Consumer Finance Insights
June 8, 2015

State Bank Enters $228,000 Consent Order with CFPB for Loan Officer Compensation Rule Violations

On June 5, the Consumer Financial Protection Bureau (CFPB) announced that it entered a consent order with a state bank for alleged violations of the Loan Originator Compensation Rule under the Truth-in-Lending Act (TILA) and Consumer Financial Protection Act of 2010.  The CFPB alleged that the bank paid loan originators based in part on the interest rates of the mortgage loans they closed in violation of the rule.  According to the consent order, the bank paid monthly fees to marketing-service entities associated with bank branches and the accounting methodology for those fees included income from retail loan originations by marketing-services-entity owners.  Because retail loans generated more revenue the higher the interest rate was set above par, the owners of the marketing-services entities allegedly were improperly receiving compensation based on the terms of the loans they originated.  The owners of the marketing-service entities included branch managers and loan originators.  The bank agreed to pay a civil penalty of $228,000 to the CFPB and agreed to ongoing recordkeeping, reporting, and compliance requirements.