The CFPB and Franklin Loan Corporation have asked a federal court to approve a consent order regarding alleged violations by Franklin Loan of the loan originator compensation rule. Franklin Loan did not admit or deny the allegations in the CFPB’s complaint.
The CFPB alleged from June 2011 to October 2013, Franklin Loan paid at least $730,000 in quarterly bonuses to 32 loan officers based in part on the interest rates on the loans they provided to borrowers; the higher the interest rate of the loans closed during the quarter, the higher the loan officer’s quarterly bonus.
The CFPB found that these bonus payments violated the Federal Reserve Board’s loan originator compensation rule, which the Bureau has enforced since July 21, 2011. The rule prohibits mortgage lenders from paying loan officers based on loan terms such as interest rate. The CFPB believes Franklin Loan violated the rule by tying its loan officers’ quarterly bonuses to the interest rates on the loans they offered to borrowers.