Wells Kickback Scheme Involved More Than 100 LOs, Garnered Multiple Warnings

Wells Fargo and JPMorgan Chase along with a former WellsrnFargo employee and his wife are the subjects of consent orders filed by thernMaryland Attorney General and the Consumer Financial Protection Bureau (CFPB).  The orders ask for close to $37 million inrncivil penalties and consumer redress, by far the bulk of the moneys coming fromrnWells Fargo.</p

In announcing the orders, filed Thursday in federal court, CFPBrnsaid that they had taken action against the group because of an illegal marketingrnservices kickback scheme they are alleged to have engaged in with GenuinernTitle.  The Maryland-based title company,rnwhich went out of business in April 2014, had provided the banks’ loan officersrnwith cash and services in return for which the loan officers agreed to increasernthe title company’s business by referring homebuyers to them for closingrnservices.  The services provided byrnGenuine were described by CFPB as including “purchasing,rnanalyzing, and providing data on consumers and creating letters with the banks’rnlogos that the company had printed, folded, stuffed into envelopes, and mailed.”rn</p

CFPB said the marketing-services-kickbackrnscheme violated the Real Estate Settlement Procedures Act (RESPA), whichrnprohibits giving a “fee, kickback, or thing of value” in exchange for arnreferral of business related to a real-estate-settlement service. </p

Under terms of the consent agreement Wells Fargo will payrn$24 million in civil penalties and JPMorgan Chase $600,000.  In addition Wells Fargo will pay $10.8rnmillion in redress to consumers whose loans were affected by the kick-backrnscheme and Chase will pay $300,000.  </p

CFPB and the Maryland Attorney General also took action against former ToddrnCohen who was employed by Wells Fargo as a loan officer from April 2009 untilrnAugust 2010.  The Bureau alleges the formerrnemployee not only received marketing materials but took substantial cashrnpayments in exchange for referrals.  Inrnorder to cover the source of the payment Elaine Oliphant (now Cohen) receivedrnthe payments for her then-boyfriend.  The proposed consent order requires Cohen and OliphantrnCohen to pay a civil penalty of $30,000, and bans Cohen from participation inrnthe mortgage industry for two years. </p

The investigation, which received assistancernfrom the Maryland Insurance Administration, identified more than 100 WellsrnFargo loan officers in at least 18 branches, largely in Maryland and Virginia, whornparticipated in the scheme and the Bureau alleges they referred thousands ofrnloans to Genuine Title over its course.  CFPB says that despite multiple warnings aboutrnthe arrangements between its loan officers and the title company, including arnfederal lawsuit specifically alleging the relationship, the bank took no actionrnand did not have an adequate system in place to identify the violations. </p

CFPB alleges that at least six Chase loanrnofficers in three branches in Maryland, Virginia, and New York alsornparticipated in the Genuine Title kickbacks, referring almost 200 loans.  The Bureau also filed an administrativernconsent order against Chase prohibiting future violations. </p

A third institution discovered it also hadrnloan officers in their employ who were also participating in the scheme.  They terminated the employees involved, self-identifiedrnto the Bureau, cooperated with the investigation, and self-initiated arnremediation plan.  The third institutionrnwas not identified and because of its response and cooperation were not party</bto the Bureau's action.</p