[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.

---------------------------------------------------------------------------

[[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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \32\ Id. at 29257.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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.'').
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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'').
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \43\ See id. at 29258.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \44\ Id. at 29257.
    \45\ 12 U.S.C. 5531, 5536(a)(1)(B).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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'').
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \63\ Id. at 29256.
    \64\ Id. at 29257.
---------------------------------------------------------------------------

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

[[Page 9168]]

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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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

[[Page 9169]]

(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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \81\ 12 U.S.C. 5512(b)(1); see also 12 U.S.C. 2617(a).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \82\ 12 U.S.C. 2617(b); see also 12 CFR 1024.4.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \83\ 44 U.S.C. 3501 through 3521.
---------------------------------------------------------------------------

    Pursuant to the Congressional Review Act,\84\ the CFPB will submit 
a report containing this interpretive rule and other required 
information to the United

[[Page 9170]]

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).
---------------------------------------------------------------------------

    \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