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What is Real Estate Giant Zillow Being Sued For?

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Judge says Zillow ‘co-marketing’ lawsuit can proceed

WASHINGTON – May 14, 2019 – A judge says a class-action lawsuit against Zillow can move forward. Parties that filed the suit allege that Zillow's "co-marketing" program between agents and lenders violates federal antikickback laws.

Zillow officials have called the lawsuit "without merit," and company officials say they intend to "vigorously defend" against the accusations.

Zillow offers a "premier" agents and brokers program, in which real estate professionals can receive prominent advertising placements on its listed home sites. In 2013, Zillow added to the program, in which agents could have large portions of their advertising fees paid for by lenders who share the advertising costs for prominent ad placements. Prospective buyers on Zillow would then see an agent and lender advertised as they browsed for homes. The program allows lenders to share access to these buyer leads.

However, the lawsuit alleges that the co-marketing program violates the Real Estate Settlement Procedures Act (RESPA), a federal law that prohibits the payment of fees for business referrals among real estate, mortgage and title industry providers that aren't for services actually rendered.

In April 2017, the U.S. Consumer Financial Protection Bureau announced an investigation intowhether Zillow's co-marketing program violated RESPA's rules regarding kickbacks. However, the CFPB dropped its case after a new agency director was named.

Investors who purchased Zillow stock also filed a class-action lawsuit alleging securities fraud, but a district court judge dismissed portions of that lawsuit. But plaintiffs were told they could file an amended complaint if they could produce evidence that Zillow's co-marketing program violated RESPA.

A federal district court judge ruled on April 19 that the lawsuit can proceed.

"The court can draw a reasonable inference that Zillow designed the co-marketing program to allow agents to provide referrals to lenders in violation of RESPA," Judge John C. Coughenour of the United States District Court for the Western District of Washington wrote in his decision.

Source: "Whistleblowers' Claims Revive a Class-Action Suit Against Zillow," The Washington Post (May 11, 2019)

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Information provided by Florida Realtors.  Click here to see the original article.

Reprinted with permission Florida Realtors. All rights reserved. 

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