On February 7, 2023, the Consumer Financial Protection Bureau (CFPB) issued an advisory opinion (Opinion) regarding online mortgage shopping platforms and mobile apps. It clarifies that digital mortgage comparison-shopping platforms (Platforms) may violate Section 8 of the Real Estate Settlement Procedures Act (RESPA) when they present mortgage options in a non-neutral manner that has the effect of steering consumers to certain lenders. According to a statement from CFPB Director Rohit Chopra, the Opinion is intended to “rein in the manipulation of digital mortgage comparison-shopping platforms” as part of a broader effort to “end the illegal biasing of ostensibly neutral platforms.”

Pursuant to the Opinion, a Platform may violate RESPA Section 8’s prohibition on illegal referrals when (i) it uses or presents information about settlement service providers in a non-neutral way; (ii) that non-neutral use or presentation has the effect of steering or affirmatively influencing consumers to select those settlement service providers; and (iii) the entity that operates the Platform receives a payment or other thing of value from a settlement service provider in exchange for the referral to that provider.

The Opinion provides the following examples of practices that Platforms should consider in order to comply with RESPA Section 8:

• Presenting one or more service providers in a non-neutral way. Presenting lenders or other settlement service providers to consumers based on referral payments rather than on the consumer’s personal data or preferences, or other objective criteria, could violate RESPA. By non-neutrally using or presenting information, Platforms impede the consumer’s ability to engage in meaningful comparison of options.
• Biasing the platform’s internal formula to favor preferred providers. Platform operators should refrain from manipulating the Platform’s inputs or formula to generate comparison options that favor higher-paying or preferred providers, such as providers that are affiliates of the operator.
• Disclosures cannot overcome potential RESPA violations. The CFPB also notes that Platform operators cannot overcome potential RESPA referral violations by providing disclosures about the way in which the Platform operates.

Entities that operate or participate on Platforms should carefully analyze the impact of this guidance. The Opinion shows the CFPB’s willingness to use RESPA’s wide scope to address FinTech offerings, consistent with CFPB’s continued focus on digital innovations and how they interplay with existing law and guidance. Indeed, the CFPB stressed in its press release that the Opinion simply clarifies the application of longstanding RESPA guidance to Platforms and does not create any new requirements. To that end, the Opinion clarifies that Platforms are a type of computer loan origination system (CLO) and therefore subject to existing guidance on CLOs.

While RESPA is not a rate-setting statute, the Opinion makes clear that Platform operators must examine and monitor the prices they charge settlement service providers to participate on their respective Platforms. They should also carefully consider how they present and display those offerings to avoid triggering RESPA concerns. However, those considerations should be weighed against the provisions of RESPA and Regulation X that expressly allow entities to pay for bona fide services and conduct normal promotional activities.

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