A Utah-based mortgage company is being accused of paying its employees for steering customers into higher priced mortgages. The Consumer Financial Protection Bureau (CFPB) has filed a complaint in the U.S. District Court against Castle & Cook Mortgage, LLC and its president Matthew A. Pineda and senior vice-president of capital markets Buck L. Hawkins for violations of the Federal Reserve Board's Loan Originator Compensation Rule which went into effect on April 6, 2011.

CFPB alleges that the company paid quarterly bonuses ranging from $6,100 to $8,700 to more than 150 of its loan officers who had persuaded consumers to take on loans with higher interest rates. By contrast those loan officers whose customers did not take such loans did not receive bonuses. CFPB said some 1,100 illegal bonuses may have been paid and tens of thousands of customers charged higher rates since the Fed rule went into effect. By tying bonuses to the interest rate of the loans in this manner, the CFPB alleges that Castle & Cooke was in direct violation of the law.

"Today we are taking action against the type of practices that precipitated the financial crisis," said CFPB Director Richard Cordray. "Consumers should be able to get a mortgage without worrying about how the financial incentives of their loan officers may cause them to pay higher rates than they actually qualify for."

 Castle & Cooke, founded in 1851, is a privately held company operating in a number of fields including aviation, hotels, resorts, mining, logistics, and real estate development. The mortgage subsidiary was founded in 2005 and does business in 22 states and maintains an estimated 45 branch offices. It originated approximately $1.3 billion in loans in 2012.

CFPB also charges the company violated laws that require companies to retain their compliance records for a certain period of time. The complaint alleges that Castle & Cooke did not record what portion of each loan officer's quarterly bonus was attributable to a particular loan and did not reference its quarterly bonus program in each loan originator's compensation agreement, in violation of federal consumer financial law.

CFPB is seeking restitution for consumers of Castle & Cooke who may have been sold the more expensive loans and is asking the court to end the unlawful compensation practice of tying bonuses based on the interest rates of loans sold and to ensure that the company retains appropriate compensation records. The Bureau is also looking for civil money penalties. The Dodd-Frank Act's three tiered framework of civil penalties allows fines of up to $5,000 for each violation (in this case a bonus); up to $25,000 for each reckless violation, and up to $1 million for each knowing violation.

This case was referred to the CFPB by investigators with the Utah Department of Commerce, Division of Real Estate.