On April 19, the Superior Court of Connecticut issued an opinion affirming the Connecticut Department of Banking’s (DOB) decision to issue a $750,000 fine against a mortgage lender for allowing its unlicensed employees to engage in activities that required a license.

In 1st Alliance Lending, LLC (1st Alliance) v Department of Banking, 1st Alliance appealed the DOB’s decision arguing the department overstepped its authority. The now-defunct company was licensed by the DOB as a mortgage lender. In 2018, the DOB conducted a compliance audit of 1st Alliance.

The audit found:

• Submission coordinators, who were not licensed as mortgage loan originators, were at times engaging in what may constitute licensed activity under the Connecticut Secure And Fair Enforcement (SAFE) Act.
• 1st Alliance failed to provide adverse action notices as required under the Fair Credit Reporting Act (FCRA).
• 1st Alliance required consumers to verify information related to their application prior to providing the required disclosures under Connecticut’s Truth in Lending Act.
• 1st Alliance refused to comply with the DOB’s lawful investigatory subpoena.

1st Alliance appealed the decision to state trial court. Judicial review under state law is limited to whether there is substantial evidence in the administrative record to support the agency’s findings. The court found the “record contains substantial evidence that unlicensed employees of [1st Alliance] offered or negotiated terms of residential mortgages.” 1st Alliance admitted to multiple FCRA violations. Further, the court found “substantial evidence that it was [1st Alliance’s] practice or policy to require a purchase and sale agreement before [1st Alliance] would provide a loan estimate, thereby requiring consumers to commit to the purchase of a property before coming to an understanding of the loan costs.” Lastly, the court found that 1st Alliance refused to comply with the subpoena.

This is not the only action pending against 1st Alliance. On January 15, 2021, the Consumer Financial Protection Bureau announced it had filed a similar suit in Connecticut federal court alleging the company used unlicensed employees to engage in mortgage-origination activities and failed to provide adverse action notices in violation of FCRA.