• What's at Stake: Huge sums in disputed revenue for rival lenders and unpaid wages for dozens of employees.
• Forward Look: West Capital Lending has fought the cases and fired back at Loandepot with its own lawsuit accusing the industry giant of steering. Overview bullets generated by AI with editorial review.   

A major brokerage is facing heightened legal scrutiny over its business practices from local competitors and now, a former employee.West Capital Lending is fending off lawsuits over accusations of mishandling leads, poaching originators, and skirting laws regarding its workforce. Those cases follow the company's second regulatory infraction this past summer over alleged widespread unlicensed mortgage activity. 

The Irvine, California-based WCL has grown into a formidable competitor in the broker space, with over 1,500 producing loan officers and more than $6.3 billion in origination volume so far this year, according to Modex.

Loandepot recently asked an Orange County, California court to force WCL to answer its interrogatories regarding LendingTree leads, as the giant's yearlong lawsuit against its local rival continues. The sides have accused each other of breaking laws in the way they categorize and pay their respective staff. 

Griffin Funding, a San Diego-based lender, also has pending litigation against WCL in its local courthouse. In a lawsuit filed last year, the consumer direct player accused WCL of diverting at least 203 customer loans away from it, for revenue losses exceeding $3.7 million. 

A former WCL loan closer, Emily Cox, also sued her former employer in Orange County for failure to pay overtime and minimum wages, in a class action wage case that her attorney wrote could span over 50 employees across the company. 

WCL did not return requests for comment. 

Mishandling leads and misclassifying LOs

Loandepot fired the first shot against WCL last year, when it accused the firm of misclassifying over 600 originators as independent contractors. That move would be a violation of lending laws, and allows WCL to avoid tax obligations and gain a competitive advantage over other lenders in lower overhead costs. 

The rival also claims WCL resold its purchased leads to its originators classified as independent contractors, thereby violating state and federal privacy laws regarding the sharing of nonpublic personal information with non-affiliated third parties. 

The competitor further alleges that WCL sells those leads to its originators at an artificially higher price and doesn't provide assurances that it's selling those same leads to other originators. LendingTree, which is not named in the case nor accused of wrongdoing, didn't respond to a request for comment. 

In its complaint last October, Loandepot estimated that 178 of its originators were poached, costing it billions of dollars in loan origination volume. 

Griffin Funding, in its poaching case which was amended this summer, specifically names three employees who absconded with trade secrets, including its former vice president of production. That lender is seeking treble damages for its revenue losses up to $11.1 million. 

Griffin Funding President and CEO Bill Lyons declined to comment Friday.

WCL fires back

The brokerage has raised Loan Officer Compensation Rule violation accusations against Loandepot, echoing claims from consumers. Attorneys for WCL say production managers at Loandepot, illegally compensated based on consumers' loan terms, granted steep price reductions for borrowers weighing offers from WCL, thereby undercutting competition. 

A judge dismissed those claims in federal court in September, stating that price cuts don't support the accusations of LO Comp Rule violations. While WCL voluntarily dismissed its federal claims, it filed a similar complaint in state court.

In a statement Friday, a spokesperson for Loandepot commented on WCL's failure to litigate the company in federal court. 

"This is only a reaction and a distraction from the real issues outlined in our complaint against West Cap," the spokesperson said.

More troubles for WCL

The wage complaint in Orange County, similar to other industry cases, accuses WCL of requiring employees to work overtime without appropriate wages. The Morgan & Morgan attorney who filed the lawsuit didn't return a request for comment. 

Regulators have previously fined WCL for violating lending laws. Four states fined the brokerage in 2023, for hundreds of violations of unlicensed origination activity earlier this decade. In July, a Washington regulator ordered the company to pay a $75,000 fine, plus a $3,000 investigative fee, for additional unlicensed and prohibited origination activity.

In agreeing to the Washington consent order, WCL neither admitted nor denied wrongdoing.