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Financial Services Law Insights and Observations

CFPB, Maryland reduce disgorgement amount in mortgage kickback case

Courts Mortgages State Issues State Attorney General CFPB RESPA Disgorgement

Courts

On February 25, the U.S. District Court for the District of Maryland granted a motion for entry of monetary remedy filed by the CFPB and the Consumer Protection Division of the Maryland Attorney General’s Office (collectively, “Regulators”) in an action concerning the disgorgement calculation for a banker found in contempt of a 2015 consent order. As previously covered by InfoBytes, in 2020, the U.S. Court of Appeals for the Fourth Circuit found that while the district court properly determined that the banker violated the terms of the consent order (which previously settled RESPA and state law mortgage-kickback allegations), the court relied on an overbroad interpretation of the consent order and lacked the causal connection between the banker’s profits and a violation when it ordered the banker to pay over $526,000 in disgorged income. The 4th Circuit vacated the disgorgement order and remanded the case to the court to reassess the disgorgement calculation based on the banker’s more limited conduct that did not comply with the order.

On remand, the court reduced the sanctions amount to approximately $270,000, which represents the banker’s earned income (after taxes) “during the period in which he defied the three express provisions of the Consent Order.” Noting that the 4th Circuit rejected the banker’s argument that the Regulators were required to prove a specific monetary harm arising from his violations, the court wrote that in instances “[w]here harm is difficult to calculate, ‘a court is wholly justified in requiring the party in contempt to disgorge any profits it may have received that resulted in whole or in part from the contemptuous conduct,’” particularly where the party engaged in a “pattern or practice” of such conduct.

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