Consumers have alleged in Washington federal court that Zillow Group Inc. ran an illegal kickback scheme that involved rewarding brokers and real estate agents with customer leads if they told clients to use Zillow's services to obtain mortgage loans, despite better financing options being available.

In the proposed class action filed on Friday, named plaintiff Araba Armstrong claimed she was told by a real estate agent who was part of the Zillow Premier Agent program to take out a mortgage loan from Zillow Home Loans when she bought an Alaska residential property in 2024.

The suit alleges Armstrong could have utilized a more affordable lending option, such as a loan from the U.S. Department of Agriculture, but her agent pushed her to use the Zillow program.

"Defendants steered Ms. Armstrong away from those lower-cost options and toward ZHL, which offers only a narrow range of conventional and [Federal Housing Administration] loans," the complaint says. "Zillow Home Loans also does not participate in or inform borrowers about comparable first-time-buyer rebate or tax-credit programs — such as closing cost assistance, down payment rebates or federal first-time-buyer tax credits — that could have provided thousands of dollars in savings at or after closing."

"Further, ZHL does not offer comparable home equity loans or lines of credit, depriving plaintiff of lower-cost tools to manage expenses or access accumulated equity after purchase," it adds.

According to the proposed class, Zillow's data and other sources show "a 1% rate change can reduce interest payments by tens of thousands of dollars on a 30-year loan."

The complaint says the Zillow Home Loans program's flaws and the illegal kickback scheme led Armstrong to pick "a higher-cost, less flexible mortgage than she likely could have obtained through a neutral lender."

Additionally, according to the proposed class, Zillow's scheme forced Armstrong and other class members to, among other things, overpay for mortgage credits.

"Consumers who used Zillow Home Loans often paid higher interest rates than comparable borrowers who used independent lenders, and many lost access to beneficial programs that ZHL does not offer," the complaint says. "Public reporting and expert reviews confirm that ZHL's products are limited in scope and generally less competitive on price."

"Borrowers funneled through Zillow's integrated referral system thus faced a narrower, more expensive set of financing options than were otherwise available in the open market, while under the false impression that their Zillow agent was acting in their best interest, as legally required, and had steered them in the right direction," it adds.

The proposed class also pointed to reviews of Zillow's lending program, including a Business Insider review posted this year that gave the program three out of five stars and stated consumers should look elsewhere if they want less expensive lending options.

The proposed class is looking to represent "at least thousands of consumers" who were pushed to borrow from the Zillow Home Loans program by real estate agents who were part of the Zillow Premier Agent program. They allege Zillow violated the Real Estate Settlement Procedures Act and the Washington Consumer Protection Act. They also say Zillow pushed real estate agents to breach their fiduciary duties to clients.

On Monday, class counsel Amy E. Keller told Law360 they "look forward to the case proceeding and proving our claims before the court."

Zillow did not immediately respond to a request for comment on Monday. Counsel information for the defendants was not immediately available.

The property listings giant is currently facing several antitrust lawsuits from the Federal Trade Commission, several U.S. states and Compass Inc.

The proposed class is represented by Jason T. Dennett and Rebecca L. Solomon of Tousley Brain Stephens PLLC and Adam J. Levitt, Amy E. Keller, Corban Rhodes and Emma Bruder of DiCello Levitt LLP.

The case is Armstrong v. Zillow Group Inc. et al., case number 2:25-cv-02226, in the U.S. District Court for the Western District of Washington.