CFPB accuses Castle and Cooke of running illegal bonus scheme

by Adam Smith24 Jul 2013

The CFPB has taken aim at a mortgage company accused of giving illegal bonuses for pushing customers to pricier loans.

The CFPB announced it has filed a complaint in federal district court against Utah-based Castle & Cooke Mortgage LLC and two of its officers, alleging the company handed out bonuses to loan officers who steered borrowers into mortgages with higher interest rates.

CFPB director Richard Cordray decried the company's alleged actions, saying that such practices "precipitated the financial crisis".

"Consumers should be able to get a mortgage without worrying about how the financial incentives of their loan officers may cause them to pay higher rates than they actually qualify for,” Cordray said.

The CFPB alleged that Castle & Cooke, through its president Matthew Pineda and senior vice president of capital markets Buck Hawkins, ran a quarterly bonus program which paid more than 150 of the company's loan officers higher bonuses when they persuaded borrowers to take on pricier mortgages, while loan officers who didn't charge consumers higher rates did not receive bonuses. The CFPB said the bonuses ranged from $6,100 to $8,700.

In addition to its complaint over the company's bonus scheme, the CFPB alleged that Castle & Cooke violated laws requiring companies to retain compliance records, claiming that the company failed to record what portion of each loan officers bonus was attributable to a particular loan. The CFPB also alleged that Castle & Cooke did not reference the quarterly bonus program in its originators' compensation agreements.

COMMENTS

  • by Eric M | 7/23/2013 1:58:10 PM

    "Consumers should be able to get a mortgage without worrying about how the financial incentives of their mortgage officers may cause them to pay higher rates than they actually qualify for,” Cordray said. Why?

  • by Carlo Sanchez | 7/23/2013 2:03:26 PM

    WOW!! That is so subjective in the editorial description. So they paid bonuses at a time when bonuses were legal to give out, years ago, but now that they are illegal to hand out they CFPB is doing nothing against the big banks like BofA that are handing out bonuses to employees to let homes go into foreclosure. The CFPB is a JOKE!!

  • by Eric M | 7/23/2013 2:05:09 PM

    I go in to buy a car and give them all my credit info, ss#, job, salary etc. They come back with a payment, I haggle with them and get the payment down. I don't haggle with them and accept the payment, I walk away and go someplace else. It is called shopping around! This is supposed to be a capitalistic country. I think the CFPB should be looking into all car dealers and see if they are not pushing their sales people to sell more expensive cars with more expensive upgrades. All consumers should be able to get cars and not have to worry about what finanicial incentive their salesperson is getting that may cause their payments to be higher!

Poll

Is TILA-RESPA a good or bad thing long term?