Supreme Court Rules in RESPA Case, “Warning” to CFPB?

The Supreme Court ruled in favor of Quicken Loans last week in a longstanding case filed over split fees charged by a Quicken loan officer. The case had implications for the interpretation of the Real Estate Settlement and Procedures Act (RESPA) by the Department of Housing and Urban Development, and more recently, by HUD. 

But the outcome, which was decided unanimously, may say more about the Supreme Court’s statements to the CFPB and HUD than about RESPA, some say.

The decision marks a “defeat” for the CFPB in its interpretation of RESPA in the case, says Chris Willis, partner with Ballard-Spahr. While the CFPB was not directly involved in the case, it filed an amicus brief offering comments in favor of the interpretation of the plaintiff earlier this year. 

The case, Freeman v. Quicken Loans, made issue of whether section 8 of RESPA should be interpreted to require the division of a fee between two entities, or whether a single entity can charge an unearned fee, Willis explains. Initially, a circuit court deemed that the sharing of a fee was required.

The Supreme Court, which ruled last week, agreed with the Fifth Circuit Court. However, there is more to the case than the decision and what it means for RESPA’s interpretation. 

“…Freeman makes it clear that the industry can—and should—oppose the CFPB’s efforts to add prohibitions to federal laws that Congress did not provide for in those laws,” Willis wrote following the decision. “The Supreme Court agreed, but the real significance of its decision lies in its strongly-worded statements rejecting the interpretation of [RESPA] by HUD (and adopted by the CFPB), and rejecting the CFPB’s amicus brief urging reversal of the Fifth Circuit’s ruling.

The CFPB filed an amicus brief in the case siding with the HUD interpretation earlier this year. It has said it will continue to file amicus briefs in the future. The Supreme Court’s position in this case could say something about how the Court views CFPB input, Willis says. 

“In addressing the HUD/CFPB interpretation of the statute, the Court characterized it as ‘manifestly inconsistent with the statute’ and a ‘palpable overreach,'” Willis writes. “As a result, the Court refused to give any deference to the HUD/CFPB interpretation of [RESPA’s Section 8] … Moreover, the Court’s rejection of the arguments advanced by the Bureau in its amicus brief will hopefully encourage lower courts to look on other CFPB amicus briefs with a similarly critical eye.”

Written by Elizabeth Ecker

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