The Consumer Protection Financial Bureau, which was created with the help of Senator Elizabeth Warren, is getting down to business and suing a
Utah-based mortgage company:
The Consumer Financial Protection Bureau on Tuesday sued Castle & Cooke Mortgage, accusing it of paying illegal bonuses to employees who steered home buyers toward higher-interest loans.
The suit marks the first time a company has been targeted under new federal loan-origination compensation rules adopted after a mountain of bad home loans set off a global financial crisis.
The bureau sued in federal court in Utah, where Castle & Cooke is based, accusing two of its top executives of running a quarterly bonus program that paid $6,100 to $8,700 to loan officers who persuaded consumers to take out pricier mortgages.
Those mortgages brought the company higher profits. Loan officers who did not push customers into higher-interest loans did not receive bonuses, the bureau said.
From recently approved CFPB Director Richard Cordray:
“Today we are taking action against the type of practices that precipitated the financial crisis,” said CFPB Director Richard Cordray. “Consumers should be able to get a mortgage without worrying about how the financial incentives of their loan officers may cause them to pay higher rates than they actually qualify for.”
From the CFPB's
press release:
The CFPB’s complaint seeks to:
- End unlawful compensation practices: The complaint seeks to prohibit Castle & Cooke from continuing its practice of incentivizing loan officers to upcharge consumers by distributing quarterly bonuses based on the interest rates of loans sold.
- Ensure that Castle & Cooke retain records of compensation: The complaint seeks to ensure that Castle & Cooke complies with federal law that requires creditors to retain evidence of compliance.
- Secure restitution for consumers: The CFPB is looking to secure restitution for consumers of Castle & Cooke who may have been upsold.
- Obtain civil money penalties: The CFPB is looking to obtain civil money penalties for each bonus paid out. The Dodd-Frank Wall Street Reform and Consumer Protection Act allows civil penalty amounts to be determined under a three-tiered framework: up to $5,000 for any violation; up to $25,000 for reckless violations; and up to $1,000,000 for knowing violations.
Let's hope the Consumer Financial Protection Bureau is just getting started and this is the first of many cases they bring against those who make a living ripping off the American consumer.