CFPB Accuses Utah Lender of Offering ‘Illegal’ Bonuses to Officers

CFPB Accuses Utah Lender of Offering ‘Illegal’ Bonuses to Officers

07/23/2013 BY: ESTHER CHO

The Consumer Financial Protection Bureau (CFPB) filed a complaint Tuesday against Castle & Cooke Mortgage LLC over allegations that the company gave bonuses to loan officers who steered customers into mortgages with less favorable terms.

The complaint, which was filed in federal district court in Utah, claims that under the direction of company president Matthew A. Pineda and Buck L. Hawkins, the SVP of capital markets, Castle & Cooke violated a rule from the Federal Reserve Board that bans compensation based on loan terms.

Since the rule took effect in April 2011, the CFPB estimates more than 1,100 quarterly bonuses ranging from $6,100 to $8,700 were paid to more than 150 loan officers at Castle & Cooke.

“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.”

Furthermore, the bureau believes the Utah-based mortgage company violated laws requiring companies to retain evidence of compliance for two years.

According to the complaint, the company maintained record of quarterly bonus amounts paid to loan officers, but did not record what portion of an officer’s quarterly bonus is attributable to a certain loan.

The complaint seeks to end the compensation scheme and is looking to secure restitution for affected customers.

According to a release from the bureau, Castle & Cooke has operations in 22 states and originated approximately $1.3 billion in loans in 2012.

 

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