On January 22, 2015, the Consumer Financial Protection Bureau (CFPB or Bureau) and the Maryland Attorney General filed a complaint and proposed consent orders, as well as concurrent administrative consent orders, against Wells Fargo and JPMorgan Chase for allegedly participating in an illegal marketing services kickback scheme with a now-defunct title company. The Bureau also took action against a former Wells Fargo employee and his wife.

The Bureau alleges that loan officers at the two banks steered home mortgage borrowers toward Genuine Title in exchange for kickbacks that included marketing services, marketing leads, and letters directed to consumers. The Real Estate Settlement Procedures Act (RESPA) prohibits giving a "fee, kickback, or thing of value" in exchange for a referral of business related to a real estate settlement service. RESPA prohibits payments for services that are not "actually furnished," and it prohibits "a charge by a person for which no or nominal services are performed or for which duplicative fees are charged." The complaint also alleges that defendants violated the Consumer Financial Protection Act and the Maryland Consumer Protection Act.

The enforcement actions provide lessons for mortgage industry participants and other financial institutions that are the subject of scrutiny by the CFPB.

  • Responsible Business Conduct – The CFPB's press release notes that another financial institution was also implicated in the alleged RESPA violations. But the Bureau states that it resolved an investigation of that company without an enforcement action, consistent with the Bureau's Bulletin on Responsible Business Conduct. The CFPB noted that the unnamed institution self-identified the issue and took corrective action and that it also cooperated with the CFPB's investigation and self-initiated a remediation plan.
  • Warning Signs – The Bureau's complaint against Wells Fargo also alleges that the bank ignored warnings, such as a federal lawsuit making similar allegations. The complaint also alleges that Wells Fargo and JPMorgan Chase did not have adequate compliance management systems in place to identify RESPA violations and to ensure that loan officers adhere to RESPA and other consumer financial protection laws.
  • Employee Liability – The complaint alleges that the former employee took substantial cash payments in exchange for referrals, which were paid to his then girlfriend.

Under the proposed consent order filed with the Maryland district court, Wells Fargo will pay $10.8 million in redress and $24 million in civil penalties, and JPMorgan Chase will pay approximately $300,000 in redress and $600,000 in civil penalties. The former employee and spouse would pay approximately $30,000 in civil penalties, and the former employee would be banned from participation in the mortgage industry for two years.

In addition, the Bureau filed concurrent administrative consent seeking injunctive relief. Wells Fargo and JPMorgan Chase would be bound by the administrative consent orders for five years. Under the proposed orders, the banks would agree not to violate RESPA's anti-kickback provision and typical compliance and administrative provisions.

CFPB Director Richard Cordray stated that the Bureau's action "should serve as a warning for all those in the mortgage market."