Wells Fargo Exec Singled Out by CFPB Says He Accepted Settlement Because He Couldn't Afford to Fight the Agency

Late last week the Consumer Financial Protection Bureau (CFPB) announced it had taken action against a former Wells Fargo employee for an illegal mortgage fee-shifting scheme. The CFPB found that David Eghbali referred a substantial number of loan closings to a single escrow company, which shifted its fees from some customers to others at Eghbali’s request. Eghbali could then manipulate loan costs and ultimately increase the number of loans he closed, increasing his commissions. The CFPB filed an administrative consent order requiring Eghbali to pay an $85,000 penalty and banning him from working in the mortgage industry for one year.

According to the LA Times, Wells Fargo spokesman Tom Goyda said the bank fired Eghbali last summer after “a thorough review that confirmed the improper activities.” He also said the bank has stopped working with New Millennium, the escrow company involved in the scheme.

Eghbali said in a statement provided by his attorney that he resigned from Wells Fargo and that ”no customer was harmed by any action taken by me or by the relationships and negotiations I cultivated.” He added that he was bullied into the settlement, though he will abide by its terms.

“I am supporting my wife, two young children and my immigrant parents,” Eghbali said. “The extraordinary cost of fighting these allegations in prolonged litigation against such a powerful federal agency was not possible.”

Since leaving Wells Fargo in July 2015, Eghbali had been working for Bank of America Home Loans. According to his LinkedIn profile, as of this month, he has now left that position.

The CFPB has taken action against individuals in the past, including:

In May 2013 the CFPB took action against another individual, Texas homebuilder Paul Taylor. He was ordered to surrender more than $100,000 he received in kickbacks for referring mortgage origination business to Benchmark Bank and to Willow Bend Mortgage Company. The Bureau is also prohibiting Taylor from engaging in future real estate settlement services, including mortgage origination.

In December 2015 the CFPB took action against Grigor and Marina Demirchyan, owners of lead aggregator T3Leads, and Eric V. Sancho, who operated a company called Lead Publisher. The Bureau claimed that both sold leads to fraudulent debt collectors without regard for how they would use the data, and/or brokered deals without properly vetting buyers and sellers of the data. According to the CFPB announcement about these matters:

• The complaint against T3Leads and the Demirchyans seeks monetary relief, injunctive relief, and penalties. The Bureau’s complaint is not a finding or ruling that the company has actually violated the law.
• Lead Publisher is now out of business. Under the order issued today, owner Eric Sancho is banned permanently from the financial products and online consumer leads industries, and has to disgorge $21,151 he obtained illegally.

insideARM Perspective

What’s somewhat different in the Wells Fargo case is that Eghbali was not an owner of the company. Smart ARM firm executives have already taken note. What the CFPB may determine a UDAAP (Unfair, Deceptive, and Abusive Practice) violation can be pretty broad, and can encompass formerly common — and not illegal — practice.