CFPB Rejects Real Estate Company’s Petition to Quash CID
The CFPB denied a real estate company’s petition to quash a civil investigative demand (CID), finding that while real estate brokers are only subject to the CFPB’s jurisdiction in limited circumstances, the CFPB can use the CID process to determine if one of these circumstances applies.
The CFPB served a CID on a real estate company offering a program that paid homeowners a sum of money in exchange for the exclusive right to serve as the homeowners’ real estate agent if they sell their house in the future. Pursuant to the CFPB’s procedural rules, the target of a CID may file a petition with the agency’s Director asking the CFPB to modify or set aside the CID. Here, the company asserted that the CFPB lacked jurisdiction to investigate or take enforcement action against the company since the Consumer Financial Protection Act states that the CFPB may not exercise any rulemaking, supervisory, enforcement, or other authority over licensed real estate brokers or real estate agents.
The CFPB Director rejected the company’s petition, noting that there is an exception for real estate brokers or agents if the broker or agent offers a consumer financial product or service, or where they otherwise engage in activity subject to one of the enumerated consumer laws enforced by the CFPB. Here, the agency claimed that the program at issue could potentially be considered a form of credit and that the company could therefore be a creditor. Specifically, the program involves the real estate broker advancing consumers a lump-sum cash payment in exchange for the exclusive right to act as the listing agent when the consumer sells their home. In turn, in the CFPB’s view, the consumer is effectively obligated to pay back the money received, plus additional money, at a later date, either by using the real estate broker as the listing agent when the home is sold—allowing the broker to receive a commission on the home sale—or by paying an early termination fee. Since extending credit is a form of consumer financial product or service, and because extensions of credit are covered by certain laws enforced by the CFPB, the Director determined that the CFPB may use the CID process to determine whether the company is in fact extending credit and is thus subject to the CFPB’s authority.
Separately, the Director rejected other arguments raised by the company to quash the CID, finding that: 1) the petition was filed untimely under the CFPB’s procedural rules; 2) the fact that the company was in bankruptcy did not stay the CFPB’s actions since the Bankruptcy Code does not prohibit a government agency from enforcing the agency’s police and regulatory powers against a company in bankruptcy; and 3) the CFPB would not quash or stay the CID pending the Supreme Court’s decision in a separate case regarding whether the agency’s funding process is unconstitutional.
