fees and
unearned fees'').
\77\ 16 CFR part 310, which was issued under the Telemarketing
and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. 6101 et seq.
\78\ 15 U.S.C. 41 et seq.; see also FTC LendEDU Matter.
\79\ 47 U.S.C. 227.
\80\ See Planet Home Order, at 6-7.
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II. Regulatory Matters
This Advisory Opinion is an interpretive rule issued under the
CFPB's authority to interpret RESPA and Regulation X, including under
section 1022(b)(1) of the Consumer Financial Protection Act of 2010,
which authorizes guidance as may be necessary or appropriate to enable
the CFPB to administer and carry out the purposes and objectives of
Federal consumer financial laws.\81\
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\81\ 12 U.S.C. 5512(b)(1); see also 12 U.S.C. 2617(a).
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By operation of RESPA section 19(b), no provision of RESPA or the
laws of any State imposing any liability applies to any act done or
omitted in good faith in conformity with this interpretive rule,
notwithstanding that after such act or omission has occurred, the
interpretive rule is amended, rescinded, or determined by judicial or
other authority to be invalid for any reason.\82\
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\82\ 12 U.S.C. 2617(b); see also 12 CFR 1024.4.
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The CFPB has determined that this Advisory Opinion does not impose
any new or revise any existing recordkeeping, reporting, or disclosure
requirements on covered entities or members of the public that would be
collections of information requiring approval by the Office of
Management and Budget under the Paperwork Reduction Act.\83\
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\83\ 44 U.S.C. 3501 through 3521.
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Pursuant to the Congressional Review Act,\84\ the CFPB will submit
a report containing this interpretive rule and other required
information to the United
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States Senate, the United States House of Representatives, and the
Comptroller General of the United States prior to the rule's published
effective date. The Office of Information and Regulatory Affairs has
designated this interpretive rule as not a ``major rule'' as defined by
5 U.S.C. 804(2).
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\84\ 5 U.S.C. 801 et seq.
Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2023-02910 Filed 2-10-23; 8:45 am]
BILLING CODE 4810-AM-P
