CFPB: Mortgage Lender Illegally Tied Employee Bonuses to Interest Rates
Franklin Loan Corporation tied employee bonuses to interest rates, says the Consumer Financial Protection Bureau (CFPB).
The company rewarded loan officers who steered consumers into mortgages with higher interest rates, a practice that is prohibited by a 2011 federal law.
Between 2011 and 2013 the company paid out $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, the higher the quarterly bonus. Franklin Loan, a lender with locations in Southern California and Chicago, will be required to end the practice and pay $730,000 in redress to the 1,400 impacted borrowers.
"Today's action will put $730,000 back in the pockets of consumers who may have never suspected that they had been harmed," said CFPB Director Richard Cordray in a statement. "Paying bonuses for steering borrowers into more expensive loans violates their trust and is against the law."
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