The Federal Trade Commission (FTC) has filed a complaint against the Louisiana Real Estate Appraisers Board (LREAB), alleging that the group is unreasonably restraining price competition for appraisal services in Louisiana, contrary to federal antitrust law. The complaint will be submitted to adjudication before an Administrative Law Judge, who will review it and render an initial decision, according to a release from the FTC.
In the administrative complaint, the FTC alleges that the Louisiana appraiser’s board limits the freedom of individual appraisers and their customers to engage in negotiations to set appraisal fees for real estate appraisals in Louisiana.
According to the FTC’s complaint, the Dodd-Frank Act “required appraisal management companies to pay a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised.”
The FTC alleged in its complaint that the appraisal board’s regulations exceeded the scope of the federal mandate.
“Specifically, the board required appraisal fees to equal or exceed the median fees identified in survey reports commissioned and published by the board. The board then investigated and sanctioned companies that paid fees below the specified levels. The complaint alleges that Dodd-Frank neither requires nor authorizes the restrictions that the board placed on appraisal fees,” the release said.
RELATED ARTICLES
Fee distribution to appraisers: What is really fair?
North Carolina Board discussing C&R
AMC exec says C&R regulations can be confusing
Louisiana Real Estate Appraiser Board Executive Director Bruce Unangst challenged the action in a statement.
“Respectfully, the FTC is just plain wrong,” Unangst said. “By issuing this legally faulty and factually incorrect complaint, the FTC is seeking to punish a Louisiana state agency for following federal regulatory mandates. Specifically, Dodd-Frank regulations – intended to protect consumers by ensuring the integrity of home mortgage appraisals – require that state appraisal agencies ensure Appraisal Management Companies (AMCs) pay customary and reasonable fees for home appraisals.”
In the release from the FTC, though, the agency said it was using discretion granted to the FTC by the Supreme Court in its case against the North Carolina State Board of Dental Examiners.
“The great preponderance of state board activity across the country occurs without significant antitrust concern, and the commission will respect the authority of such boards when they operate within the defined scope of antitrust law,” Bureau of Competition Acting Director Abbott (Tad) Lipsky said in the release
“Today’s action – the first such commission complaint against a state board since the Supreme Court decision in North Carolina Dental – shows that the commission remains vigilant and will exercise its prescribed authority when economically sound and otherwise consistent with the public interest,” Lipsky went on to say. “Nearly everyone that purchases or refinances a home in the state of Louisiana pays appraisal fees, these consumers deserve to benefit from a free market where those fees are set by competition.”
Richard Horn, founder of Richard Horn Legal, PLLC and a former special advisor to the Consumer Financial Protection Bureau, said the FTC was enforcing in an area in which it has authority and experience.
“The FTC Act as well as the CFPB's appraisal rules say you can’t engage in anticompetitive acts, and this is an area the FTC has a lot of experience in investigating and enforcing,” he said.
Unangst said Louisiana was following what it believed the federal requirements mandated.
“It is the federal government that put these requirements on state appraisal agencies, and our bard followed these federal regulations after an open, public and transparent rulemaking process,” he said in the statement. “To now suggest that LREAB’s good-faith efforts to comply with federal law is some sort of shadowy price-fixing conspiracy is ludicrous. Congress and six financial regulatory agencies in Washington have directed Louisiana to do exactly what the FTC is now alleging is an antitrust violation.
“These claims distort the reality of the board’s conduct in an attempt to stitch together a conspiracy where none exists,” Unangst further stated. “We plan to vigorously contest these charges and defend the interests of Louisiana consumers while ensuring our state complies with federal appraisal independence regulations.”
The administrative trial is scheduled to begin Jan. 30, 2018. The case could be decided on whether the way the Louisiana board enforced the customary and reasonable fees provided a floor that companies must meet. Although the rules Louisiana’s board might not have stated the C&R fees were a minimum standard that the industry must meet, if the FTC is able to provide evidence that the enforcement of the rules created a de facto minimum standard, that could prove to be anti-competitive behavior.
“This is truly an overreach by the FTC, in direct contradiction to the federal government’s focused and consistent efforts since the 1980s to ensure the integrity of the residential mortgage market,” said W. Stephen Cannon, Constantine Cannon LLP, counsel to LREAB.