CFPB – Don’t Do What Zillow Did

Dreaming of an oceanfront condo in Southern California or a cabin escape on the slopes in Aspen? Or perhaps you’re moving to a new town and are looking at apartments? No matter what type of place you’re searching for, chances are you’ve used Zillow.

Launched in 2006, the Seattle-based real estate giant is a free platform that provides consumers with “data, inspiration and knowledge.” So, how did this free, consumer-dedicated platform find itself in the crosshairs of the Consumer Financial Protection Bureau?

Simple: government oversight run amok.

Originally proposed by Elizabeth Warren in 2007 and established in 2011, the CFPB was intended to prevent financing companies from treating consumers unfairly. But the bureau has a history of overstepping that mandate, with its aggressive tactics hurting both consumers and businesses alike.

Over the past several years, the CFPB has used anti-kickback laws in the Real Estate Settlement Procedures Act (RESPA) to slap companies with multi-million dollar fines for engaging in historically-common business practices. The CFPB regularly sues mortgage lenders and real estate agencies that have simply partnered in routine marketing service agreements (MSAs), whereby a realtor advertises or recommends a lender or broker.

Two years ago, the CFPB trained its sights on Zillow and began investigating the online platform for allowing advertising by real estate agents and mortgage lenders with MSAs.

To provide free services to consumers, Zillow sells ad space to realtors, rental companies, builders, lenders, and others in the home industry. Zillow simply provides a neutral platform for businesses to reach customers interested in real estate to advertise.

Monthly advertising accounts for around 70 percent of Zillow’s revenue, nearly $190 million in the second quarter of 2017 alone.

The CFPB is now demanding that the real estate giant settle to the tune of millions of dollars or face legal action for allowing realtors and lenders with MSAs to advertise on its site.

Zillow, baffled by the allegations, reached out to the CFPB to discuss the matter, but has not received a formal response. The agency also declined to comment on news stories related to its vague charges.

In a recent article about the case in GeekWire, a Zillow spokesperson said the CFPB has “failed to give concrete feedback, and we’re aware of no evidence of consumer harm or any actual consumer complaints…this is a clear overreach, and one of main examples of the CFPB legislating by fiat.”

Additionally, the agency’s logic in going after Zillow is questionable.

If the CFPB’s priority is to protect consumers—as one would assume given the bureau’s name—going after a website such as Zillow is puzzling. Zillow and similar websites provide valuable tools to consumers at no cost. They help would-be homebuyers or sellers access important information critical to negotiating the terms of a real estate sale or purchase. And it would be a stretch to argue that Zillow somehow restricts consumers’ access to other real estate agents or lenders simply by allowing businesses to purchase advertising space.

Given these facts, why would the CFPB push so hard to settle this case with such scant evidence?

It appears CFPB’s battle against Zillow is more about politics and less about consumer protections.

Late last year, mortgage company PHH Corp. successfully defended a $109 million fine imposed against them by the CFPB. The court lambasted the CFPB’s actions as a clear overreach.

After such a ruling, the CFPB should have pumped the brakes on the anti-kickback witch-hunt, but CFPB Director Richard Cordray sees it differently.

Cordray, who has dramatically expanded the intended scope of the CFPB during his tenure, is rumored to be plotting a run for governor in Ohio next year. A “win” against Zillow provides another campaign talking point to brand himself as a top consumer watchdog.

No matter the purpose of the CFPB’s new hunt for RESPA violations, the vague anti-kickback statute confuses and harms the real estate industry and consumers.

Baseless allegations against Zillow and others invalidate the bureau’s claims of consumer protection. The CFPB is unconstitutional and its unaccountable overreach has no place in our government.

Cameron DeSanti is a student at George Washington University and a former policy intern at Americans for Prosperity.

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