The CFPB filed a complaint in federal district court against RPM Mortgage, Inc. and its CEO, Erwin Robert Hirt, for illegally paying bonuses and higher commissions to loan originators to incentivize them to steer consumers into costlier mortgages. The CFPB also filed a proposed order that, if entered by the court, would require RPM to pay $18 million in redress to consumers and a $1 million civil penalty, and would require Hirt to pay an additional $1 million civil penalty.
According to the CFPB: RPM instituted a compensation plan that gave loan officers financial incentives to steer consumers into higher-rate mortgage loans. RPM provided its loan officers with different forms of compensation that were derived in part from the interest rates of the loans they closed. The company sought to mask this interest-rate-based compensation by filtering it through so-called “employee-expense accounts.” RPM deposited profits from an originator’s closed loans – profits that were directly tied to the loans’ interest rates – into an expense account set up for the originator. RPM used the expense accounts to pay bonuses and higher commissions to its loan originators. The company also allowed loan originators to tap their expense accounts to offset interest-rate reductions or give credits to certain customers to avoid losing the transactions to competitors.
The CFPB alleged the actions violated the Loan Originator Compensation Rule which prohibits incentivizing loan originators to steer consumers to costlier mortgages. The CFPB also alleged that Hirt, RPM’s CEO, was responsible for managing the design and implementation of this illegal compensation plan.
RPM and Hirt did not admit or deny the allegations in the CFPB’s complaint.
An RPM representative advised that although the CFPB’s press release claims that RPM loan officers steered consumers into higher cost loans, the CFPB’s own complaint does not support this claim. The complaint does not allege that steering actually occurred or that RPM’s customers paid higher costs. Instead, the CFPB’s complaint alleges only that RPM’s 2011-2013 compensation policies created an incentive to steer.
According to RPM’s CEO, its regulatory law firm extensively reviews RPM’s LO comp policy every six months to ensure that RPM is in accordance with the current directives from the CFPB.
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