Washington Regulator Resolves Consumer Loan Act Allegations Against Mortgage Lender

The Washington State Department of Financial Institutions (DFI) has officially entered into a consent order with a residential mortgage lending company to settle a series of administrative allegations. The regulatory action resolves claims that the institution repeatedly violated Washington’s Consumer Loan Act (CLA) alongside corresponding state regulatory requirements.

The consent order concludes an enforcement process that commenced nearly a year prior. The allegations were first detailed in a formal statement of charges issued by the DFI on September 8, 2025. This resolution highlights the department’s ongoing emphasis on enforcing strict licensing oversight, maintaining internal operational controls, and ensuring institutional compliance throughout the state’s mortgage market.

Allegations of Unlicensed Activity and Lack of Supervision

Central to the DFI’s investigation were allegations regarding unlicensed individuals performing regulated mortgage activities. According to regulatory findings, the lending entity permitted an unlicensed individual to act as a mortgage loan originator (MLO) by helping a consumer complete and submit a residential mortgage loan application. Furthermore, regulators revealed that the company accepted at least one residential mortgage application prior to securing its own required state entity license.

Compounding these licensing concerns, state examiners discovered significant gaps in executive supervision. The DFI alleged that at least six managers supervising licensed mortgage loan originators lacked proper licenses while actively discharging their supervisory duties. Under Washington law, individuals directing or managing licensed MLOs must maintain valid licensing credentials to ensure accountability and regulatory adherence across consumer interactions.

Governance, Reporting, and Operational Deficiencies

Beyond individual licensing infractions, the DFI identified broad operational failure points across the company’s internal controls and regulatory reporting mechanisms.

According to the statement of charges, the compliance breakdowns included:

• Supervisory Planning Failures: The mortgage lender failed to formulate, maintain, and execute at least 34 required supervisory plans designed to oversee staff and business operations.
• Surety Bond Non-Compliance: The institution failed to maintain its mandatory state surety bond coverage across multiple evaluation cycles in 2023 and 2024, creating potential risk exposure for consumers.
• Delinquent Regulatory Reporting: The firm submitted untimely and inaccurate annual financial and activity reports for calendar years 2022 and 2023.

Anti-Money Laundering (BSA/AML) Deficiencies

The department’s examination extended into financial crime safeguards, uncovering notable deficiencies in the company’s Bank Secrecy Act and Anti-Money Laundering (BSA/AML) compliance architecture. Regulators determined that the lender failed to ensure its employees underwent regular, mandated BSA/AML training. Additionally, the company neglected to conduct periodic independent testing of its AML program, a critical requirement designed to evaluate the strength and effectiveness of internal financial crime prevention controls.

Terms of the Settlement and Broader Regulatory Context

To resolve the enforcement action, the company signed the July 8 consent order and agreed to immediately cease and desist from future violations of the Consumer Loan Act and its implementing rules. As is standard in regulatory administrative settlements, the agreement resolves all pending state claims without the mortgage lender admitting or denying any of the DFI’s specific factual allegations or legal conclusions.

While the order does not constitute a formal judicial finding of wrongdoing or civil liability, it legally binds the entity to establish rigorous compliance protocols and strict licensing verification mechanisms moving forward. This enforcement action reflects a broader trend across Washington’s financial sector, where state regulators continue to actively penalize non-compliance in loan origination, servicing, and consumer protection.