WASHINGTON—The Consumer Financial Protection Bureau and the Maryland Attorney General Thursday fined Wells Fargo $24 million and JPMorgan Chase $600,000 for an alleged illegal marketing-services-kickback scheme they participated in with Genuine Title, a now-defunct title company.
The CFPB alleges that Genuine Title gave the banks’ loan officers cash, marketing materials, and consumer information in exchange for business referrals. In addition to the civil penalties, the proposed consent orders, filed in federal court Thursday, outlined the banks, collectively, will pay an additional $11.1 million redress to consumers whose loans were involved in this scheme.
The Bureau and Maryland also took action against former Wells Fargo employee Todd Cohen and his wife, Elaine Oliphant Cohen, for their involvement. Cohen and Oliphant Cohen also 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 in a release. “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.
Loan Officer Kickbacks
Genuine Title was a Maryland-based title company that offered real-estate-closing services from 2005 until it went out of business in April 2014. As part of the marketing-services-kickback scheme, Genuine Title offered loan officers valuable services to increase the amount of loan business generated, the CFPB stated.
Genuine Title conducted this scheme at several financial institutions, the CFPB stated. The services the company offered included 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 would increase Genuine Title’s profits by referring homebuyers to the company for closing services, the bureau explained.
The 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 agency reported.
The Bureau’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 Bureau alleges that these loan officers referred thousands of loans to Genuine Title over the course of the scheme. The Bureau alleges that, despite the fact that Wells Fargo had multiple warnings of the illegal arrangements between its loan officers and Genuine Title – including a federal lawsuit explicitly alleging the existence of such agreements – the bank failed to take action to stop the practices and did not have an adequate system in place to identify these violations. Under the proposed consent order, Wells Fargo would be required to pay $10.8 million in redress and $24 million in civil penalties. The Bureau also filed an administrative consent order against Wells Fargo prohibiting future violations.
Cash Payments
Wells Fargo employed Todd Cohen as a loan officer from April 2009 through August 2010. The Bureau alleges that, while at Wells Fargo, Cohen not only received marketing materials, he also took substantial cash payments in exchange for referrals. Rather than pay Cohen directly, Genuine Title made payments to Cohen’s then-girlfriend, now-wife, Elaine Oliphant Cohen, in an effort to disguise the kickback nature of the payment. She received tens of thousands of dollars in payments for loans Cohen referred to Genuine Title. Under the proposed consent order, Cohen and Oliphant Cohen would be required to pay a civil penalty of $30,000, and Cohen would be banned from participation in the mortgage industry for two years.
The CFPB also found that loan officers at JPMorgan Chase participated in the marketing-services-kickback scheme with Genuine Title. The Bureau alleges that at least six Chase loan officers in three different branches in Maryland, Virginia, and New York were involved. These officers referred settlement business to Genuine Title on almost 200 loans, the CFPB stated. The Bureau also alleges that Chase did not have an adequate system in place to ensure that its loan officers were following the law. Under the proposed consent order, Chase would pay approximately $300,000 in redress and $600,000 in civil penalties. The Bureau also filed an administrative consent order against Chase prohibiting future violations.
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