Proposed Castle & Cook Settlement on Alleged Loan Originator Compensation Violations

By: Kristie D. Kully

The Consumer Financial Protection Bureau has proposed a settlement with Castle & Cook Mortgage and two of its officers. The CFPB brought an action against Castle & Cook and those officers, alleging that they violated the prohibition against loan-term based compensation under the Dodd-Frank Act and its regulations. On November 7, 2013, the parties to the action proposed a settlement to the federal court in Utah for the payment by the company and the officers of over $9 million for redress to affected consumers, plus a $4 million civil money penalty. The company and officers would also be permanently enjoined from paying compensation to a loan originator in violation of the applicable regulations, and would have to retain evidence of their compliance. According to the proposed settlement, although it would resolve the issue with the CFPB, consumers’ rights to seek redress on their own behalf against the company and/or the officers would not be limited.

The CFPB alleged that the company and its officers paid quarterly bonuses to loan officers in amounts that varied based on the interest rates of the loans they originated, and that the company did not reflect this quarterly bonus program in its written compensation agreements or in any written policies, in violation of the Dodd-Frank Act and Regulation Z. However, the proposed settlement would not require the company or the officers to admit or deny any of the substantive allegations set forth in the CFPB’s complaint.

Click here to learn more about the CFPB’s allegations, and here to learn more about loan originator compensation restrictions.