CFPB sues 1st Alliance alleging improper LO licensing

The Consumer Financial Protection Bureau on Friday sued 1st Alliance Lending and its principals over allegations of improper loan officer licensing similar to unresolved accusations Connecticut first levied against the company in 2018.

“Since at least 2015, in the course of its mortgage-lending business, 1st Alliance used unlicensed employees to engage in mortgage-origination activities and interactions with consumers that required them to be licensed under state law, in violation of TILA and Regulation Z, its implementing regulation,” the CFPB said in a press release.

The case is likely to be watched closely by the broader industry because its outcome may help to determine the roles licensed loan officers need to play in consumer-direct operations to be compliant.

Named as prosecuting the case is Don Gordon, senior litigation counsel for the CFPB, who is known for having worked with Connecticut and other jurisdictions on multistate regulatory actions like the PHH case in the past. To date, however, no other states have joined the 1st Alliance action.

In addition to the company, the CFPB suit filed in Connecticut’s U.S. District Court names as defendants three managing executives of the company: former CEO John DiIorio, Kevin St. Lawrence and Socrates Aramburu. The company closed in 2019.

“These allegations are not based in fact,” the company said in an emailed statement that also made note of wide-ranging litigation underway between the company and the state.

"The attack on the principals is especially egregious. There is no truth to the assertion that Soc, Kevin, and/or John, ever, acted in any way to harm consumers,” the statement added. "1st Alliance Lending served the underserved in cooperation with HUD. Our systems of origination were built to accommodate those programs. Atypical, yes. Illegal? Not according to the Multistate Mortgage Committee, or the dozen or so individual states that examined our practices across the country, finding them compliant.”

"This is a very sad day for sound, honest regulation,” the statement continued. "We will put forth a rigorous defense, will prevail; and then hold some bad actors accountable.”

In the suit, the CFPB seeks to order disgorgement, enjoin defendants from committing future violations, and award injunctive relief, consumer redress, damages or other monetary relief; civil-money penalties; and costs.