How does the CFPB’s position that “the contract is a thing of value” work?

In PHH, what Director Cordray said, that the Bureau has asserted, is that the opportunity to participate in a profit-making venture, or to receive payments of some sort, even if you don’t actually receive it, is a thing of value in and of itself. That’s their position. I haven’t seen it applied to anything in particular, because I don’t think they needed that point to control in order to reach the conclusions they have. Nevertheless, it raises some very interesting questions around traditional concepts of consideration in legal agreements. In law school we learned that an agreement has to have consideration in order to be enforceable, well, they’re suggesting that the mere opportunity to participate in an agreement has value in and of itself, in the absence of consideration. That’s throwing out a couple hundred years of common law. I don’t know if that’s going to be upheld. It also raises all kinds of problems for other types of permissible RESPA structures like affiliated business arrangements. The argument would suggest that while the affiliated business arrangement might be compliant, that the opportunity to participate in an affiliated business arrangement, is somehow a payment for a referral, is a separate thing of value. I don’t think that was their intent, but we are still left to wonder what that might mean.

Answered By: Brian Levy