Zillow faces lawsuit alleging illegal kickbacks in mortgage business

"According to the complaint, Zillow pressures agents in its Premier Agent and Flex lead programs to steer buyers to Zillow Home Loans for their purchase mortgage pre-approval. Allegedly, agents who sent more clients to Zillow's mortgage arm for their pre-approvals received extra or higher-quality leads in exchange. If agents in the Flex program fail to send a sufficient number of leads to ZHL for pre-approval, they risk being removed from the program."

"The plaintiff claims that buyers were steered to ZHL for their pre-approval without being informed that a large lead source for their agent depended on this. Zillow's system harms consumers, who are robbed of the disinterested advice of their fiduciary real estate agent, and instead are unknowingly steered towards ZHL's limited and often uncompetitive mortgage products, the complaint states. Zillow's system ensures that agents' financial interests are aligned with Zillow's corporate goal of maximizing mortgage originations through ZHL, not with their clients' best interests."

"According to the complaint, Araba was not informed of Zillow's quotas, incentives, or requirements linking the agent's access to Zillow leads to referrals or pre-approvals with ZHL. Additionally, the complaint claims that Zillow knew that allegedly forcing Zillow Flex agents to steer clients to ZHL constituted a breach of the agents' fiduciary duties to their clients. The Participating Agents' fiduciary breaches caused consumers to incur loan costs, lose access to more favorable lending programs,"

Zillow allegedly pressured agents in Premier Agent and Flex lead programs to steer buyers to Zillow Home Loans for mortgage pre-approvals by rewarding referrals with extra or higher-quality leads and threatening removal for noncompliance. Buyers reportedly were not informed that agent lead sources depended on sending clients to Zillow's mortgage arm. The alignment of agent incentives with Zillow's mortgage-origination goals purportedly deprived consumers of unbiased fiduciary advice, led to higher loan costs, reduced access to favorable lending programs, and resulted in biased guidance influenced by undisclosed financial incentives.

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