CFPB Fines Lender over Expense Accounts

For the second time this week thernConsumer Financial Protection Bureau (CFPB) has filed in federal court againstrna lender for unfair compensation practices. rnToday’s complaint was levied against RPM Mortgage, Inc. and its CEO, Erwin Robert Hirt, for illegallyrnpaying bonuses and higher commissions to loan originators to incentivize themrnto steer consumers into costlier mortgages. rnThe complaint was accompanied by a proposed order asking the court tornrequire RPM to pay $18 million in redress to consumers and a $1 million civilrnpenalty, and compel an additional $1 million civil penalty payment from Hirt. </p

RPMrnMortgage, Inc. is a residential-mortgage lender headquartered in California andrnoperating about sixty branches in six states. rnCFPB contends that, under a plan originated in April 2011, RPM providedrnits loan officers with different forms of compensation that were derived inrnpart from the interest rates of the loans they closed.  </p

“RPMrnrewarded its loan officers for steering consumers into mortgages with higherrninterest rates,” said CFPB Director Richard Cordray. “Today we are putting anrnend to RPM’s unlawful practices and holding Robert Hirt personally responsiblernfor his involvement in them.” </p

Therncomplaint alleges that RPM sought to mask this arrangement by filtering itrnthrough so-called “employee-expense accounts,” depositing profits from closedrnloans – profits that were directly tied to the loans’ interest rates – into anrnexpense account set up for the originator.  RPM used the expense accounts to pay bonusesrnand higher commissions to its loan originators and allowed those originators torntap the accounts to offset interest-rate reductions or give credits to certainrncustomers to avoid losing the transactions to competitors. RPM paid or financedrnmillions of dollars in unlawful bonuses, pricing concessions, and supplemental commissions. </p

The announcementrnof the enforcement action from CFPB noted that the Loan Originator CompensationrnRule has prohibited incentivizing loan originators to steer consumers torncostlier mortgages since 2011 and that Hirt was responsible for managing therndesign and implementation of this illegal compensation plan.  </p

Thernplan incentivized loan officers to saddle consumers with costlier loans tornincrease the loan officers’ compensation violating not only the Loan OriginatorrnCompensation Rule but also the Consumer Financial Protection Act (CFPA)rnby: </p<ul type="disc"