CFPB Targets Missouri Lender over Alleged Kickbacks

The Consumer Financial Protection Bureau (CFPB) last week ordered a Missouri-based mortgage lender and its president to pay more than $80,000 for funneling illegal kickbacks in exchange for real estate referrals.

According to CFPB's complaint filed in mid-January, Fidelity Financial Mortgage Corporation (FFMC) in 2010 entered into an agreement with a Missouri bank in which Fidelity would lease an office at the bank in exchange for business referrals. Much of FFMC's business was then taken over by Fidelity Mortgage Corporation, a firm created in 2012 by Bank of Sullivan (which was not party to CFPB's decree).

Because the amount of rent paid on the office was connected with volume of loans it produced, CFPB says the agreement violated the Real Estate Settlement Procedures Act (RESPA), which prohibits fees or kickbacks in exchange for real estate-related referrals.

"Kickbacks harm consumers by hampering fair market competition and by unnecessarily increasing the costs of getting a mortgage," said CFPB Director Richard Cordray. "The Consumer Financial Protection Bureau will continue to take action against schemes that steer consumers to lenders through unscrupulous and illegal business practices."

Under the terms of the order, Fidelity and its president, Mark Figert, are required to pay $27,076, the amount the company made under its referral agreement. In addition, Fidelity and Figert are ordered to pay a $54,000 civil penalty to the bureau, bringing the order's total to $81,076.

In a statement, Bank of Sullivan president Mike Hoffman commented that CFPB's complaint was based on FFMC's practices and noted that Fidelity's current operations have not been challenged.

"Fidelity did not admit that Fidelity violated any laws," Hoffman went on to say. "But the cost of defending a claim made by the Federal government is too much for a small financial institution to afford. Therefore we decided that it was in the best interests of Fidelity to settle the claim."