CFPB Issues Guidance to Protect Mortgage Borrowers from Pay-to-Play Digital Comparison-Shopping Platforms

WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) issued an advisory opinion to protect Americans from double dealing on digital mortgage comparison-shopping platforms. Companies operating these digital platforms appear to shoppers as if they provide objective lender comparisons, but may illegally refer people to only those lenders paying referral fees. When shoppers use a lender that is not the best option for their needs, they may end up with a lower quality lender or paying thousands more in closing costs or interest. The advisory opinion outlines how companies violate the Real Estate Settlement Procedures Act (RESPA) when they steer shoppers to lenders by using pay-to-play tactics rather than providing shoppers with comprehensive and objective information.

“Given the rise in mortgage interest rates, it is even more important for homebuyers to shop and compare loan offers,” said CFPB Director Rohit Chopra. “We are working to ensure that online platforms are not manipulating their search results in order to coerce kickbacks from lenders.”

Over the last year, mortgage interest rates have risen substantially. People looking for the best deal on mortgages or other settlement services often are turning to comparison-shopping platforms and mobile apps. Many of the websites and applications claim to offer ranked lists of providers suitable to the individual consumer’s needs. After providing their personal data to an online site to get access or run a customized search, people reasonably expect a neutral and fair presentation of the providers that may best meet their mortgage or other settlement needs.

Under RESPA, it is illegal for companies and individuals, including digital comparison-shopping platforms, to receive kickbacks and referral fees in connection with a transaction involving a residential mortgage or other real estate settlement service. Eliminating illegal kickback schemes fosters fair competition by forcing lenders and other providers to compete on a level playing field and leads to lower rates and higher quality service.

Today’s advisory opinion seeks to assist law-abiding companies to comply with existing law. It does not create any new requirements, but rather offers clarity on how firms can navigate issues associated with digital mortgage comparison-shopping platforms. It describes how these companies may violate RESPA, and potentially other laws, if they coerce payments from mortgage professionals, unlawfully steer consumers, or engage in other illegal referral activities, including:

• Presenting one or more service providers in a non-neutral way: The platform’s operator presents lenders based on extracted referral payments rather than the shopper’s personal data or preferences or other objective criteria. For example, the operator presents a lender as the best option because that lender pays the highest referral fee. However, the shopper is led to believe the lender was selected based on their shared personal data or preferences. In one variation, digital mortgage comparison-shopping platforms may receive payments from lenders to rotate them as the top presented option regardless of whether the highlighted lender is the best fit for the shopper.
• Biasing the platform’s internal formula to favor preferred providers: The platform’s inputs or formula are manipulated to generate comparison options favoring higher-paying or preferred providers. For example, a platform’s formula is designed to steer shoppers to use providers in which the operator has a financial stake. In this case, the shopper is unaware that the platform’s formula was potentially designed to steer them away from non-preferred providers.

The Consumer Financial Protection Act of 2010 transferred authority for RESPA to the CFPB from the Department of Housing and Urban Development (HUD). This advisory opinion supplements guidance HUD provided in 1996 on early versions of comparison-shopping platforms, which the CFPB continues to apply. The CFPB will enforce RESPA to protect consumers and to ensure a robust, competitive mortgage market. Today’s advisory opinion also follows a set of Frequently Asked Questions regarding RESPA published in 2020 to help entities understand their obligations under current law.

Read the advisory opinion, Real Estate Settlement Procedures Act (Regulation X); Digital Mortgage Comparison-Shopping Platforms and Related Payments to Operators.

Read Director Chopra’s Statement on Mortgage Comparison Shopping in a Time of Higher Interest Rates.

Learn about the CFPB’s tools and resources for homebuyers.

The CFPB established the Advisory Opinion program in 2020 to provide guidance to companies about how existing federal consumer financial protection law applies to emerging market trends and business practices.

Consumers can submit complaints about mortgage and other financial products and services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).

The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.consumerfinance.gov.