The Consumer Financial Protection Bureau and the Maryland Attorney General took action against two of the top mega banks, Wells Fargo (WFC) and JPMorgan Chase (JPM), for an illegal marketing services kickback scheme they participated in with Genuine Title, a now-defunct title company.

The CFPB and Maryland also took action against former Wells Fargo employee Todd Cohen and his wife, Elaine Oliphant Cohen, for their involvement.

According to the bureau, Genuine Title gave the banks’ loan officers cash, marketing materials and consumer information in exchange for business referrals.

As a result, Wells Fargo would be required to pay $24 million in civil penalties, JPMorgan would be required to pay $600,000 in civil penalties, along with $11.1 million in redress to consumers whose loans were involved in this scheme.

Additionally, Cohen and Oliphant Cohen will have to pay a $30,000 penalty.

“These banks allowed their loan officers to focus on their own illegal financial gain rather than on treating consumers fairly. Our action today to address these practices should serve as a warning for all those in the mortgage market,” said CFPB Director Richard Cordray.

“Homeowners were steered toward this title company, not because they were the best or most affordable, but because they were providing kickbacks to loan officers who referred consumers to them,” said Maryland Attorney General Brian Frosh. “This type of quid pro quo arrangement is illegal, and it’s unfair to other businesses that play by the rules.

Genuine Title was a Maryland-based title company that offered real-estate-closing services from 2005 until it went out of business in April 2014.

As part of the scheme, the title company offered loan officers valuable services to increase the amount of loan business that was generated.

In return, the banks’ loan officers would increase Genuine Title’s profits by referring homebuyers to the company for closing services.

This scheme violated the Real Estate Settlement Procedures Act, which prohibits giving a “fee, kickback, or thing of value” in exchange for a referral of business related to a real-estate-settlement service.

There was another financial institution that also participated in the scheme with Genuine Title, but based on the institution’s behavior, the CFPB has resolved that investigation without an enforcement action, consistent with the CFPB’s Bulletin on Responsible Business Conduct. The CFPB did not name the bank.

The unnamed bank self-identified the problematic practices and terminated the loan officers involved, unlike Wells Fargo and JPMorgan Chase.

Wells Fargo:

The investigation identified more than 100 Wells Fargo loan officers in at least 18 branches, largely in Maryland and Virginia, who participated in this scheme. The bureau alleges that these loan officers referred thousands of loans to Genuine Title over the course of the scheme.

Under the proposed consent order filed today, Wells Fargo would be required to pay $10.8 million in redress and $24 million in civil penalties. The bureau also filed an administrative consent order against Wells Fargo prohibiting future violations.

Wells Fargo employed Todd Cohen as a loan officer from April 2009 through August 2010. The bureau alleges that, while at Wells Fargo, Cohen not only received marketing materials, he also took substantial cash payments in exchange for referrals.

Under the proposal, Cohen and Oliphant Cohen would be required to pay a civil penalty of $30,000, and Cohen would be banned from participation in the mortgage industry for two years.

“Wells Fargo holds its team members to the highest ethical standards and does not tolerate improper activities or failure to comply with rules, regulations or company policies. We have fully cooperated with the CFPB in this matter and have taken strong corrective action, including terminating team members who were involved and enhancing our procedures to provide greater oversight and monitoring of both the process and our team members,” said Vickee Adams, vice president of WFHM External Communications.

JPMorgan:

The Bureau alleges that at least six Chase loan officers in three different branches in Maryland, Virginia, and New York were involved. These officers referred settlement business to Genuine Title on almost 200 loans.

Under the proposed consent order filed today, Chase would pay approximately $300,000 in redress and $600,000 in civil penalties. Additionally, the CFPB also filed an administrative consent order against Chase prohibiting future violations.

“We are fully committed to ensuring that our mortgage bankers comply with all legal and regulatory requirements. These former employees clearly violated our policies, procedures and training,” said Jason Lobo, vice president and head of external communications with Chase Mortgage Banking. 

[CORRECTION: An earlier version of this story reflected the CFPB's comment that Wells Fargo would be required to pay $11.1 million in redress. This version reflects their correction]