Despite saying he did nothing wrong, a mortgage lending executive has agreed to make a personal $1 million fine payment as part of a $20 million settlement with the Consumer Financial Protection Bureau (CFPB) over allegations that he paid his employees to bilk their clients.
RPM Mortgage CEO Robert Hirt will pay a million-dollar penalty out of his own pocket, and another $1 million fine will come from the corporate treasury. The other $18 million is earmarked for repaying consumers misled by loan officers who were paid more for loans with higher interest rates.
That alleged compensation scheme is at the heart of the case. RPM “gave loan officers a financial incentive to steer customers into higher-rate loans by paying them, in part, based on the interest rates of the loans they closed,” the CFPB complaint said, in violation of CFPB rules and a 2010 law aimed at preventing lenders from a practice known as “steering.”
Loan officers bear a heavy responsibility to look out for the best interests of the borrower who brings them her business. The same person might qualify for a range of different loan terms, and may not be equipped with the financial expertise to discern which deal is best for their current needs and future economic security. Loan officers provide a value to the borrower by assisting in that choice. But the same position within the transaction that allows a lender to help a borrower make the best choice also enables him to mislead a borrower into a worse one. Pushing a borrower into taking a loan that makes more money for the lender than another that the borrower would have benefited from is called steering.
But it’s not clear any RPM customers ever got steered. Hirt and RPM maintain they did nothing wrong, and the settlement contains no admission of guilt. Hirt pointed out that the CFPB’s initial complaint did not even allege that customers were harmed by the compensation policy he created, telling Housing Wire that he settled anyway because “I felt it was better to move forward and focus solely on the needs of our customers.” Requests for clarification from the CFPB were not immediately returned.
Creating a compensation system that provides incentive for steering is illegal on its own, even absent evidence of direct consumer harm. And the terms of the settlement imply that the agency has evidence that RPM customers got suboptimal deals from the company. The government plans to “notify eligible customers and send refund checks in the mail” from the $18 million in redress payments that RPM is making. The terms of the settlement dictate that any surplus money left after everyone harmed by RPM is made whole will return to the U.S. Treasury.