A former East Hartford mortgage originator that closed its doors in 2019 when state regulators revoked its license is now facing federal allegations.
This month, the Consumer Financial Protection Bureau filed a lawsuit against 1st Alliance Lending, alleging that the company and its three owners, including majority shareholder John DiIorio, had violated the Fair Credit Reporting Act, Truth in Lending Act, and several other federal consumer laws over an approximately four-year span.
The CFPB’s lawsuit, filed Jan. 15 in Connecticut U.S. District Court, seeks injunctions and unspecified amounts of monetary damages, civil penalties, consumer redress and disgorgement of ill-gotten gains.
The agency’s lawsuit alleges that between 2015 and 2019 1st Alliance used unlicensed employees ‒ which the company referred to as “submission coordinators” and later “home loan consultants” ‒ to engage in mortgage-origination activities and interactions with consumers.
The suit also alleges that 1st Alliance employees misrepresented to prospective borrowers their chances of obtaining credit and future refinancing; required some to submit additional documentation before providing them with a loan estimate; and failed to send legally mandated notices to loan applicants who had been denied financing.
1st Alliance declined comment for this story.
The company made lots of headlines in Connecticut over the past two years, as DiIorio tussled publicly with the state Department of Banking over some similar allegations.
For example, like CFPB, the Connecticut department also probed 1st Alliance’s use of unlicensed staff in the mortgage origination process. The situation culminated in Commissioner Jorge Perez revoking the company’s license in Oct. 2019. The specific reason for the revocation was 1st Alliance’s failure to post a surety bond, after The Hartford terminated its previous coverage.
1st Alliance, which argued that the banking department’s interpretation of mortgage regulations was unusual compared to other states, closed its doors in late 2019, having laid off virtually all of its 178 employees.
The company, once licensed in 46 states, is now licensed in none, according to the Nationwide Multistate Licensing System & Registry. In many cases, 1st Alliance voluntarily surrendered its licenses. While it does not appear that Connecticut’s proceedings against 1st Alliance spurred regulatory counterparts in other states to take similar action, CFPB’s allegations do overlap with Connecticut’s in that they take aim at use of unlicensed employees to originate loans.
Connecticut banking department spokesperson Matt Smith said Friday that the CFPB’s lawsuit “shows that the department is not alone in its allegations against 1st Alliance.”
“We continue to monitor this situation closely and look forward to the outcome,” Smith said.
Though the banking department revoked 1st Alliance’s state license more than a year ago, the matter is not yet over. Though administrative hearings on the department’s allegations against 1st Alliance concluded in Feb. 2020, the department has not yet issued a final decision.
Just three days before CFPB filed its lawsuit in federal court against 1st Alliance, the company filed its own suit against the state banking department, alleging that the regulator had improperly extended its deadline for issuing the final decision. 1st Alliance said in its Jan. 12 Superior Court complaint that it needs that decision, which was originally due by Jan. 18, to file a court appeal.
The banking department has cited one of Gov. Ned Lamont’s COVID-19 executive orders for the extension to April, but 1st Alliance argues in its suit that the extension is unrelated to the state’s response to the pandemic, asking a judge to order the decision be issued soon.
DiIorio, who had once planned to open a 350,000-square-foot headquarters for 1st Alliance in Vernon, told Hearst Connecticut earlier this month that he doesn’t intend to create another business in the state.
He is now involved in a Massachusetts mortgage outfit, Phoenix Home Lending, whose website lists his title as managing member.
