CFPB Fines MLO Individually

[Ken Rishel]

For those of you who believe the CFPB will not go after small operators, or that MLO's are experts on regulation that can protect you, consider this excerpt from a press release:

The CFPB found that David Eghbali referred a substantial number of loan closings to a single escrow company, which shifted its fees from some customers to others at Eghbali’s request. Eghbali could then manipulate loan costs and ultimately increase the number of loans he closed, increasing his commissions. The CFPB filed an administrative consent order requiring Eghbali to pay an $85,000 penalty and banning him from working in the mortgage industry for one year.

“We have taken action against an individual loan officer for illegal mortgage fee-shifting,” said CFPB Director Richard Cordray. “This should send a strong message that the law must be followed not only by large financial institutions, but also by the individuals who work for them.” (My underlining) Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions or individuals engaging in unfair, deceptive, or abusive acts or practices or that otherwise violate federal consumer financial laws.

I am taking no position on the innocence or guilt of Mr. Eghbali. The point is, the CFPB can and will take action against individuals and small operators.

Mr. Eghbali stated that he accepted the CFPB settlement because he could not fight them and that they literally crushed him with their overwhelming resources. 

Go delve into this if you wish. I can see how he could easily justify his actions, but I can also see how he could have lost in a court room because it came down to interpretation of the meaning of the regulations involved. This is why I always tell people they need either consultants like us with long practical experience or a "real" regulatory attorney. Regulatory law exists on a different plain that other forms of law. The ability to interpret regulatory law, secondary law, and regulations is critical to staying out of trouble.

The whole point to this post is to further demonstrate the dangers of accepting amateur advice on how to avoid all these new laws. They really cannot be avoided, and invoking wishful thinking or magical thinking is courting very real dangers.