Last month, the Federal Trade Commission filed a complaint against the Louisiana Real Estate Appraisal Board, accusing the regulatory body that oversees property appraisals in the state of stifling price competition by requiring appraisal management companies to follow the state’s established polices for the fees that AMCs pay to appraisers.
At the time, the Louisiana Real Estate Appraisers Board denied the FTC’s allegations, stating that any accusations that it operates beyond its rights are “ludicrous” and without merit.
“To now suggest that LREAB’s good faith efforts to comply with federal law is some sort of shadowy price-fixing conspiracy is ludicrous. Congress and six financial regulatory agencies in Washington have directed Louisiana to do exactly what the FTC is now alleging is an antitrust violation,” Bruce Unangst, executive director of the Louisiana Real Estate Appraisers Board, said in a statement at the time.
Unangst also said that the board planned to fight the FTC, and that’s exactly what the board is doing.
Earlier this week, the Louisiana Real Estate Appraisers Board filed a response to the FTC’s allegations, in which the group repeatedly denies the FTC’s numerous allegations.
“The LREAB categorically and vociferously denies these allegations as factually false and politically wrong-headed,” the board said in its response. “The State of Louisiana and the LREAB diligently implemented and followed the Dodd-Frank federal mandates so as to protect the greater public interest in a financially sound home real estate market.”
The board also states that the FTC has “no cause, legal or factual, to punish the LREAB for acting in good faith” to implement the appraisal laws laid out by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
“LREAB’s actions throughout the rule-making process — tracking the express language of Dodd-Frank and allowing extensive public comment on its proposed rules — demonstrate LREAB’s painstaking efforts both to be consistent with federal law and responsive to public and industry concerns,” the board’s response states. “The FTC has no cause, legal or factual, to punish the LREAB for acting in good faith to implement federal laws and policies designed to serve the public interest by ensuring the integrity of the residential mortgage appraisal process.”
Those rules stipulate that appraisal management companies should pay “a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised.”
In its complaint, the FTC alleges that the board required that appraisal fees are equal to or greater than the median fees established in survey reports commissioned and published by the board.
Additionally, the FTC claimed that the board exceeded its authority by investigating and sanctioning companies that paid fees below the levels specified in those reports.
The FTC’s complaint alleges that Dodd-Frank “neither requires nor authorizes the restrictions that the board placed on appraisal fees.” And according to the FTC, the state’s rules and the board’s insistence on enforcing them limits the freedom of appraisers and their customers to engage in “bona fide negotiations” to set appraisal fees for real estate appraisals in the state.
“The Board adopted a regulation, effective as of Nov. 20, 2013, purportedly implementing a requirement under federal and Louisiana law that AMCs pay appraisers a ‘customary and reasonable’ fee for real estate appraisal services,” the FTC said in its complaint. “In both promulgating and subsequently enforcing that regulation, the Board has unlawfully restrained price competition.”
In its 15-page response, the board denies all of those allegations. In fact, the board’s response goes through each paragraph of the FTC’s allegations individually and denies each one in turn.
The board’s response also lays out a series of defenses to the FTC’s charges, stating the following:
- The FTC’s complaint fails adequately to allege that the Board has a controlling number of active participants in the relevant residential appraisal market (emphasis included in board’s response)
- LREAB has acted in good faith to comply with a federal regulatory mandates
- The Complaint fails to allege any plausible harm to competition
- The Complaint fails to allege any plausible harm to consumers or consumer welfare
- The alleged potential harm to competition is not actionable