Consumer bureau ends inquiry into Zillow’s marketing practices

IKenneth R. Harney

n a move with potentially significant implications for consumers, realty agents and lenders, the Trump administration has decided not to take legal action against online-realty giant Zillow for alleged violations of federal anti-kickback and deceptive-practices rules.

The decision represents a departure from the direction that the Consumer Financial Protection Bureau appeared to be headed under its previous director, Richard Cordray, an Obama appointee who resigned last November to run for governor of Ohio.

Rick Mulvaney, the bureau’s acting director appointed by President Donald Trump, simultaneously serves as director of the White House Office of Management and Budget. Mulvaney has promised to bring a more business-friendly approach to the bureau’s enforcement activities in the financial arena.

Cordray, by contrast, aggressively sued or obtained settlements from banks, mortgage companies, title companies and other businesses and obtained an estimated $12 billion in fines and consumer restitutions.

Although the consumer bureau made no announcement of its decision and declines to discuss the case, Zillow said in a statement that “we are pleased the CFPB has concluded their inquiry into our co-marketing program.”

Early last year Zillow was informed by the bureau that it was considering legal action because of alleged violations of the Real Estate Settlement Procedures Act and federal unfair and deceptive practices rules. Zillow has steadfastly denied that its program violates any federal law.

The focus of the bureau’s concerns was Zillow’s “co-marketing” plan, under which “premium” realty agents have portions of their advertising bills on Zillow sites paid for by mortgage lenders.

In one high-profile settlement last year, the bureau fined Prospect Mortgage, a national lender, $3.5 million for allegedly illegal referral-fee-marketing arrangements with more than 100 realty firms. Among the allegations in the settlement were that Prospect paid portions of realty agents’ marketing costs on an unidentified “thirdparty website” — widely understood to be Zillow. Prospect neither admitted nor denied wrongdoing as part of the settlement.

Following the Prospect settlement, some lawyers expected that the bureau would sue Zillow or seek a settlement.

By dropping the case, the bureau, under its new leadership, appears to be signaling that Cordray’s tough approach to policing co-marketing arrangements between realty agents, lenders and title companies is dead.