RESPA Section 8, UDAAP, and the CFPB’s Spring Guidance Purge: What is the Effect on Compliance?
On May 12, 2025, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) officially withdrew nearly 70 guidance documents issued under previous administrations—including some that have been in effect since the agency’s infancy. As Acting Director Russell Vought described in the preamble to the Federal Register notice effectuating the withdrawal, the mass withdrawal followed Vought’s April 11, 2025 memorandum to staff prohibiting the use of guidance to expand the Bureau’s regulatory reach and instructing staff to review all existing guidance to identify which should be withdrawn or retained.
In the preamble to the Federal Register notice, the CFPB cited three independent reasons for the action:
To support the Bureau’s commitment to “issuing guidance only where that guidance is necessary and would reduce compliance burdens rather than increase them”;
To comply with President Trump’s directives to “deregulate and streamline bureaucracy,” citing to President Trump’s Executive Order 14219, and announcing that the CFPB was “reducing its enforcement activities” in light of these directives; and
No reliance interests necessitate retention, as the guidance is non-binding, enforcement will be deprioritized, and interpretive guidance outside the scope of statute or regulation is “unlawful.”
The rescinded guidance materials represent a range of topics, including policy statements, interpretive rules, advisory opinions, bulletins, and circulars. While many withdrawn documents were broadly applicable to the consumer finance industry, some of the withdrawn (and not withdrawn) guidance documents affect or discuss the mortgage industry directly.
Below I discuss a tale of two statutes and how they fared under this guidance purge. First is the Dodd-Frank Act’s prohibition against unfair, deceptive, or abusive acts or practices (“UDAAP”). Acting Director Vought withdrew the CFPB’s 2023 Policy Statement on the definition of Abusive under UDAAP issued by former Director Chopra, likely because it was incredibly expansive and conflicted with the current leadership’s view of how the CFPB should use its supervisory and enforcement authority. I also tie this withdrawal to the CFPB’s recently released Spring 2025 rulemaking agenda. Second, I discuss RESPA Section 8, which was also the subject of a recent CFPB advisory opinion issued by former Director Chopra: the CFPB’s 2023 Advisory Opinion regarding digital mortgage comparison shopping tools. In contrast to UDAAP, the Advisory Opinion was not withdrawn and is officially still on the books, and this statutory section is absent from the CFPB’s Spring 2025 rulemaking agenda. What does this all mean for the mortgage industry? Read below and find out.
1. Unfair, Deceptive, or Abusive Acts or Practices (UDAAP): A More Limited View of Abusive
One of the guidance documents withdrawn by the CFPB was the Statement of Policy Regarding Prohibition on Abusive Acts or Practices, 88 FR 21883 (Apr. 12, 2023) (“Policy Statement”). The Policy Statement, issued by former Director Chopra, set forth the CFPB’s interpretation of the “Abusive” prong under the Dodd-Frank Act’s UDAAP prohibition. As background, the Abusive prong prohibits conduct that:
Materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service; or
Takes unreasonable advantage of: (A) a lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service; (B) the inability of the consumer to protect the interests of the consumer in selecting or using a consumer financial product or service; or (C) the reasonable reliance by the consumer on a covered person to act in the interests of the consumer. 12 USC 5531(d).
When it first came out, the Policy Statement was rightly subject to criticism for its expansive view of abusiveness. For one, the Policy Statement stated that the Abusive prong “requires no showing of substantial injury to establish liability, but is rather focused on conduct that Congress presumed to be harmful or distortionary to the proper functioning of the market.” In addition, the CFPB eschewed “intent” as an element needed to find an Abusive violation, stating that, “intent is not a required element to show material interference.”
Further, the CFPB interpreted the “unreasonable advantage” prongs of Abusive very broadly as well, also not requiring evidence of intent. For example, regarding “unreasonable advantage,” the Policy Statement stated that it is a violation even if the circumstance being taken advantage of (out of the three enumerated circumstances) “was not created by the entity,” and that “unreasonable advantage-taking includes using the statutory circumstances to acquire particular leverage over people.” This essentially would have only required “leverage” over a statutory circumstance not created by the company to result in a violation.
Particularly troubling for the mortgage industry was that the Policy Statement essentially concluded that a consumer’s “lack of understanding” about the mortgage market is one statutory circumstance that would support an Abusive violation. In addition, the CFPB stated in the Policy Statement that a consumer’s “lack of understanding” did not have to be “reasonable” and can exist even if the consumer has “awareness that it is in the realm of possibility that a particular negative consequence may follow or a particular cost may be incurred…” The Policy Statement cited to the CFPB’s past Abusive enforcement actions in the mortgage space, stating that “entities took unreasonable advantage of consumers’ lack of understanding regarding the residential-mortgage industry.” The Policy Statement also cited the subprime mortgage market before the Great Recession as one of Congress’ focuses for the “unreasonable advantage” part of the statutory definition of Abusive. The CFPB stated that “mortgage lenders were willing to make loans on terms that people could not afford in part due to the ability to off-load default risk into the secondary market.” The Policy Statement connected this to the Abusive prong, stating that “Congress prohibited certain abusive business models and other acts or practices that…misalign incentives and generate benefit for a company when people are harmed,” and that “it is unreasonable for an entity to benefit from, or be indifferent to, negative consumer outcomes.”
In sum, former Director Chopra appears to have been sending the message that the mortgage industry was in the cross-hairs as a result of consumers lacking understanding about the mortgage market, and the bar was very low for a violation. Luckily, former Director Chopra seemed more interested in other consumer finance markets than the mortgage market during his tenure, but having this Policy Statement on the books would have created a risk for all companies operating in the mortgage market even after his tenure.
Contrast this Policy Statement with the current acting CFPB leadership’s April 2025 memorandum to staff regarding the CFPB’s enforcement priorities generally (which I wrote about here). That memorandum stated that the CFPB “will focus on actual fraud against consumers, where there are identifiable victims with material and measurable consumer damages as opposed to matters based on the Bureau’s perception that consumers made ‘wrong’ choices.” Note that the current leadership’s use of the term “fraud” is meaningful - claims of fraud typically require intent and consumer harm. Clearly, the current CFPB leadership would disagree about wielding the Abusive prong in cases where there is no actual intent or identifiable consumer harm.
Additional reduction of this compliance risk is on the horizon. The CFPB’s Spring 2025 Regulatory Agenda (which I wrote about here) includes a UDAAP rulemaking, which may be an effort by the acting leadership to enshrine in regulation a much more limited view of the Abusive prong. The CFPB states in the agenda’s summary of the rulemaking that, “[a]lthough over the last several years the Bureau’s policy statements, rulemaking work, and enforcement actions have addressed abusiveness, the Bureau is considering whether rulemaking…may be helpful to clarify the statutory language with respect to unfair, deceptive, or abusive acts and practices….” This may be an effort to make it more difficult for a future Democrat-appointed director to issue an expansive interpretation similar to the 2023 Policy Statement (although it would not be impossible to amend a regulation, it would be more difficult than merely rescinding a policy statement). It will be important for the mortgage industry to keep an eye out for a future UDAAP rulemaking and submit comments in support of a narrower interpretation than the CFPB took in the 2023 Policy Statement.
2. RESPA Digital Mortgage Comparison Shopping Websites and Mini-Correspondent Guidance Not Withdrawn
In February 2023, under former Director Chopra, the CFPB issued an Advisory Opinion on RESPA Section 8 compliance for “Digital Mortgage Comparison-Shopping Platforms” (which I wrote about here) (“Advisory Opinion”). These platforms are defined as “digital platforms that…enable consumers to comparison shop options for mortgages and other settlement services, including those platforms that generate potential leads for the platform participants through consumers’ interaction with the platform.” They can include “consumer-facing websites or online applications that allow consumers to search for and compare options for mortgages or other settlement services.” The main takeaway from this Advisory Opinion is that the CFPB believes such a platform violates RESPA Section 8 if the operator non-neutrally displays a settlement service provider based on compensation from that provider. Examples of such a non-neutral display include highlighting a provider or placing a provider at the top of a list. The Advisory Opinion provides an analysis supporting the CFPB’s interpretation and contains specific examples of such violations.
Importantly, this Advisory Opinion was not withdrawn by the CFPB as part of its recent guidance purge. Also, the CFPB’s Frequently Asked Questions (“FAQs”) on RESPA Section 8, including on marketing service agreements (which I wrote about here) still appear on the CFPB’s website (as I note in my previous blog, these FAQs may indicate a broad view of RESPA Section 8 that conflicts with recent case law). Further, the CFPB does not appear to be planning to revisit RESPA Section 8 compliance in the near future, as the topic does not appear on the CFPB’s Spring 2025 rulemaking agenda.
Putting this all together, does this mean that this Advisory Opinion represents the current acting leadership’s view? It might. The Acting Director noted in the preamble to the Federal Register notice for the guidance withdrawal that he instructed the CFPB staff “to identify and review all guidance material previously produced and flag for retention guidance documents that conform to the principles set out in my separate April 11 memorandum on guidance.” Media reports indicate that this separate April 11th internal memorandum required staff to flag guidance for retention, and that such guidance must be “faithful to the statutory or regulatory requirements” to be retained. It is possible that the Acting Director determined that this Advisory Opinion conformed to this April 11th internal memorandum. But it is also possible that such a determination regarding the Advisory Opinion has not yet been made, because the Federal Register notice for the guidance withdrawal also states that “the Bureau intends to continue reviewing all guidance documents to determine whether they should ultimately be retained.” This statement leaves the door open for more withdrawals in the future.
Notably, though, the CFPB did consider and withdraw a related guidance document regarding digital consumer shopping and comparison tools. This guidance—Consumer Financial Protection Circular 2024-01: Preferencing and steering practices by digital intermediaries for consumer financial products or services, 89 FR 17706 (Mar. 12, 2024) (“Circular”)—analyzed such digital platforms under the Abusive definition of UDAAP. The Circular applied to “digital comparison-shopping tools” in all consumer finance markets – not only the mortgage market, to which RESPA Section 8 is limited. The term was defined to mean tools that “facilitate comparison shopping by presenting information about the costs, features, or other terms for a set of comparable financial products or services, such as credit cards, student loans, and savings accounts, offered by different providers.”
The Circular essentially described how such a tool could violate the “unreasonable advantage” prong of the Abusive definition based on similar non-neutral presentations of providers as discussed in the Advisory Opinion. The Advisory Opinion had also mentioned that, in addition to violating RESPA Section 8, such non-neutral presentations “could also potentially implicate the Dodd-Frank Act’s prohibition on unfair, deceptive, or abusive acts or practices (UDAAPs).” As noted above, the current acting CFPB leadership is considering replacing former Director Chopra’s UDAAP guidance with a new rulemaking, which could have been one of the reasons for the Circular, but not the Advisory Opinion, being withdrawn. But until the Advisory Opinion is withdrawn, in light of its nearly identical subject matter as the withdrawn Circular, including a reference to a potential UDAAP violation, courts and other regulatory authorities could consider the Advisory Opinion to represent the current CFPB leadership’s official position on RESPA Section 8 compliance and mortgage shopping platforms.
Interestingly, the CFPB also has not withdrawn the 2014 Policy Guidance on RESPA compliance for “Mortgage Brokers Transitioning to Mini-Correspondent Lenders” issued under former Director Richard Cordray, perhaps further evidencing the CFPB’s apparent intent to maintain the status quo on RESPA Section 8 policy. See 79 FR 41671 (July 17, 2014). That guidance addressed a purported trend in the early days of the CFPB’s Loan Originator Compensation and other Dodd-Frank Act rules in which mortgage brokers were “restructur[ing] their business[es] to become mini-correspondent lenders (mini correspondents) in the possible belief that doing so would alter the applicability of important consumer protections that apply to transactions involving mortgage brokers,” such as disclosure requirements under RESPA and provisions dealing with mortgage broker payments under TILA. With respect to RESPA Section 8, this evaluation also affects whether compensation is being paid “for the sale of a mortgage loan in a secondary market transaction,” which is “beyond the scope of [S]ection 8.” Specifically, the CFPB purported that this practice involved arrangements between mortgage brokers and wholesale lenders under which “the mortgage broker may in form appear to be the lender or creditor in each transaction by engaging in activities such as closing the loan in its own name, funding the loan from what is designated as a warehouse line of credit, and receiving compensation through what may nominally take the form of a premium for the sale of the loan to an investor,” but “in substance…these mortgage brokers may continue to facilitate brokered loan transactions between borrowers and wholesale lenders.”
The Policy Guidance set forth a framework of questions the CFPB would consider when determining whether a mortgage broker’s transition into a “mini correspondent” crossed a line and would be considered a brokered transaction or whether the transaction was a “bona fide secondary-market transaction” to which RESPA and TILA do not apply.
Considering the CFPB does not appear to be planning to revisit RESPA Section 8 any time soon, it may prudent to consider that the Policy Guidance, like the 2023 Advisory Opinion, reflects the current leadership’s view. That said, like with the Advisory Opinion, we do not know for sure whether the Policy Guidance has been reviewed under the Acting Director's April 11th memorandum and determined to be “faithful to the statutory or regulatory requirements” and retained. As the Bureau “continue[s] reviewing all guidance documents” for retention or withdrawal pursuant to the April 11th memorandum, the mortgage industry should keep an eye on the status of the Policy Guidance, as well as the Advisory Opinion and any other RESPA guidance.
3. Takeaways for the Mortgage Industry
Although it is not expected that the CFPB will begin focusing on RESPA Section 8 in examinations and enforcement actions any time soon (and it does not appear the CFPB is conducting any examinations or investigations for that matter), the Advisory Opinion, Policy Guidance, and the RESPA FAQs still appear on the CFPB’s website. Will this guidance and the regulation eventually fare the same as UDAAP? We do not know. As such, they still present a compliance risk for the mortgage industry. For the time being, courts and other federal and state regulatory authorities can still use this guidance to support their own interpretations and actions under RESPA. Companies should still pay attention to compliance with RESPA Section 8, including this CFPB guidance.
Further, regarding the withdrawn guidance, it still exists in the Federal Register for all to see. There is nothing stopping other regulators and courts from giving weight to or taking the same interpretations expressed in any withdrawn guidance. State authorities may also use similar theories under their own state laws, including state “mini-RESPA” statutes or state unfair trade practices statutes, so this guidance could still be in play. For now, companies should asses the modified, but arguably still present, risk the withdrawn guidance poses to their operations.
If you would like to discuss or have questions, please email me at rich@garrishorn.com.
