The CFPB recently filed a complaint in the United States District Court for the District of Connecticut alleging violations of various federal consumer protection laws by 1st Alliance Lending, LLC (1st Alliance), a former mortgage lender. The complaint also names several principals of 1st Alliance as defendants. According to the complaint, certain alleged conduct occurred from 2015 until at least August 2019, with other alleged conduct occurring in a narrower period within such timeframe. The CFPB indicates that it believes 1st Alliance ceased lending in August 2019, and then ceased operations in November 2019.

Among the allegations made by the CFPB in the complaint are that 1st Alliance:

  • Had employees who were not licensed as mortgage loan originators in accordance with the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) and related state licensing laws regularly perform licensable activities. The CFPB also alleges that:
    • Unlicensed employees sent solicitations to consumers indicating that they were licensed.
    • Unlicensed employees in a certain position would at times provide credit-repair advice, discuss interest rates and other loan terms with consumers, make credit decisions, and disqualify consumers.
    • Unlicensed employees made misrepresentations to borrowers concerning a borrower’s likelihood of obtaining a mortgage-credit product or term, including whether the consumer was prequalified for a mortgage with 1st Alliance. The CFPB also asserts that as a result of their reliance on the employees’ misrepresentations concerning their likelihood of obtaining a loan with 1st Alliance, some consumers lost thousands of dollars in fees, expenses, and deposits and wasted months of time that they could have spent securing alternative financing for a home.
  • Had employees regularly require consumers to submit documents for verification before 1st Alliance issued Loan Estimates to the consumers, which is not permitted by the TRID rule.
  • Allowed employees during initial calls with consumers treat the interactions as applications for credit by advising the consumers that they were “ineligible” or “not qualified” for a mortgage loan without issuing adverse action notices under the Equal Credit Opportunity Act (ECOA) or Fair Credit Reporting Act (FCRA).
  • Had employees represent to consumers seeking purchase-money mortgage loans that after six months of satisfactory payments the consumers could obtain a significantly better rate through a streamline refinance mortgage loan, even though the employees had no assurance that the consumer would qualify for a streamline refinance loan, even if the on-time payment conditions were met, or that the rate would be significantly better than the consumer’s purchase-money mortgage interest rate. The CFPB also asserts that employees frequently told consumers that the consumer could obtain a streamline refinance loan at no cost to the consumer when, in fact, this was not true.

The CFPB asserts that the alleged conduct violated various federal consumer protection laws, including the Truth in Lending Act (TILA) and Regulation Z; the SAFE Act and related state licensing laws; the Consumer Financial Protection Act (CFPA), with regard to its prohibitions against unfair and deceptive acts or practices; the Mortgage Acts and Practices (MAP) Rule (also known as Regulation N); the ECOA; and the FCRA.

The relief requested by the CFPB includes (1) enjoining the defendants from committing future violations of the CFPA, TILA, the MAP Rule, ECOA and FCRA, (2) awarding additional injunctive relief as justice may require, (3) awarding consumer redress, (4) awarding damages or other monetary relief, (5) ordering disgorgement of ill-gotten gains, and (6) awarding civil-money penalties.

The CFPB notes in the complaint that 1st Alliance was previously subject to a February 2014 CFPB consent order in which the CFPB alleged violations of section 8 of the Real Estate Settlement Procedures Act.