loanDepot Seeks Dismissal of West Capital Lending Lawsuit

loanDepot has requested a federal judge to dismiss a lawsuit filed by mortgage brokerage West Capital Lending (WCL), asserting that WCL lacks the legal standing to sue and is attempting to resolve a business competition issue through consumer protection laws. In a reply brief submitted on Thursday to the U.S. District Court for the Central District of California, loanDepot contended that WCL has no valid basis for its lawsuit. The company argued that the Truth in Lending Act (TILA)'s loan officer compensation rule is intended to protect borrowers, not rival lenders, and does not grant competitors a private right to sue. loanDepot is seeking the dismissal of the complaint with prejudice. A loanDepot representative declined to comment beyond the official court filing.

WCL initiated the lawsuit earlier this year, alleging that loanDepot illegally compensated its production managers. WCL claimed this practice enabled loanDepot to selectively reduce mortgage prices and gain business from competitors, thereby violating TILA and California’s Unfair Competition Law. loanDepot countered that WCL has failed to demonstrate any actual loss of customers or measurable financial harm, stating that WCL "cannot establish economic injury." The filing indicates that WCL has withdrawn its request for monetary damages and is now only seeking declaratory and injunctive relief. However, WCL has not identified a single borrower allegedly lost due to loanDepot's alleged practices.

Thursday's filing stated, "WCL does not identify a specific transaction, expenditure, or lost opportunity; it merely alleges that it suffered harm because loanDepot offered unspecified customers unspecified low prices." loanDepot further argued that if WCL had evidence of a lost customer, it would have presented it. The company also challenged the core of WCL's claims, maintaining that the LO compensation rule pertains to how lenders pay their employees, not the mortgage rates offered to consumers. loanDepot asserts that the rule does not dictate pricing strategies.