First Alliance Lending Subject of CFPB Action for Unlawful Lending Practices

Well it didn’t take long. We have been predicting for the past few months that the new Biden Administration would start to get much tougher on mortgage lenders. Especially as lenders are now seeing record revenues and profits; lots of deep pockets to collect fines and penalties.

On January 15th, the CFPB announce it had filed litigation against First Alliance Lending LLC as well as its owners over its lending practices. The lawsuit, filed in Federal Court in the State of Connecticut alleges, among other things, that “unlicensed 1st Alliance employees routinely and illegally engaged in mortgage-origination activities and interactions with consumers that required the employees to be licensed under the applicable state laws, in violation of the Truth in Lending Act and Regulation Z,” and that “1st Alliance employees regularly required consumers to submit documents for verification before issuing the consumer a Loan Estimate, in violation of the Truth in Lending Act and Regulation Z,” and also that “on thousands of occasions, 1st Alliance employees denied credit to consumers based on information in a consumer report or in response to an application but did not give the consumer the “adverse action” notice required under the Fair Credit Reporting Act or the Equal Credit Opportunity Act.”

What is unique about this lawsuit is that traditionally these type of operational issues would be uncovered in a state audit, set forth in a consent order and result in negotiated fines paid to a state department of banking. Historically the CFPB has focused on larger, more significant legal issues rather than operational compliance matters. However with this lawsuit, matters traditionally dealt with locally are being elevated to federal court and dressed up as an underlying “business model incorporat[ing], in part, a series of deceptive acts or practices, unfair acts or practices, or both, that harmed or posed a substantial risk of harm to consumers.”

Once again we remind our clients and their peers that compliance matters are now back in the white hot spotlight of aggressive federal regulators. Please assess your compliance and operational risk management practices and procedures. If you cannot handle something, outsource the oversight and management to a qualified vendor partner.

As always, Secure Insight stands ready to assist you with wire fraud, mortgage fraud and overall vendor risk management and reporting. After 12 Million successful mortgage transactions supervised by our SaaS platform, without a loss, we have a track record you can rely on to survive and thrive in any state or federal audit.

Be safe out there friends!

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