June 29, 2018.
The Consumer Financial Protection Bureau (CFPB) has ended its investigation into Zillow’s alleged Section 8 Real Estate Settlement Procedures Act (RESPA) violation. Zillow was notified on June 22, 2018, in a letter from the CFPB that its three-year inquiry was complete. No action will be taken against Zillow’s co-marketing program that splits advertising costs between Zillow Premier Lenders and Premier Agents.
Had Zillow been found in violation of RESPA, agents could have been held legally responsible for not paying their fair portion of advertising.
Industry experts have expressed shock to see the investigation dropped without penalty. Realtors who rely on co-marketing to acquire leads and generate business also consider the decision to be a win for the industry.
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Zillow’s “Premier” co-marketing program allows mortgage lenders to pay for advertising space alongside realtors. The CFPB’s initial investigation alleged that the co-marketing practice looked like endorsement, implicating a potential Section 8 RESPA kickback violation. Lender-agent endorsement may also violate Section 1036 of the Consumer Financial Protection Act.
In response to the CFPB, Zillow argued that its online co-marketing program was RESPA compliant and beneficial to consumers. Digital co-marketing between agents and lenders, Zillow said, makes it easier for site visitors to find service providers.
“As we have said before, it is long-standing practice for agents and lenders to advertise together. We are glad they can continue to do so through Zillow Group’s advertising platform,” Emily Heffter, a spokeswoman for Zillow, expressed in a statement. “Our mission has always been to arm consumers with information that helps them make smarter financial decisions, which this program does by providing consumers with an easy way to connect with agents and lenders.” Heffter said Zillow was pleased to come to a resolution.
The CFPB’s decision to drop its inquiry came on the heels of the June 21 federal court ruling that declared the Bureau’s structure unconstitutional. Until the CFPB makes internal structural changes or appeals the case, the Bureau lacks legal authority to investigate.
Thomas Claps, an analyst for the Susquehanna Financial Group, predicted in 2017 when Zillow first disclosed the CFPB investigation that a lawsuit was imminent. Claps also believes Zillow may have benefited from the crossover to the Trump administration, evidenced by the recent unconstitutionality ruling against the CFPB.
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Realtors who utilize co-marketing, on Zillow or otherwise, can continue using the service as intended. RESPA prohibits giving and receiving in exchange for a referral. But compliant co-marketing can help agents acquire leads, extend off-line reach, and access new networks on social media. The National Association of REALTORS suggests realtors participate in co-marketing programs with proportionate price sharing, accurately advertised services, and written agreements to adhere to Section 8.
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*Some loans may also take longer than 15 minutes to close. Not all loan programs will qualify for the 15-minute closing.
**10-day close not typical. Not all loans will close in this timeframe.
For educational purposes only. Please contact a qualified professional for specific guidance.
Sources also deemed reliable but not guaranteed.