Updated with statements from JPMorgan and Wells Fargo.
Wells Fargo [1] and JPMorgan [2] have agreed to pay a combined $35.7 million in penalties and redress over their roles in an alleged kickback scheme with a Maryland title company.
In an announcement on Thursday, the Consumer Financial Protection Bureau [3] (CFPB) said loan officers at the two banks accepted cash, marketing materials, and consumer information in exchange for business referrals to Genuine Total, a now-defunct title firm formerly headquartered in Owings Mills. Kickback schemes are barred under the Real Estate Settlement Procedures Act (RESPA).
"Today we took action against two of the nation's largest banks, Wells Fargo and JPMorgan Chase, for illegal mortgage kickbacks," said CFPB Director Richard Cordray. "These banks allowed their loan officers to focus on their own illegal financial gain rather than on treating consumers fairly.
"Our action today to address these practices should serve as a warning for all those in the mortgage market," he added.
CFPB says it identified more than 100 loan officers at Wells Fargo and at least six at JPMorgan Chase who participated in the scheme, which garnered thousands of referrals for Genuine Title in exchange for consumer information and marketing services. The bureau also alleged that both banks "did not have an adequate system in place" to identify the violations and that Wells Fargo took no action to stop the practice despite multiple warnings and even a federal lawsuit.
For its part, Wells Fargo would be required to pay $10.8 million in redress and $24 million in civil penalties under the proposed consent order [4]. JPMorgan would pay approximately $300,000 in redress and $600,000 in penalties. The bureau also filed administrative consent orders against the banks prohibiting future violations.
In addition to Wells Fargo and JPMorgan Chase, CFPB says several loan officers at another unnamed institution also participated in the scheme with Genuine Title. Unlike the other two banks, that firm self-identified the problem, terminated the loan officers involved, and cooperated with CFPB, which said it has "resolved that investigation without an enforcement action."
Also included in the action are former Wells Fargo employee Todd Cohen and his wife, Elaine Cohen, who were allegedly involved in the scheme. CFPB says that during his employment as Wells Fargo from April 2009 through August 2010, Todd Cohen received both marketing emails and "substantial cash payments" in exchange for referrals. The payments were allegedly funneled through Elaine Cohen, who was his girlfriend at the time, in order to disguise the kickbacks.
Under the proposed consent order, the two would be required to pay a civil penalty of $30,000, and Todd Cohen would be banned from participating in the mortgage industry for two years.
JPMorgan Chase commented on the agreement with a statement: "We are fully committed to ensuring that our mortgage bankers comply with all legal and regulatory requirements. These former employees clearly violated our policies, procedures and training."
Wells Fargo also issued a statement: "Wells Fargo holds its team members to the highest ethical standards and does not tolerate improper activities or failure to comply with rules, regulations or company policies. We have fully cooperated with the CFPB in this matter and have taken strong corrective action, including terminating team members who were involved and enhancing our procedures to provide greater oversight and monitoring of both the process and our team members."