Alamo-based residential mortgage lender RPM Mortgage, Inc. was ordered last month to pay a total of $19 million in consumer refunds and penalty fees after the Consumer Financial Protection Bureau (CFPB) determined the company offered incentives to its loan officers to steer customers into costlier mortgages.
By the terms of a consent order approved by the court in June, RPM is ordered to pay $18 million in reparation to its customers and a $1 million civil penalty fee. Company CEO Erwin Robert Hirt was also ordered to pay a separate $1 million civil penalty fee.
RPM said it agreed to the settlement with the CFPB with no admission of wrongdoing in the matter to avoid the cost and distraction of litigation, according to a statement released by the company.
The company's statement also said that throughout the investigation, RPM asserted all of its compensation policies were and are currently fully compliant with the law.
RPM has until Sept. 30 to pay the $18 million portion in full, according to the consent order. The bureau's original complaint against RPM was made on June 4 and the consent order was approved four days later.
According to the CFPB, RPM in 2011 implemented a compensation plan that offered loan officers employed by the company financial incentives to lead consumers into higher-rate mortgage loans, and the forms of compensation came partially from the interest rates of the loans they closed.
The CFPB accused RPM of masking the illegal practices by filtering the interest-rate-based compensation through employee-expense accounts into which RPM would deposit profits from a loan officer's closed loans.
The accusations also indicate that RPM allowed loan originators to tap into their expense accounts to give credits to customers to avoid losing them to competitors and to off-set interest rate reductions, according to the CFPB.
The bureau said that Hirt was instrumental in designing and implementing the compensation plan that violates the Loan Originator Compensation Rule -- enacted in 2011 -- prohibiting companies from offering incentives for loan officers to steer customers into high-rate mortgages.
RPM Mortgage maintains that the bureau's complaint does not allege that steering consumers into higher-rate mortgages actually occurred nor that RPM customers paid higher costs, but rather that the company's compensation policies between 2011-13 created an incentive to steer, according to RPM reps.
"There were no allegations of harm to the company's customers in the filed complaints," Hirt said in a blog post on RPM's website. "We reviewed our pricing in 2011-2013 and confirmed that RPM's rates were always competitive and, for the majority of its loans, matched or beat the average rates in RPM's markets of Northern and Southern California."
Upon receipt of full payment from RPM, eligible consumers will be contacted by a settlement administrator and the $18 million will be distributed amongst them. Consumers do not need to take any action of their own, CFPB reps said.