In a time of limited resources, perhaps a new model is emerging of joint CFPB/State Attorney General enforcement actions. The 2015 joint action by the Bureau and Maryland Attorney General Brian Frosh provides a nice case study.
In 2015, Maryland Attorney General Brian Frosh and the Consumer Financial Protection Bureau took an action against a mortgage kickback scheme involving former Maryland title company Genuine Title, LLC and employees at national banks Wells Fargo and JPMorgan Chase. “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 . . . this type of quid pro quo is illegal, and it’s unfair to other businesses.” Said Maryland Attorney General Brian Frosh. The complaint in the case is available here.
Between 2009 and 2013, Genuine Title swapped marketing services and cash payments for referrals of business by loan officers to Genuine Title.
Loan officers typically are paid by commission. Through the Marketing Services Scheme, Genuine Title offered loan officers valuable services to increase the amount of business they generated, and thus the commissions they would earn. The scheme was also intended to increase the amount of business generated by the participating loan officers and, through referrals, to increase Genuine Title’s profits.
In some cases Genuine Title:
not only analyzed and purchased leads from a third-party vendor, it also paid for marketing letters directed to the consumer leads to be printed, folded, stuffed into envelopes, and mailed.
Genuine Title even attempted to conceal its involvement by having the company which printed the marketing materials provide “fake” invoices to the loan officers, so that it could pretend that the loan officers had paid for the materials themselves. Genuine Title went out of business in April 2014, which is why they are not named in the joint enforcement action.
Over 100 loan officers at Wells Fargo were involved in the scheme, along with 6 at the JPMorgan Chase, and an unknown number at other, unnamed banks. The enforcement action led to consent orders with Wells Fargo and JPMorgan Chase. Wells Fargo will pay over $10 million in redress to affected consumers, $21 million in penalties to the CFPB and $3 million to the Maryland Attorney General’s office. Chase will pay less than $1 million in redress and penalties.
Maryland’s First Co-Operative Action with the CFPB
This was the first case in which the Maryland Attorney General’s office and the CFPB acted jointly. The investigation seems to have started in Maryland, with the Office of the Attorney. In a time of contracting state budgets, joint federal/state actions of consumer protection laws seems to make good sense, and seems to be an excellent way to use the Dodd Frank act to pursue both local and national actors when they engage in fraud and abuse in the area of consumer financial services.