West Capital sues loanDepot over TILA pay violations

"The filing alleges that loanDepot paid more to production staff who steered borrowers into loans with higher interest rates and fees, while penalizing those who granted pricing exceptions. The excess profit generated from these loans allowed the lender to provide discounts by reducing compensation to certain employees, ultimately giving loanDepot an unfair competitive edge."

"The more discounts are approved/sought by Production Managers, and the more frequent those concessions are provided, the less a Production Manager earns from the loans closed by his team, creating a powerful incentive to maintain the highest pricing on loans offered to consumers in violation of the Loan Officer Compensation Rule."

"WCL argues that these practices eliminated any incentive for competitors to offer anything but the lowest price to consumers up-front, as well as no ability for other lenders to offset discounts in loan terms with reductions in pay to production staff. This provided loanDepot the unlawful and unfair ability to price loans higher upfront to maximize profits."

WCL filed a complaint against loanDepot's consumer direct division alleging coordinated unlawful business practices centered on compensation structures for production managers and loan officers. The compensation plan allegedly rewarded staff for maintaining higher loan pricing and penalized those who approved pricing exceptions, violating TILA's Loan Officer Compensation Rule. This structure created incentives to steer borrowers into loans with higher interest rates and fees. The excess profits from these practices enabled loanDepot to offer selective discounts while reducing compensation to certain employees, providing competitive advantages unavailable to other lenders. Former loanDepot employees provided declarations supporting the allegations. The lawsuit argues these practices eliminated competitors' ability to offer competitive pricing or offset discounts through staff compensation adjustments.

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