The Consumer Financial Protection Bureau’s prolonged scrutiny of internet giant Zillow might soon end. Zillow, in its recent quarterly earnings report, revealed that the CPFB has completed its investigation and is talking possible settlement. That outcome would be a boon for both sides.
The CFPB’s interest in Zillow dates back to 2015, when the bureau served the company with a civil investigative demand (CID). The focus of the bureau’s inquiry was Zillow’s co-marketing program, which allows agents and mortgage lenders to advertise together on the company’s website and mobile apps. Zillow responded to the CID, but then nothing seemed to happen. This past April, however, the bureau sent Zillow a new CID and included with it a Notice and Opportunity to Respond and Advise (NORA) letter. Those missives supposedly permit targets to explain the situation and possibly avoid further investigation and enforcement. Kathleen Philips, Zillow’s chief financial officer, said she expects the upcoming settlement negotiations to be “a pretty fast process,” quickly bearing fruit or reaching an impasse.
Given all the factors involved, both Zillow and the CFPB are likely motivated to strike a deal. For instance, the constitutionality of the CFPB is uncertain, and the bureau faces a hostile and motivated Congress. CFPB Director Richard Cordray has less than a year remaining in his term, and he probably hopes to score one or more high profile victories before leaving office.
Also, Zillow knows its co-marketing programs fall close to the line of violating the Real Estate Settlement Procedures Act (RESPA). It is also aware of the existential dangers facing the CFPB. If Zillow can convince a weakened and desperate CFPB to approve a watered-down version of its current co-marketing program, the company will have removed considerable uncertainty for its business operations. Zillow could then continue to dominate online real estate advertising, assured that no Washington bureaucrat will stand in its way.