The Impact of CFPB’s Policy Statement on Abusive Conduct on Real-Estate Joint Ventures

In a recent policy statement by the Consumer Financial Protection Bureau (CFPB), the agency clarified its stance on abusive acts or practices, particularly as they apply to “covered persons” or “service providers” as outlined in the Consumer Financial Protection Act of 2010 (CFPA). What does this mean for real-estate agents participating in joint ventures with mortgage or title companies?

The CFPA’s Relevance to Real-Estate Agents

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Though real-estate agents may not directly fall under the CFPA’s definition of “covered persons” or “service providers,” they expose themselves to these categories when they enter into joint ventures with mortgage or title companies. These joint ventures qualify as “covered persons” under the CFPA due to their offering of credit or title services. Additionally, real-estate agents who “materially participate” in these joint ventures, such as referring customers to these entities, may be deemed “covered persons” themselves.

In light of these potential classifications, real-estate agents should be aware of the CFPB’s expansive policy statement, especially regarding “reasonable reliance.”

Consumers’ Reasonable Reliance on Real-Estate Agents

The CFPA defines abusiveness as taking unreasonable advantage of “the reasonable reliance by the consumer on a covered person to act in the interests of the consumer.” Real-estate agents often play a vital role in helping their clients select providers in the market. Therefore, clients naturally place a degree of trust in their agents. However, this trust can be betrayed if an agent, driven by self-interest, steers a client towards a company they partially own.

This practice could fall under what the CFPA describes as “abusive,” due to the potential for taking unreasonable advantage of consumers’ reasonable reliance. This is true even if the agent discloses their conflict of interest. The CFPB and the Treasury Department note that even with disclosure, consumers often maintain faith in their intermediaries, making it possible for them to mistakenly rely on advice from conflicted intermediaries.

Moreover, in situations where an agent refers a client seeking title services to their own joint venture, they could compromise the required neutrality of the title company. This conflict of interest has led states like Arizona, New York, and the District of Columbia to pass laws restricting real-estate agents from receiving compensation from joint ventures.

Final Thoughts

The CFPB’s recent policy statement has significant implications for real-estate agents participating in joint ventures with mortgage or title companies. The agency’s interpretation of the CFPA’s prohibition on abusive conduct, coupled with existing state laws, exposes real-estate agents to potential legal risks. It is vital for these professionals to be cognizant of these developments and reconsider their involvement in such ventures. By doing so, they can ensure they maintain ethical standards of conduct and protect the interests of their clients, while also avoiding potential legal issues.

Author: Delroy A. Whyte-Hall
Delroy is an expert copywriter and content creator specializing in real estate. She helps real estate professionals tell compelling stories that drive engagement and results. For more insights and tips, visit