RPM Mortgage, Inc. and Erwin Robert Hirt
Documents in this case
- Complaint · · 14 p.
- Stipulation · · 11 p.
Case summary
CFPB filed a complaint in federal district court against RPM Mortgage, Inc. and its CEO, Erwin Robert Hirt, for illegally paying bonuses and higher commissions to loan originators to incentivize them to steer consumers into costlier mortgages.
Complaint ()
PDF of this document (14 pages)
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ANTHONY ALEXIS, DC Bar #384545 (Phone: 202-435-7999) (Email: [email protected]) JEFFREY PAUL EHRLICH, FL Bar #51561 (Phone: 202-435-7598) (Email: [email protected]) NATALIE R.WILLIAMS, NY Bar #2422590 (Phone: 212-328-7017) (Email: [email protected]) THOMAS G. WARD, IL Bar #6291011 (Phone: 312-610-8966)
(Email: [email protected]) LAWRENCE D. BROWN, TX Bar #24040586 (Phone: 202-435-7116) (Email: [email protected]) Consumer Financial Protection Bureau 1700 G Street NW Washington, DC 20552 Fax: (202) 435-7722
Attorneys for Plaintiff Consumer Financial Protection Bureau
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA
Consumer Financial Protection Bureau, Plaintiff, v.
RPM Mortgage, Inc. and Erwin Robert Hirt, individually, Defendants.
Case No. 4:15-cv-02475
COMPLAINT FOR PERMANENT INJUNCTION AND OTHER RELIEF
The Consumer Financial Protection Bureau files this Complaint against RPM Mortgage, Inc. and Erwin Robert Hirt (collectively, “Defendants”) and alleges as follows:
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Introduction 1.
In September 2010, the Federal Reserve Board announced a rule that prohibited the compensation of loan officers based on a term or condition of a mortgage loan, including the interest rate. This rule (the “Compensation Rule”) also outlawed “point-bank” schemes – tracking systems that permit loan officers to “bank” profits on one loan to supplement their compensation on future ones. 2.
In April 2011, RPM implemented a compensation plan that gave loan officers a financial incentive to steer customers into higher-rate loans by paying them, in part, based on the interest rates of the loans they closed. Loans with higher rates created more profits for RPM.
3.
But RPM disguised this interest-rate-based compensation by funneling it through so-called employee-expense accounts. RPM deposited profits from an officer’s closed loans – profits that were a direct product of the loans’ interest rates – into the loan officer’s employee-expense account, and then used it to pay her bonuses and increased commissions. RPM also allowed loan officers to use their employee-expense accounts to offset interest-rate reductions or credits for RESPA-tolerance cures or appraisal costs they sometimes granted to avoid losing loans to a competitor. 4.
Because this compensation came from funds that were based on the interest rates of the loans, RPM’s compensation plan violated both the Compensation Rule and § 1036 of the Consumer Financial Protection Act of 2010 (“CFPA”).
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Jurisdiction and Venue
5.
This Court has subject-matter jurisdiction over this action because it is brought under “Federal consumer financial law,” 12 U.S.C. § 5565(a)(1), presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345.
6.
Venue is proper in this district because a substantial part of the events or omissions giving rise to the claims occurred here, RPM’s principal place of business is located here, and Defendants reside here. 28 U.S.C. §1391(b); 12 U.S.C. § 5564(f). Parties 7.
The Bureau is an independent agency of the United States created by the CFPA. It has independent litigating authority, including the authority to enforce the Compensation Rule and the CFPA and to secure appropriate relief for violations of those provisions.12 U.S.C. §§ 5564(a)-(b), 5565.
8.
RPM Mortgage, Inc., a California corporation, maintains its principal place of business at 3240 Stone Valley Road West, Alamo, California. As a significant part of its business, RPM offers and provides mortgage loans to consumers primarily for personal, family, or household purposes. Those activities are “consumer financial services or products” under the CFPA. 12 U.S.C. § 5481(5)(A), (15)(A)(i). RPM is therefore a “covered person” under the CFPA. 12 U.S.C. § 5481(6). 9.
Erwin Robert Hirt is RPM’s CEO and one of its two shareholders and directors. Hirt is a licensed real-estate broker in California, and his Nationwide Mortgage Case4:15-cv-02475 Document1 Filed06/04/15 Page3 of 14
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Licensing System and Registry unique identifier is 4756. At all times material to this Complaint, Hirt has exercised managerial responsibility for RPM and has materially participated in the conduct of its affairs. Hirt is therefore a “related person.” 12 U.S.C. § 5481(25)(C)(i)-(ii). Because Mr. Hirt is a “related person,” he is deemed a “covered person” under the CFPA. 12 U.S.C. § 5481(25)(B).
Factual Background 10.
RPM is a residential-mortgage lender that offers and provides loan products, including conventional fixed loans, adjustable-rate loans, Federal Housing Act loans, and United States Department of Agriculture loans, to consumers seeking to purchase or refinance residential homes. Each of these loans is secured by the dwelling for which the mortgage loan was provided.
11.
RPM currently operates about 60 branches in 6 states. From 2011 through 2013, RPM operated in 18 states and originated tens of thousands of mortgage loans worth billions of dollars.
12.
RPM’s branches employ loan officers who work directly with borrowers. RPM pays its loan officers to assist borrowers with obtaining and arranging credit to be secured by a dwelling. Borrowers do not directly compensate RPM’s loan officers for the loan-origination services they provide.
13.
RPM’s loan officers take the initial loan applications, assess the borrowers’ creditworthiness, and determine the interest rates to offer borrowers for particular loan products.
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14.
RPM offers loan products at a variety of interest rates, and each interest rate is connected to a specific cash rebate or profit that RPM earns from selling the loan on the secondary market. RPM regularly sells the loans it originates on the secondary market.
15.
RPM informs its loan officers that higher-interest-rate loans will result in higher secondary-market prices, translating into higher profits for RPM. 16.
Before the Compensation Rule became effective, RPM paid its loan officers a “commission split,” that is, a pre-determined percentage of the rebate or profit generated on a closed loan.
17.
A loan officer received a higher commission on loans that generated higher profits to RPM. Loan officers shared in the profits generated on higher-interest-rate loans and thus had a financial incentive to steer consumers to those more expensive products. Employee Expense Account Plan 18.
The Compensation Rule made RPM’s then-existing commission structure illegal.
19.
RPM, however, still wanted to encourage its loan officers to originate highinterest (and high-profit) mortgages. Soon after the Compensation Rule went into effect, RPM implemented a new compensation plan based on “employee-expense accounts.” Like the one that preceded it, this compensation plan tied the loan officers’ compensation to the interest rates of the loans they originated. Case4:15-cv-02475 Document1 Filed06/04/15 Page5 of 14
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20.
RPM’s new compensation plan provided for (i) an upfront commission based either on a fixed percentage of the loan amount or a flat dollar amount per loan closed and (ii) compensation based on the loan’s profit, including periodic bonuses, pricing concessions, and, later, supplemental commissions. 21.
RPM maintained an employee-expense account for each of its loan officers. The company enabled loan officers to monitor their employee-expense-account balances. 22.
For each loan closed, RPM would make a deposit into the loan officer’s expense account if the revenue exceeded the sum of the branch fees (fees charged at the branch level for operating the business) and the upfront commission the loan officer earned on the loan.
23.
Loan officers thus could cause greater deposits to be made into their individual expense accounts by placing consumers into higher-interest-rate loans. Employee Expense Accounts Fund Loan Officer Bonuses
24.
A loan officer’s ability to draw on funds in her employee-expense account turned on her profitability – that is, whether she had a positive balance in her expense account.
25.
Each loan officer with a positive account balance was able to withdraw funds from her employee-expense account for, among other things, deferred compensation in the form of bonuses.
26.
After the Compensation Rule became effective, RPM began paying loan officers periodic bonuses from the existing balances in the employee-expense accounts. Case4:15-cv-02475 Document1 Filed06/04/15 Page6 of 14
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RPM initially paid the bonuses on a quarterly basis, but eventually moved to monthly payouts.
27.
RPM paid bonuses only to loan officers who had funds in their employeeexpense accounts. With few exceptions, a loan officer generally would not receive a bonus that exceeded the amount in her employee-expense account. 28.
Indeed, for loan officers who received bonuses, the amount was strongly correlated with the balances in their individual employee-expense accounts. 29.
In 2011 alone, RPM paid millions of dollars in periodic bonuses to its loan officers from their employee-expense accounts. Employee Expense Accounts Serve as Point Banks 30.
RPM also permitted loan officers to withdraw funds from the employeeexpense accounts to grant “price concessions” to consumers, including interest-rate discounts and credits for RESPA-tolerance cures and appraisal costs. 31.
By granting certain consumers interest-rate discounts or other credits, loan officers were able to close and earn commissions on deals they would have otherwise lost.
32.
In 2011, RPM permitted loan officers to tap funds in their employee-expense accounts to subsidize more than 1,000 interest-rate discounts, resulting in more than one million dollars in withdrawals from the employee-expense accounts. Case4:15-cv-02475 Document1 Filed06/04/15 Page7 of 14
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33.
From 2011 through 2013, RPM permitted loan officers to tap funds in their employee-expense accounts to subsidize more than one million dollars in credits to certain consumers for RESPA-tolerance cures or appraisal costs. Employee Expense Accounts Fund Commission Resets 34.
Although RPM continued to use employee-expense accounts to grant pricing concessions, RPM stopped paying loan officers bonuses from employee-expense accounts at the end of 2011.
35.
Starting then, RPM continued to deposit loan profits into individual employee-expense accounts, but allowed loan officers to use those funds to cover the cost of individual commission-rate resets (the Commission Resets). In this way, loan officers used the employee-expense accounts to give themselves raises on future loan transactions.
36.
Typically, a significant increase in a loan officer’s commission rate would render a loan unprofitable for RPM. If a loan officer’s commission exceeded the total revenue the loan generated on the secondary market, the transaction would result in an “underage,” or financial loss to RPM.
37.
The Commission Resets did not cause RPM to lose money because the underages were covered by withdrawals from the employee-expense accounts. 38.
By financing the Commission Resets with individual employee expenseaccount funds, RPM allowed loan officers to convert profits from earlier high-interest loans into commission income.
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39.
RPM encouraged loan officers to adjust commission settings to ensure that funds in their employee-expense accounts were paid out to them as commission income. 40.
From 2012 through 2013, RPM’s loan officers made thousands of Commission Resets that were financed with funds in their employee-expense accounts. 41.
During this same period, RPM permitted its loan officers to withdraw about 55% of the existing employee expense-account balances to pay for millions of dollars in supplemental commissions and pricing-concession subsidies. Hirt Designed, Implemented, Authorized, and Benefitted From the Unlawful Payments
42.
At all times material to this Complaint, Hirt has co-owned RPM. As a coowner, Hirt benefitted from the increased volume of high-profit loans that resulted from the employee-expense-account plan’s financial incentives to loan officers. 43.
At all times material to this Complaint, Hirt has served as RPM’s CEO and as a member of RPM’s two-person Board of Directors. RPM’s Branch Operations report directly to Hirt. RPM’s compliance, finance, and accounting divisions report directly to Hirt. These divisions were responsible for the tracking and payment of funds in the employee-expense accounts.
44.
In 2011, Hirt served on the RPM committee that determined the monthly loan-officer bonuses to be paid out of employee-expense accounts. 45.
Hirt was responsible for managing the design and implementation of RPM’s employee-expense-account plan, including all unlawful compensation paid out of it.
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Count I Defendants’ Violations of the Compensation Rule (Bonus Payments) 46.
The Bureau realleges and incorporates by reference paragraphs 1-45. 47.
The Compensation Rule provides that “[i]n connection with a consumer credit transaction secured by a dwelling, no loan originator shall receive and no person shall pay to a loan originator, directly or indirectly, compensation in the amount that is based on any of the transaction’s terms or conditions.” 12 C.F.R. § 1026.36(d)(1)(i) (2011) (revised 2014).
48.
RPM and Hirt are both “persons” under the Compensation Rule. 12 C.F.R. § 1026.36(d)(1)(i) (2011) (revised 2014).
49.
Each of RPM’s loan officers is a “loan originator” under the Compensation Rule. 12 C.F.R. § 1026.36(a)(1)(i) (2011) (revised 2014). 50.
From April 2011 through January 2012, Hirt managed the design and implementation of RPM’s expense-account plan that paid RPM’s loan officers periodic bonuses that were based on terms or conditions of consumer-credit transactions secured by a dwelling, in violation of 12 C.F.R. § 1026.36(d)(1)(i) (2011) (revised 2014). 51.
Defendants paid 511 periodic bonuses in amounts that varied based on the terms or conditions of consumer-credit transactions secured by a dwelling. 52.
Each periodic bonus payment made by Defendants to its loan officers constitutes a discrete violation of the Compensation Rule, 12 C.F.R. § 1026.36(d)(1)(i) (2011) (revised 2014).
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Count II Defendants’ Violations of the Compensation Rule (Pricing Concessions)
53.
The Bureau realleges and incorporates by reference paragraphs 1-45. 54.
From April 2011 through December 2013, Hirt managed the design and implementation of RPM’s expense-account plan that permitted RPM’s loan officers to withdraw expense-account funds that were derived from the interest rates those loan officers charged consumers.
55.
Those expense-account funds were used to finance pricing concessions that allowed loan officers to close and earn commissions on loans they would otherwise have lost. Therefore, the funds used for the pricing concessions were prohibited compensation in violation of 12 C.F.R. § 1026.36(d)(1)(i) (2011) (revised 2014). 56.
Defendants permitted loan officers to make thousands of withdrawals from their expense accounts to support thousands of pricing concessions during this period. 57.
Each loan transaction involving a pricing concession constitutes a discrete violation of the Compensation Rule, 12 C.F.R. § 1026.36(d)(1)(i) (2011) (revised 2014). Count III Defendants’ Violations of the Compensation Rule (Commission Resets) 58.
The Bureau realleges and incorporates by reference paragraphs 1-45. 59.
From January 2012 through December 2013, Hirt managed the design and implementation of RPM’s expense-account plan that allowed RPM’s loan officers to Case4:15-cv-02475 Document1 Filed06/04/15 Page11 of 14
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reset their commission rates on future loans and withdraw funds from their expense accounts to cover resulting underages.
60.
Because the expense-account funds were derived from the interest rates loan officers charged on mortgage loans, the commission increase they financed constituted compensation based on loan terms and conditions. 61.
In thousands of loan transactions, Defendants paid their loan officers increased commission income, a form of deferred income, in amounts that varied based on the terms or conditions of consumer-credit transactions secured by a dwelling. 62.
Each loan transaction involving such supplemental commission payments via a Commission Reset constitutes a discrete violation of the Compensation Rule, 12 C.F.R. § 1026.36(d)(1)(i) (2011) (revised 2014). Count IV Defendants’ Violations of the CFPA 63.
The Bureau realleges and incorporates by reference paragraphs 1-45. 64.
RPM’s violations of the Compensation Rule, described in Counts I-III, constitute violations of § 1036 of the CFPA. 12 U.S.C. § 5536(a)(1)(A); 15 U.S.C. § 1607(b).
65.
Because he is a “related person,” Hirt is deemed a “covered person” for purposes of the CFPA. 12 U.S.C. § 5481(25).
66.
Hirt’s violations of the Compensation Rule, described in Counts I-III, constitute violations of § 1036 of the CFPA. 12 U.S.C. §§ 5536(a)(1)(A); 15 U.S.C. § 1607(b).
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Demand for Relief The Bureau requests that the Court: a. permanently enjoin Defendants from committing future violations of the Compensation Rule, 12 C.F.R. § 1026.36, the CFPA, 12 U.S.C. § 5536, and any other provision of “Federal consumer financial law,” as defined by 12 U.S.C. § 5481(14);
b. grant additional injunctive relief as the Court may deem just and proper; c. order Defendants to pay redress to consumers harmed by their unlawful conduct;
d. order Defendants to disgorge all ill-gotten gains; e. impose on Defendants a civil money penalty; f. award costs against Defendants; and g. award additional relief as the Court may determine to be just and proper. Dated: June 4, 2015
Respectfully Submitted,
Anthony Alexis (DC Bar #384545) Enforcement Director
Jeffrey Paul Ehrlich (FL Bar #51561)
Deputy Enforcement Director
Natalie R. Williams (NY Bar #2422590) Assistant Litigation Deputy
/s/ Thomas G. Ward
Thomas G. Ward (IL Bar #6291011)
Lawrence D. Brown (TX Bar #24040586) Case4:15-cv-02475 Document1 Filed06/04/15 Page13 of 14
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Enforcement Attorneys
Consumer Financial Protection Bureau 1700 G Street NW Washington, DC 20552 Telephone (Ward): 312-610-8966 Telephone (Brown): 202-435-7116 Fax: 202-435-7722 e-mail: [email protected] e-mail: [email protected]
Attorneys for Consumer Financial Protection Bureau Case4:15-cv-02475 Document1 Filed06/04/15 Page14 of 14
Stipulation ()
PDF of this document (11 pages)
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I UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA Consumer Financial Protection Bureau, Case No. 4:15-cv-02475 Plaintiff, v.
STIPULATED FINAL JUDGMENT AND ORDER RPM Mortgage, Inc. and Erwin Robert Hirt, individually, Defendants.
The Consumer Financial Protection Bureau ("Bureau") commenced this civil action on June 4, 2015, to obtain injunctive and monetary relief from RPM Mortgage, Inc. ("RPM") and Erwin Robert Hirt (collectively, "Defendants"). The Complaint alleges violations of the Loan Originator Compensation Rule, 12 C.P.R. § 226.36(d)(l)(i)(2011) (recodified as 12 C.P.R.§ 1026.36(d)(l)(i) (2011)), and§ 1036(a) ofthe Consumer Financial Protection Act of2010 (CFPA), 12 U.S.C. § 5536(a)(l)(A). The parties, by and through respective counsel, agree to the entry of this Stipulated Final Judgment and Order ("Order").
THEREFORE, it is ORDERED:
FINDINGS AND CONCLUSIONS 1.
This Court has jurisdiction over the parties and the subject matter of this action.
2.
The Bureau and Defendants agree to entry of this Order, without adjudication of any issue of fact or law, to settle and resolve all matters in dispute arising from the conduct alleged in the Complaint to the date this Order is entered. Case3:15-cv-02475-MEJ Document6 Filed06/09/15 Page1 of 11
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3.
Defendants neither admit nor deny any allegations in the Complaint, except as specifically stated in this Order. For the purposes of this Order, Defendants admit the facts necessary to establish the Court's jurisdiction over them and the subject matter of this action.
4.
Defendants waive service under Rule 4(d) of the Federal Rules of Civil Procedure, and waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order. Defendants also waive any claim they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each Party will bear its own costs and expenses, including without limitation attorneys' fees.
5.
Entry of this Order is in the public interest. DEFINITIONS The following definitions apply to this Order: 6.
"Affected Consumer" means any person (i) who obtained a closed-end mortgage loan for personal, family, or household use through a Loan Originator, (ii) whose Loan Originator received a positive expense-account contribution from RPM associated with such mortgage loan between April 6, 2011 and the Effective Date, and (iii) whose Loan Originator received an Expense Account Payment from RPM between April 6, 2011 and the Effective Date.
7.
"Effective Date" means the date on which this Order is entered on the docket.
8.
"Enforcement Director" means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, or his delegee. 9.
"Loan Originator" means an employee of RPM who meets the definition of "loan originator" in the Truth in Lending Act, 15 U.S.C. § 1601 et seq., and its implementing regulations.
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l 10.
"Expense Account Payment" means a debit from a Loan Originator's 2 expense account that was associated with a bonus or supplemental commission payment 3 to that originator from RPM or a price concession relating to mortgage loans closed by 4 that originator, as described in the Complaint. 11.
"Related Consumer Action" shall mean a private action by or on behalf of 6 one or more consumers or an enforcement action by another governmental entity brought 7 against any of the Defendants, or against any Loan Originator, by or on behalf of a 8 consumer based on substantially the same facts alleged in the Complaint. 12.
"RPM" means RPM Mortgage, Inc. and any successors or assigns. ORDER A.
Injunctive Relief 13.
IT IS ORDERED that Defendants and RPM's officers, agents, servants, employees, and all other persons in active concert or participation with them who have actual notice of this Order, whether acting directly or indirectly, are permanently enjoined from paying compensation to a Loan Originator in violation of the Truth in Lending Act, 15 u.s.c. § 1601 et seq., and its implementing regulations and§ 1036(a) ofthe Consumer Financial Protection Act of2010 (CFPA), 12 U.S.C. § 5536(a)(l)(A). B.
Monetary Relief 14.
IT IS FURTHER ORDERED that a judgment for equitable monetary relief is hereby entered in favor of the Bureau and against Defendants, jointly and severally, in the amount of $18,000,000.
15.
Within 7 days of the Effective Date, Defendants must pay to the Bureau, by wire transfer to the Bureau or to the Bureau's agent, and according to the Bureau's wiring instructions, $2,000,000 in partial satisfaction of the judgment as ordered in Paragraph 14 ofthis Order.
16.
Defendants must also pay to the Bureau, by wire transfer to the Bureau or to the Bureau's agent, and according to the Bureau's wiring instructions, $16,000,000 in full 28 1~--------------------------------------------------------- Case3:15-cv-02475-MEJ Document6 Filed06/09/15 Page3 of 11
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satisfaction of the judgment as ordered in Paragraph 14 of this Order no later than September 30, 2015.
17.
Any funds received by the Bureau in satisfaction of this judgment will be deposited into a fund or funds administered by the Bureau or its agent, according to 5 applicable statutes and regulations, to be used for redress for Affected Consumers, including but not limited to refund of moneys, restitution, damages, or other monetary 7 relief, and for any attendant expenses for the administration of any such redress. 18.
If the Bureau, in its sole discretion, determines that redress to Affected 9 Consumers is wholly or partially impracticable or if funds remain after redress is completed, the Bureau may apply any remaining funds for other equitable relief (including consumer-information remedies) reasonably related to the violations alleged in the Complaint. Any funds not used for such equitable relief will be deposited in the United States Treasury as disgorgement. Defendants will have no right to challenge any actions that the Bureau or its representatives may take under this paragraph. 19.
Payment of redress to any Affected Consumer under this Order may not be conditioned on that Affected Consumer waiving any right. C.
Civil Money Penalties 20.
Based on the factors in§ 1055(c)(3) ofthe CFPA, 12 U.S.C. § 5565(c)(3), a 19 judgment for a civil money penalty is hereby entered in favor of the Bureau and against RPM in the amount of$1,000,000.
21.
Based on the factors in§ 1055(c)(3) ofthe CFPA, 12 U.S.C. § 5565(c)(3), a judgment for a civil money penalty is hereby entered in favor of the Bureau and against Erwin Robert Hirt in the amount of $1,000,000.
22.
Within 7 days of the Effective Date, Defendants shall pay their respective penalties in the form of a wire transfer to the Bureau or to such agent as the Bureau may direct, and in accordance with wiring instructions to be provided by counsel for the Bureau.
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23.
The civil money penalties paid under this Order shall be deposited in the Civil Penalty Fund ofthe Bureau in accordance with§ 1017(d) ofthe CFPA, 12 U.S.C. § 5497(d).
24.
Defendants shall treat the civil money penalties as a penalties paid to the government for all purposes. Regardless of how the Bureau ultimately uses those funds, Defendants shall not:
D.
a.
claim, assert, or apply for a tax deduction or tax credit with regard to any federal, state, or local tax for any civil money penalty that Defendants pay under this Order; or b.
seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made pursuant to any insurance policy, with regard to any civil money penalty that Defendants pay under this Order.
Other Monetary Provisions 25.
In the event of any default on Defendants' obligations to make payment under this Order (including any redress payment), interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of default to the date of payment, and will immediately become due and payable. 26.
Defendants must relinquish all dominion, control, and title to the funds paid to the fullest extent permitted by law and no part of the funds may be returned to Defendants.
27.
Under 31 U.S.C. § 7701, Defendants, unless they have already has done so, must furnish to the Bureau their social-security numbers or taxpayer-identification numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order.
28.
Within 30 days of the entry of a final judgment, consent order, or settlement in a Related Consumer Action of which Defendants have actual knowledge, Defendants 28 1~------------------------------------------------------- Case3:15-cv-02475-MEJ Document6 Filed06/09/15 Page5 of 11
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shall notify the Bureau as described below in Section H (Notices) of the final judgment, consent order, or settlement in writing. That notification shall indicate the amount, if any, that Defendants or Loan Originators paid or are required to pay to consumers and describe the consumers or classes of consumers who will be paid, if any. 29.
Hirt agrees that under§ 604(a)(1) ofthe Fair Credit Reporting Act, 15 U.S.C. § 1681b(a)(l), the Bureau may obtain from any consumer-reporting agency a consumer report concerning him. The Bureau may use any such report to collect on and report any amount not paid as required by this Order. E.
Reporting Requirements 30.
IT IS FURTHER ORDERED that for 5 years from the Effective Date, RPM must notify the Bureau of any of the following: a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor company; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order; the filing of any bankruptcy or insolvency proceeding by or against RPM; or a change in RPM's name or address. RPM must provide this notice at least 30 days before the development or as soon as practicable after learning about the development, whichever is sooner.
31.
Within 7 days of the Effective Date, RPM shall designate at least one telephone number and an email, physical, and postal address as points of contact, which Bureau representatives may use to communicate with it. 32.
For 3 years from the Effective Date, RPM shall report any change in the information required to be submitted under Paragraph 31 at least 30 days before such change; provided, however, that with respect to any proposed change about which RPM learns less than 30 days before the date such action is to take place, it shall notify the Bureau as soon as is practicable after obtaining such knowledge. 33.
For 3 years from the Effective Date, Hirt shall notify the Bureau of: (a) any change in name, including aliases or fictitious names; (b) any change in residence, postal 6 .
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address, email address, or telephone number; (c) any change in title or role in any business activity, including any business for which he perform services, whether as an employee, officer, or otherwise, and any entity in which he has any ownership interest, identifying for each its name, physical address, and Internet address; or (d) the filing of any bankruptcy petition or proceeding by or against him. 34.
Within 7 days of the Effective Date, Hirt shall: a.
identify a contact telephone number, email address, and home address;
b.
identify all titles and roles for all business activities, including any business for which he performs services whether as an employee or otherwise and any entity in which he has any ownership interest; and c.
describe in detail his involvement in each such business, including title, role, responsibilities, participation, authority, control, and any ownership.
35.
For 3 years from the Effective Date, Hirt shall report any change in the information required to be submitted under Paragraph 34 at least 30 days before such change; provided, however, that with respect to any proposed change about which he learns less than 30 days before the date such action is to take place, he shall notify the Bureau as soon as is practicable after obtaining such knowledge. F.
Order Distribution and Acknowledgement 36.
IT IS FURTHER ORDERED that within 7 days of the Effective Date, Defendants must submit to the Enforcement Director an acknowledgment of receipt of this Order, sworn under penalty of perjury.
37.
Within 30 days of the Effective Date, RPM must deliver a copy of this Order to each of its board members and executive officers, as well as to any managers, employees, service providers, any business entity that has common or overlapping 28 1+-------------------------------------------------------- Case3:15-cv-02475-MEJ Document6 Filed06/09/15 Page7 of 11
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I I I ownership with RPM, and other agents and representatives who have responsibilities related to the subject matter of this Order.
38.
For 5 years from the Effective Date, RPM must deliver a copy of this Order to any business entity resulting from any change in structure referred to in Section E, any future board members and executive officers, as well as to any managers, employees, service providers, and other agents and representatives who will have responsibilities related to the subject matter of this Order before they assume their responsibilities. 39.
RPM must secure a signed and dated statement acknowledging receipt of a copy of this Order, ensuring that any electronic signatures comply with the requirements of theE-Sign Act, 15 U .S.C. § 7001 et seq., within 30 days of delivery from each of its board members, executive officers, and managers who received a copy of this Order under Paragraph 3 7, and from all persons receiving a copy of this Order under Paragraph 38. Additionally, within 40 days of the Effective Date, RPM must certify to the Bureau that it has complied with the requirements of Paragraph 37. G.
Recordkeeping 40.
IT IS FURTHER ORDERED that Defendants must create and retain for at least 5 years from the Effective Date all documents and records necessary to demonstrate full compliance with each provision of this Order, including documents detailing the amounts, dates, and components of all compensation paid to Loan Originators and how such compensation was calculated, and all other submissions to the Bureau.
41.
Defendants must make the documents identified in Paragraph 40 available to the Bureau upon the Bureau's request.
H.
Notices 42.
IT IS FURTHER ORDERED that unless otherwise directed in writing by the Bureau, Defendants must provide all submissions, requests, communications, or 28 1~------------------------------------------------------ Case3:15-cv-02475-MEJ Document6 Filed06/09/15 Page8 of 11
Page 24
I i i other documents relating to this Order in writing, with the subject line, "In re RPM Mortgage, Inc. and Erwin Robert Hirt, File No. 2013-0962-02" and send them either: a.
By overnight courier (not the U.S. Postal Service), as follows: Assistant Director for Enforcement Consumer Financial Protection Bureau ATTENTION: Office ofEnforcement 1625 Eye Street, N.W.
Washington D.C. 20006; or b.
By first class mail to the below address and contemporaneously by email to Enforcement [email protected]:
Assistant Director for Enforcement Consumer Financial Protection Bureau ATTENTION: Office ofEnforcement 1700 G Street, N.W.
Washington D.C. 20552 I.
Cooperation with the Bureau 43.
IT IS FURTHER ORDERED that Defendants must cooperate fully to help the Bureau determine the identity, location, and any and all other available information which the Bureau deems relevant concerning each Affected Consumer. Defendants must provide such information in their or their agents' possession or control within 30 days of receiving a written request from the Bureau. 44.
Defendants must cooperate fully with the Bureau in this matter and in any investigation related to or associated with the conduct described in the Complaint. Defendants must provide truthful and complete information, records, evidence, and testimony. Defendants must cause its officers, employees, representatives, or agents to appear for interviews, discovery, hearings, trials, and any other proceedings that the Bureau may reasonably request upon 5 days written notice, or other reasonable notice, at such places and times as the Bureau may reasonably designate, without the service of compulsory process.
Case3:15-cv-02475-MEJ Document6 Filed06/09/15 Page9 of 11
Page 25
J.
Compliance Monitoring 45.
IT IS FURTHER ORDERED that, for purposes of monitoring Defendants' compliance with this Order, Defendants must submit, within 30 days of receipt of a written request from the Bureau, additional compliance reports or other requested information, which must be made under penalty of perjury; provide sworn testimony; or produce documents.
46.
For purposes of this Section, the Bureau may communicate directly with Defendants, unless Defendants retains counsel related to these communications. 47.
Defendants must permit Bureau representatives to interview any employee 1 0 or other person affiliated with Defendants who has agreed to such an interview. The person interviewed may have counsel present.
48.
Nothing in this Order limits the Bureau's lawful use of compulsory process under 12 U.S.C. § 5526 and 12 C.F.R. § 1080.6.
49.
Defendants agrees to be subject to the Bureau's supervisory authority under 12 U.S.C. § 5514. Consistent with 12 C.F.R. § 1091.111, Defendants may not petition for termination of supervision under 12 C.F.R. § 1091.113. 1 7 K.
Release 50.
The Bureau releases and discharges Defendants from all potential liability for law violations that the Bureau has or might have asserted based on the practices alleged in the Complaint, to the extent such practices occurred before the Effective Date and the Bureau knows about them as of the Effective Date. The Bureau may use the practices alleged in the Complaint in future enforcement actions against Defendants and its affiliates, including, without limitation, to establish a pattern or practice of violations or the continuation of a pattern or practice of violations or to calculate the amount of any penalty. This release does not preclude or affect any right of the Bureau to determine and ensure compliance with the Order, or to seek penalties for any violations of the Order. L.
Retention of Jurisdiction 10 .
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j ~ ~ 40.
The Court will retain jurisdiction of this matter for purposes of construction, modification, and enforcement of this Order. IT IS SO ORDERED.
DATED:
United States District Judge JUNE 8, 2015 U N I T E D S T A T E S D I S T R I C T C O U R T N O R T H E R N D I S T R I C T O F C A L I F O R N I A Judge Maria-Elena James Case3:15-cv-02475-MEJ Document6 Filed06/09/15 Page11 of 11