Loandepot is raising serious accusations against West Capital Lending, accusing the brokerage of raiding its workforce, stealing its leads and skirting labor laws in California.
The Irvine, California-based giant sued its city neighbor last week in state court, seeking unspecified damages for bad behavior allegedly involving hundreds of loan officers. The complaint stems from Loandepot’s discovery last year that the competitor was in possession of a swath of its customer data.
Amid numerous allegations, the suit’s major claim suggests WCL has misclassified over 600 originators as independent contractors, violating lending laws, skirting taxes and giving it a competitive advantage in lower overhead costs.
“A fair and balanced playing field is the cornerstone of the free enterprise system,” a spokesperson for Loandepot said in a statement. “As our complaint alleges in detail, West Capital Lending has manipulated fair lending, privacy and tax laws and regulations to create an unfair competitive advantage. We plan to pursue every legal remedy available to demand accountability and fairness.”
The Irvine-based brokerage’s co-founders, named as defendants, didn’t respond to messages seeking comment Wednesday. The lawsuit also mentions up to 50 unidentified individuals, who allegedly profited off stolen customer information.
Although the companies operate in different channels, they’re among the industry’s most competitive. Loandepot is a retail and direct-to-consumer leader, whereas WCL is a high-volume brokerage. The smaller firm, founded in 2016, is also a top broker partner to Rocket Cos., according to the lawsuit and a recent news article.
Rocket, which was mentioned as WCL’s partner several times throughout the lawsuit, was not accused of wrongdoing and didn’t return a request for comment Wednesday.
How a customer list sparked the larger lawsuit
The complaint originates from a WCL employee, James Williams, who notified Loandepot last June that the brokerage came into possession of Loandepot customers’ nonpublic personal information. That sensitive data came via What’s a Mortgage, a lead generation company Loandepot previously worked with. WCL came upon the Loandepot customer lists in question when it partnered with WAM.
Williams’ outreach began a correspondence between the lenders, in which Iskander and WCL co-founder Eric Hines allegedly told Loandepot the client lists were not uploaded to WCL servers. The brokerage returned a thumb drive of information to Loandepot earlier this month, but Loandepot claims WCL didn’t take further requested steps to confirm it did not retain the information.
Loandepot raises poaching, labor, LO Comp claims against the rival
The 27-page lawsuit lays out a laundry list of WCL’s alleged wrongdoings, including WCL’s poaching of Loandepot originators with active leads. Those loans are quickly closed at the competitor, and WCL obscures the theft by having a different LO sign off on them, Loandepot claims.
The lender and servicer estimates 178 of its originators have been poached, costing it billions of dollars in revenue.
Loandepot also suggests WCL is misclassifying 625 of its California-based originators as independent contractors. Such action gives the brokerage a competitive advantage as it skirts labor laws and lowers overhead costs by shifting benefits, reimbursements and millions of dollars of total expenses onto its originators, the lawsuit states.
The complaint explains at length licensing requirements in California, in which WCL’s originators are registered with the Department of Real Estate as salespersons with MLO endorsements. Loandepot claims its LOs who have departed to the competitor shed their MLO licenses with California’s Department of Financial Protection and Innovation to adhere to WCL’s structure.
Loandepot points to evidence that the originators should be classified as employees, including WCL classifying its non-California-based LOs as employees; and the brokerage selling leads to its originators for a profit, inconsistent with their supposed unaffiliated status.
Loandepot in shorter language further accuses WCL of paying LOs based on a “lucrative split” of revenue, violating the loan officer compensation rule.
More litigation for Loandepot
A summons was issued to the defendants Friday, and a case management conference is scheduled for next March, according to the docket in the Superior Court of California in Orange County.
The Irvine-based Loandepot is facing its own accusations of violating LO comp rules, in a lawsuit from borrowers who say they were steered to higher rates. The company has denied those accusations as the sides have traded filings in recent weeks.
