Recently the Consumer Financial Protection Bureau (CFPB) and the Maryland Attorney General took action against Wells Fargo and JPMorgan Chase for an illegal marketing-services-kickback scheme they participated in with Genuine Title, a now-defunct title company. According to the CFPB website, Genuine Title gave the banks’ loan officers cash, marketing materials, and consumer information in exchange for business referrals. The CFPB has posted consent orders, filed in federal court, that require $24 million in civil penalties from Wells Fargo, $600,000 in civil penalties from JPMorgan Chase, and $11.1 million in redress to consumers whose loans were involved in this scheme. Two bank employees who were directly part of the scheme will pay a $30,000 penalty.
“Today we took action against two of the nation’s largest banks, Wells Fargo and JPMorgan Chase, for illegal mortgage kickbacks,” said CFPB Director Richard Cordray. “These banks allowed their loan officers to focus on their own illegal financial gain rather than on treating consumers fairly. Our action today to address these practices should serve as a warning for all those in the mortgage market.”
“Homeowners were steered toward this title company, not because they were the best or most affordable, but because they were providing kickbacks to loan officers who referred consumers to them,” said Maryland Attorney General Brian Frosh. “This type of quid pro quo arrangement is illegal, and it’s unfair to other businesses that play by the rules.”
According to the CFPB, Genuine Title offered loan officers services, including purchasing, analyzing, and providing data on consumers and creating letters with the banks’ logos that the company had printed, folded, stuffed into envelopes, and mailed. In return, the banks’ loan officers referred homebuyers to the company for closing services. This scheme was especially profitable for the loan officers, who generally are paid by commission.
This marketing-services-kickback scheme violated the Real Estate Settlement Procedures Act (RESPA), which prohibits giving a “fee, kickback, or thing of value” in exchange for a referral of business related to a real-estate-settlement service.
The CFPB’s investigation identified more than 100 Wells Fargo loan officers in at least 18 branches, largely in Maryland and Virginia, who participated in this scheme. The CFPB also found that at least six loan officers at JPMorgan Chase participated in the marketing-services-kickback scheme with Genuine Title.