FTC Refunds Hispanic Consumers Overcharged for Mortgage Loans

Hispanic family in CaliforniaMore than 3,000 Hispanic consumers who were fleeced by a California mortgage company because of their ethnicity have been mailed refund checks by the Federal Trade Commission.

On April 22, 2011, the FTC mailed 3,162 refund checks to mortgage loan borrowers taken advantage of by Golden Empire Mortgage Inc. of Bakersfield, Calif., and its president and CEO, Howard D. Kootstra.

The FTC sued Golden Empire and Koostra in May 2009 for violating the Equal Credit Opportunity Act by pricing mortgage loans based on ethnicity rather than on applicants' credit characteristics or underwriting risk.The defendants were accused of giving loan officers and branch managers wide latitude to charge some borrowers "overages" through higher interest rates and higher up-front charges. Golden Empire and Koostra then paid loan officers a percentage of the overages as a commission -- giving them an incentive to rip off Hispanic customers. They also failed to monitor whether Hispanics were paying higher overages than non-Hispanic white borrowers.

As Consumer Ally reported, Koostra and Golden Empire agreed to settle FTC charges last September. The settlement order bans the defendants from discriminating on the basis of national origin in credit transactions.

In addition, the settlement also requires Golden Empire to implement:
  • A policy that restricts loan originators' pricing discretion.
  • A fair lending monitoring program.
  • A program to ensure the accuracy and completeness of their data.
  • Employee training programs.
"We will continue to be vigilant in enforcing fair lending laws and we're not going to tolerate discriminatory practices by mortgage lenders," FTC Chairman Jon Leibowitz said in a statement when the defendants settled. "Lenders who allow discretion in pricing loans can't escape liability simply by burying their heads in the sand. Those lenders must monitor discretionary pricing to ensure that American borrowers are treated equally based on their credit – not their race, national origin, or gender."

The settlement also imposed a $5.5 million penalty against Koostra and Golden Empire, which was suspended when the defendants handed over $1.5 million to the FTC to refund their victims.

Consumers who receive checks should cash them on or before June 21, 2011. The FTC never requires consumers to pay a fee or provide information to cash redress checks. Golden Empire customers with questions should call the redress administrator, Gilardi & Co. LLC, at 888-292-6875 or visit the FTC's refund website.

The Equal Credit Opportunity Act and its implementing Regulation B bar creditors from discriminating against applicants for credit on the basis of race, color, religion, national origin, sex, marital status, age, or the fact that an applicant's income is derived from public assistance. More information about consumers' rights under the Act is available here.

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