West Capital Lending Opposes loanDepot Bid to Dismiss TILA Suit

West Capital Lending (WCL) is opposing loanDepot’s attempt to dismiss a lawsuit alleging violations of the Truth in Lending Act (TILA). In a brief filed on June 18 in the U.S. District Court for the Central District of California, WCL contended that its complaint adequately states that loanDepot violated TILA’s loan originator compensation rule. The core accusation is that loanDepot tied production managers’ compensation to the pricing terms offered to borrowers, thereby gaining an unfair competitive advantage.

WCL initially filed the lawsuit in March, asserting that loanDepot’s consumer direct division contravened TILA’s loan originator compensation rule by linking production managers’ pay to loan profitability and pricing concessions. WCL maintains that this rule applies to production managers because they negotiated loan terms with borrowers, even while holding supervisory positions. The complaint further alleges that loanDepot leveraged this compensation structure to achieve pricing flexibility that compliant lenders did not possess. This allegedly enabled loanDepot to selectively undercut competitors, including WCL, while simultaneously reducing managers’ compensation, leading to WCL’s loss of customers, market share, and revenue.

To substantiate its claims, WCL presented declarations from former loanDepot production managers and executives. These declarations reportedly stated that managers frequently negotiated rates and fees with borrowers and that their pay was reduced when they approved pricing concessions. The filing also referenced an internal compensation formula that purportedly decreased production managers’ bonuses based on the number of pricing exceptions granted to borrowers. WCL argues that this policy directly linked compensation to loan terms, in violation of Regulation Z. Additionally, WCL alleges that former employees were instructed to match or beat offers from WCL irrespective of profitability, with loanDepot allegedly willing to incur losses on individual loans to prevent competitors from securing business.