Alleged kickbacks from a now defunct title insurance agency has prompted the Consumer Financial Protection Bureau to take costly action.
The regulator alleges that Wells Fargo and JPMorgan Chase participated in an illegal marketing-services-kickback scheme.
Such practices violate the Real Estate Settlement Procedures Act. RESPA prohibits giving fees, kickbacks or something of value in exchange for real estate settlement business referrals.
On the other side of the illegal transactions was Genuine Title. The company provided real estate closing services from 2005 until it went out of business in April 2014.
The bureau claims that Genuine Title gave loan officers at several financial institutions including Wells Fargo and Chase
cash, marketing materials and consumer information.
Genuine Title reportedly purchased, analyzed and provided
data on consumers to the banks. It also created letters on the banks’ letterhead and sent them out to prospective clients.
This was all done
in exchange for business referrals to Genuine Title
The CFPB said it identified more than a hundred Wells Fargo loan originators who participated in the scheme.
“The bureau alleges that, despite the fact that Wells Fargo had multiple warnings of the illegal arrangements between its loan officers and Genuine Title — including a federal lawsuit explicitly alleging the existence of such agreements –the bank failed to take action to stop the practices and did not have an adequate system in place to identify these violations,” the CFPB said.
One loan officer at Wells Fargo, Todd Cohen, allegedly
“took substantial cash payments in exchange for referrals.” Tens of thousands of dollars in payments were made to Cohen’s girlfriend at the time, Elaine Oliphant — who is now his wife. The payments were made indirectly in order to disguise the kickback nature of the payment.
At Chase, at least six originators were alleged to have participated.
Chase’s systems were inadequate in catching such transactions.
Although a third institution was identified, it
self-identified the problematic practices, terminated the loan officers involved and self-initiated a remediation plan. It also cooperated with the CFPB.
“Based on the institution’s behavior, the CFPB has resolved that investigation without an enforcement action, consistent with the CFPB’s Bulletin on Responsible Business Conduct,” the announcement said.
The CFPB said Thursday that it issued consent orders.
The orders,
filed in U.S. District Court for the District of Maryland, include $24 million in civil penalties against Wells Fargo as well as $10.8 million in redress to consumers whose loans were involved in the scheme.
Civil penalties against Chase are $0.6 million, and Chase will pay $0.3 million in redress.
Cohen and his wife will pay a $30,000 penalty.
“These banks allowed their loan officers to focus on their own illegal financial gain rather than on treating consumers fairly,” CFPB Director Richard Cordray stated in the announcement. “Our action today to address these practices should serve as a warning for all those in the mortgage market.”
