RPM Mortgage Ordered to Pay $19 Million by CFPB for Taking Advantage of Consumers

The Consumer Financial Protection Bureau (CFPB) filed a complaint in federal district court against RPM Mortgage, Inc. and its CEO, Erwin Robert Hirt, for illegally paying loan originators bonuses and higher commissions to encourage them to draw consumers toward higher mortgages, according to a recent press release. The CFPB also filed a proposal that would require RPM to pay $18 million to consumers and a $1 million civil penalty. The proposal, if entered by the court would also require Hirt to pay an additional $1 million civil penalty.

If the CFPB’s proposal is entered in the court, RPM would need to notify consumers and send them refund checks totaling $18 million in the mail. RPM and Hirt would also each pay $1 million to the CFPB’s Civil Penalty Fund.

“RPM rewarded its loan officers for steering consumers into mortgages with higher interest rates,” said CFPB Director Richard Cordray. “Today we are putting an end to RPM’s unlawful practices and holding Robert Hirt personally responsible for his involvement in them.”

RPM Mortgage is a residential-mortgage lender that operates about sixty branches across 6 states, according to the CFPB. The company began offering its loan officers financial incentives to motivate consumers to purchase higher mortgage loans in April 2011. The funds RPM provided its loan officers partly stemmed from the interest on the loans they closed and were masked through an “employee-expense account.” The company paid millions of dollars illegal bonuses, pricing concessions, and supplemental commissions.

The CFPB’s 2011 Loan Originator Compensation rule does not allow loan officers to receive incentives for guiding consumers to buy more expensive mortgages, according to the Bureau. The CFPB found that RPM and Hirt violated the rule and the Consumer Financial Protection Act (CFPA) by paying loan originators 511 bonuses worth millions of dollars from April 2011 to January 2012. RPM also paid employees tens of millions of dollars in higher commissions based on high-interest loans, and used the expense account to pay for pricing incentives to close new mortgages.

RPM cooperated fully with the CFPB investigation, announcing in a press release that it has reached a settlement with the CFPB to resolve this investigation and that the CFPB did not allege that their wrongdoings actually harmed its consumers by raising interest rate or otherwise.

"The company has always taken great care to provide outstanding service and highly competitive rates while complying with the rules governing loan originator compensation, despite the limited and sometimes confusing guidance provided by regulators," said Rob Hirt, RPM CEO. “The company chose to settle this matter without an admission of wrongdoing in order to avoid the cost and distraction of litigation. RPM values its reputation as a respected mortgage lender and has maintained from the beginning of the investigation that all of its compensation policies were and are fully compliant with the law.”

Click here to view a copy of the CFPB's complaint.

Click here to view a copy of the CFPB's proposed order.