RPM Mortgage and its CEO, Erwin Robert Hirt, are in hot water for allegedly paying bonuses and higher commissions to loan officers who guided consumers into costlier mortgages.
According to the complaint filed in federal district court by the Consumer Financial Protection Bureau, California-based RPM Mortgage offered its loan officers interest-rate-based compensation for loans it closed: the higher the interest rate, the more compensation loan officers earned.
The company operates about 60 branches in six states, according to the complaint, which says that “from 2011 through 2013, RPM operated in 18 states and originated tens of thousands of mortgage loans worth billions of dollars.”
“RPM paid or financed millions of dollars in unlawful bonuses, pricing concessions, and supplemental commissions,” the CFPB said.
The CFPB is asking for $19 million from RPM – $18 million for consumer redress and a $1 million civil penalty – plus an additional $1 million civil penalty from Hirt.
“RPM rewarded its loan officers for steering consumers into mortgages with higher interest rates,” CFPB director Richard Cordray said in a statement. “Today we are putting an end to RPM’s unlawful practices and holding Robert Hirt personally responsible for his involvement in them.”
The CFPB alleges that RPM attempted to mask its deceptive compensation plan by filtering it through “employee-expense accounts,” which involved depositing profits from a loan officer’s closed loan into an expense account. The profits, which were based on the loan’s interest rate, were used to pay bonuses and higher commissions to the loan officers.
The CFPB said Hirt was responsible for managing the design and implementation of RPM’s illegal compensation plan, which totaled 511 bonuses to loan officers.
RPM said that although it opted for a settlement with the CFPB, it is not admitting to any wrongdoing.
“The company has always taken great care to provide outstanding service and highly competitive rates while complying with the rules governing loan originator compensation, despite the limited and sometimes confusing guidance provided by regulators,” Hirt said in a statement.
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