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Lender Still on the Hook Despite CFPB Consent Order

by devteam October 31st, 2014 | Share

A recent motion filed by a mortgagerncompany to dismiss portions of a class action suit against it shows, accordingrnto an attorney familiar with the matter, that a consent order settling chargesrnbrought by the Consumer Financial Protection Agency (CFPB) “does notrnnecessarily bring finality to the issues it covers.”   At least not in the absence of releasesrnfrom affected consumers.</p

Barbara S. Mishkin, writing in thernBallard & Spahr CFPB Monitor saysrnthat earlier this week Castle & Cooke Mortgage, LLC filed a motion torndismiss three counts in a class action complaint filed against it in federalrncourt last July.  The named plaintiff, a consumer,rnhad received redress under a consent order from CFPB against Castle &rnCooke finalized in November 2013.  Thernorder had settled charges that the mortgage company had violated the RegulationrnZ loan originator compensation rule by establishing a quarterly bonus systemrngiving loan officers greater bonuses for originating loans at higher interestrnrates.  CFPB maintained that the bonusrnsystem was not reflected in the company’s compensation agreements and whilernpayroll records reflected the bonuses there was nothing indicating what portionrnof a bonus was attributable to which loan</p

Castle & Cooke did not admit tornany of the Bureau’s allegations but did consent to a judgment of equitablernmonetary redress of $9.23 million against the company and two of its officers andrnto a civil money penalty in the amount of $4.0 million.  Mishkin said at the time Ballard & Spahrrnhad commented that the size of the judgment “was likely intended by the CFPB tornsend a strong message to the mortgage industry that violations of the LOrnCompensation Rule will be addressed in a serious manner.”</p

The consent order stated that thernredress provided under the judgment “shall not limit consumers’ rights in anyrnway” and this was noted by the named plaintiff in his suit on behalf of arnnationwide class defined to include “all individual consumers who on or afterrnApril 1, 2011 obtained a mortgage loan from the company in which the companyrnpaid a bonus or other compensation based on the loan terms other than thernamount of credit extended or paid a referral fee or split a charge other thanrnfor services actually performed.”</p

According to Mishkin’s article, therncomplaint alleges that the company’s violations entitle the named plaintiff andrnclass members to actual and statutory damages, alleging the bonus payments werernunlawful referral fees or fee splits under RESPA entitling the plaintiff andrnclass members to three times the loan origination and settlement charges theyrnpaid to the mortgage company.  The complaint also includes claims that thernbonuses violated the Utah Residential Mortgage Practices and Licensing Act and forrnsome members of the class, California’s Unfair Competition Law (UCL).</p

On Monday the mortgage company filedrnfor dismissal of the RESPA, Utah and California claims. As to RESPA the companyrnargues that the complaint alleges no facts showing the company paid a referralrnfee in connection with the named plaintiff’s loan or paid anyone for servicesrnnot provided.  The motion cites NinthrnCircuit precedent that RESPA Section 8 does not prohibit overcharges nor doesrnthe named plaintiff have a RESPA claim to the extent he is trying to allegernthat he was charged too much for his loan.  The company argues that thernplaintiff’s Utah unjust enrichment and California UCL claims should berndismissed because his TILA/Regulation X and other claims provide an adequaternlegal remedy.  As a further reason for dismissal of the UCL claim, therncompany argues that only injunctive relief and restitution are available underrnthe UCL and plaintiff’s claim is one for damages rather than restitution.

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About the Author

devteam

Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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