The Compliance Contradiction
Summary
For years, I have debated with mortgage companies, explaining that they should pay their loan officers W2, with potential minimum-wage and employee-benefit implications, instead of taking the easier path of a commission-only 1099 independent contractor. After weighing their options and helping them understand the potential implications, the business owners could opt to take the risk if they still felt it was the right fit for them. In February 2021, the Arizona Department of Insurance and Financial Institutions released a statement that “the Department concludes that Arizona mortgage laws do not expressly or impliedly prohibit AZ Mortgage Lenders from electing to employ and compensate Arizona-licensed loan originators as independent contractors.” Their statement points out that the position “… narrowly address[es] one aspect of what Arizona mortgage laws require … ” and does not address how the IRS may view their determination. In its recent report to Congress, the CFPB’s Fair Lending Director, Patrice Alexander Ficklin, described recent racial and economic inequalities, and then stated, “ … the bureau’s fair lending work is more important now than perhaps ever.” In the same report, CFBP Acting Director David Uejio stated, “As I have made clear before, … my top priorities for this agency are to take bold and swift action to address issues of pervasive racial injustice and the long-term economic impacts of the COVID-19 pandemic on consumers.” (Emphasis added) Despite the strong statements, the CFPB has delayed action to address inequities within the bureau. They also discovered that the “disparities in base pay between white and minority employees exist even when job type, experience, and even grade are the same.” Apparently, the same people who will be taking “bold and swift action” against mortgage companies are delaying reviews that would address disparities within their own agency.