Consumer Financial Protection Bureau Not Shown Deference by Ninth Circuit in Real Estate Settlement Procedures Act Case

October 11, 2015

The Ninth Circuit Court of Appeals held that the interpretation offered by the Consumer Financial Protection Bureau (CFPB) of 12 U.S.C. § 2607(c)(2) of the Real Estate Settlement Procedures Act (RESPA) was not entitled to “Chevron deference.” The case at issue is Edwards v. The First Am. Corp., No. 13-55542. Before analyzing the decision, let us explore an important contextual issue:

What the Heck is Chevron Deference?

This is a key principle in administrative law established by the U.S. Supreme Court in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The case raised the issue of how courts should treat federal agency interpretations of statutes that mandated an agency take some action. The Supreme Court held that courts should defer to agency interpretations of such statutes unless those interpretations are unreasonable.

Okay, So What Did the CFPB Interpret in RESPA?

The statutory provision at issue was the safe harbor for the RESPA anti-kickback prohibition. Specifically, the provision states that “notwithstanding the general prohibition of exchanging any thing of value for a referral, a statutory safe harbor exempts a payment from RESPA violation if the payment–despite being made simultaneously with a referral–was ‘for goods or facilities actually furnished or for services actually performed.'” Slip Op. at 10 (quoting 12 U.S.C. § 2607(c)(2)). The question was whether an ownership interest exchanged could be categorized as a good, facility, or service, according to an article published on

The CFPB interpreted “that § 2607(c)(2) does not apply to the transactions [in question] because First American’s payment for ownership interests is not a payment for goods, facilities, or services” and the Bureau urged the Court “to give deference to its interpretation.” Slip Op. at 11.

Chevron Denied

The Ninth Circuit did not agree with the CFPB’s interpretation. The court stated that the “[CFPB’s] interpretation of the statute–when presented in an amicus brief–is not promulgated in the exercise of its formal rule-making authority, so no Chevron deference is warranted.” The Ninth Circuit also concluded that “because the statutory terms at issue are not ambiguous, no deference is merited.” Id. at 12.

The Court nevertheless agreed with the CFPB’s interpretation based on the language of the statute, finding that the “the meanings of ‘goods,’ ‘facilities,’ and ‘services’ are plain,” and that “ownership interests purchased by First American are equity shares, not goods, services, or facilities.” Id. at 13. The Ninth Circuit concluded that, because the safe harbor could not apply to those circumstances as a matter of law, “the district court erred in relying on § 2607(c)(2) to determine the propriety of class certification,” according to the aforementioned article.

Contact an Experienced Business Lawyer Today

CFPB’s interpretations of statutes such as the RESPA and TILA (i.e. Truth in Lending Act) can have major effects on your real estate business. You need an experienced real estate attorney to help guide you through this regulatory mine field. Kristina Reed is here to help. Real estate buyers and sellers, agents/brokers and landlords/tenants all trust in Kristina Reed’s knowledge and skill. Contact her today to talk about your business and legal needs.

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