Lew Sichelman

Homebuyers hunting for financing often turn to online mortgage comparison platforms to find the lowest rates available. But some may have been duped into choosing lenders that paid these websites to put them at the top of their lists – even though they were charging consumers more. 

To date, no particular site has been charged with such illegal behavior, at least in the mortgage space. But Uncle Sam’s chief financial watchdog agency has fired a warning shot across the bow of consumer-facing comparison sites and mobile apps that steer consumers to the lenders that pay the sites the most. 

In 2020, the Federal Trade Commission came down on LendEDU.com on charges that the site’s operators favored companies that paid for top-of-the-list placement, even though the site claimed to provide unbiased information about student loans, personal loans and credit cards. 

Now, in a new advisory opinion said to be aimed at helping law-abiding companies comply with the rules, Rohit Chopra, director of the Consumer Financial Protection Bureau, said that “if similar conduct is observed in the mortgage market, the CFPB will not hesitate to act.” 

The bureau calls the practice “double dealing” and said it violates the Real Estate Settlement Procedures Act by guiding shoppers to lenders by using pay-to-play tactics rather than providing them with comprehensive and objective information. 

“We are working to ensure that online platforms are not manipulating their search results in order to coerce kickbacks from lenders,” Chopra said. 

Goal: Ensure Small Lender Visibility 

The goal is to make certain small banks, credit unions and other lower-cost alternatives can be seen. The bureau offered several examples of how that might not happen. 

For example, a “non-neutral” site could manipulate information provided by a consumer to make sure lenders who pay the site rank higher than those who don’t. Or it could de-emphasize – or even exclude – criteria that would favor a lower-cost alternative. In other instances, platforms could provide information on all participant lenders, but only offer links to paying providers. Or sites might ever-so-slyly highlight paying lenders by showing others in a smaller font or requiring consumers to scroll down to find them. 

Sometimes users are just presented a list of lenders from which operators have extracted kickbacks. Some platforms may have a financial stake in referenced companies, a conflict of interest they conveniently fail to reveal. Or they might just hand off a shopper to the highest bidder, indicating it is the best option.  

There are all kinds of ways pay-to-play platforms can manipulate their algorithms. But the CFPB is having none of it. 

Said Chopra: “These platforms produce results that are rigged. … Instead of being neutral referees, [they] extract illegal kickbacks to steer shoppers towards more expensive or lower quality lenders.” 

What Can Buyers Do? 

Faced with such skullduggery, borrowers smart enough to hunt for low-rate financing could still end up paying thousands more in interest than necessary. And these anticompetitive schemes also hurt fair-and-square mortgage lenders, brokers and loan officers. 

In fact, the CFPB said it regularly receives complaints about RESPA violations from mortgage professionals forced to pay to play – more complaints, in fact, than it gets from consumers, who may never know they’ve been had. 

I was told by a source, on background, that consumers’ lack of complaints is “to be expected,” and that it is “part of the problem.” Why? Because consumers are not aware that “backdoor kickbacks distort the market.” 

On the other hand, the CFPB advisory said that “honest mortgage professionals shouldn’t feel that middlemen get to extort fees for them to be able to compete and have their mortgage offerings seen by consumers.” 

Part of a Larger Push 

The move to rein in the manipulation of digital mortgage comparison-shopping platforms is part of a broader, government-wide effort to end the illegal injection of bias into ostensibly neutral platforms. 

As part of this effort, the CFPB has taken steps to combat fake reviews on digital platforms. A year ago, it issued policy guidance that posting fake positive reviews or falsifying customer ratings may be a violation of the Consumer Financial Protection Act. 

The FTC, too, has advised companies that, if they use endorsements to deceive consumers, the agency will be ready to hold them responsible “with every tool at its disposal.” In particular, it is looking at contractual “gag” clauses that attempt to silence consumers from posting an honest review. 

More than two years ago, I wrote in this column that consumers might want to look askance at online reviews, noting that they may not be all that reliable. Better to ask for the names, email addresses and phone numbers of recent clients from any company you are considering working with, then contact them directly for their opinions.  

You also can check with other sources such as your local Better Business Bureau and consumer affairs agency. And search online for the name of the company you’re screening, plus the word “complaint.” Realize, though, that unhappy customers tend to post their beefs much more frequently than satisfied customers post about their experiences. So personal contacts are always best.  

Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com. 

Loan Comparison Sites Not All Fair

by Lew Sichelman time to read: 4 min