Holly Bunting, partner at Mayer Brown, and Kerri Webb, an associate at the firm, shared with RESPA News how the Consumer Financial Protection Bureau’s (CFPB) advisory opinion on dealings with digital comparison shopping platforms has impacted how the industry is approaching their relationships with these entities.
The CFPB’s advisory opinion addressed potential issues with marketing and lead generation arrangements with digital platforms that allow consumers to compare potential mortgage providers. It stated there could be potential RESPA Section 8 violations where the comparison-shopping platforms provide preferential treatment to those settlement service providers who pay more to have their information featured.
Find more information about the guidance, click here.
“The advisory opinion is not really a guide on how to comply with Section 8, but more of a description on how a platform operator may violate Section 8 through particular conduct,” Webb said in a podcast produced by Mayer Brown.
Webb also outlined the three elements the bureau said could result in a RESPA violation: a digital comparison platform non-neutrally using or presenting information about one or more providers; that non-neutral information steering the consumer, or otherwise affirmatively influencing the consumer selection of a provider; and the platform receiving a payment or another thing of value that is, at least in part, for the referral activity rather than for compensable goods or services.
The two members of Mayer Brown’s Financial Services Regulatory and Enforcement practice said the industry found the guidance useful, though it did raise some questions the bureau left unanswered.
“There were some things that the industry hoped the CFPB would have gone a little bit further on,” Bunting told RESPA News. “For example, they made clear in the guidance that a list of one [provider] would be a referral. But the industry was certainly hoping that the CFPB would provide more guidance on what number of providers in a list is a safe harbor or would be sufficient to make the case that it’s not a referral. And the CFPB doesn’t do that.”
The advisory opinion encouraged industry players to do their due diligence when looking for a comparison platform, as behind-the-scenes fee structures or algorithms may result in inadvertent RESPA violations. Bunting said some of her clients have developed questionnaires to submit to the digital platforms with which they do business in order to learn more about their processes and make informed decisions about their marketing partners.
“The reaction we’ve seen the most is folks using it as an opportunity to double-check their compliance, ask additional questions, and make sure that they’re good to go under the guidelines,” she added.
Bunting said she also has clients wondering if the advisory opinion could apply beyond RESPA. The bureau noted potential issues with deceptive information or misrepresentations made by the platforms, raising questions as to whether the guidance could apply to auto lending, as an example, or if there are unfair, deceptive, and abusive practices (UDAAP) considerations that would apply in a context outside of RESPA.
In addition to lenders using questionnaires to better understand their platform partners, clients told Bunting some shopping platforms are looking at their own algorithms and payment structures in response to the guidelines.
“Do the diligence, and ask questions,” Bunting said. “The guidance does a pretty good job listing the kinds of issues that would raise a RESPA concern, and so being able to use those, almost like a checklist, to make sure that a company is comfortable that the platform is designed and operating in compliance with that guidance is that best path forward.”