Filing for class action status
It seems inevitable that investors would be unhappy with the recent (and steep) downturn in Zillow stock value. According to court documents, they’re “Class Action” unhappy.
Today in the U.S. District Court in the Central District of California, the Vargosko v. Zillow Group, Inc. et al suit seeks Class Action status for alleged damages inflicted by the August 08 announcement that Zillow would immediately attempt to negotiate a settlement with the Consumer Finance Protection Bureau (CFPB).
Two years ending in settlement talks
The CFPB spent two years investigating Zillow’s “Premier Agent” program and whether or not the co-marketing advertising for mortgage and real estate companies violates the Real Estate Settlement Procedures Act (RESPA).
The Zillow stock took a nearly 15 percent nosedive at the news of the impending negotiations and investors reacted immediately.
Long-asked questions about the program
Columnist Ken Harney writes, “Consumers likely are in the dark about the lender’s financial relationship with the realty agent unless they know to click on a question mark icon after the promotional words ‘ask these lenders about financing,'” thus the crux of the CFPB’s involvement and subsequent investigation.
Over a year before the CFPB even launched their investigation, The Real Daily questioned the lawfulness of the practice, concluding that it’s questionable. All along, Zillow’s Terms of Service has indicated that it is the responsibility of each agent and lender to ensure their own compliance with laws and regulations, RESPA included (leaving it in users’ hands).
The investors suing are unlikely impressed.
It will be a long process
Hiring the Rosen Law Firm in Los Angeles, California, the investors allege that they have “suffered damages,” according to Noel Chandonnet, Jr., Director at the firm. They are seeking Class Action status given the scope of the losses alleged, although court documents do not reveal how much they’re seeking in damages.
Chandonnet says they’ll be “in discovery phase for some time,” so we don’t anticipate resolution anytime soon. It is worth noting that although the lawsuit was filed today, no judge has granted Class Action status to the case yet.
The CFPB has not yet responded to our requests for comment on the Class Action lawsuit and the lawfulness of the “Premier Agent” program.
UPDATE: Zillow declines to comment on the pending litigation, but Zillow spokeswoman, Emily Heffter tells us, “we believe our co-marketing program is lawful and allows agents and lenders to advertise in a way that complies with RESPA.”