When people speak about the cost of non-compliance the first thing people think about are fines levied in connection with investigations. In fact, that is the least of your concerns. Due to the publicity about certain employees having received millions of dollars in connection with acting as whistleblowers against financial institutions a new risk has quickly arisen. If you don’t believe it search the Internet for “qui tam attorneys mortgage” and see the host of law firms beckoning former/current borrowers, competitors, employees and others, to initiate whistleblower claims whereby the government can intervene and take over a case and pay 20% of the recovery to the individual responsible for initiating the case.
Understand also that the interplay between the False Claims Act and an amendment under the Financial Institutions Reform Recovery Enforcement Act essentially allows the government to recover millions in penalties from a lender (or its officers/directors) for violations of various financial laws and regulations, even where there is no actual injury caused by the infractions. As long as the violation itself was not unintended —in other words a systemic ongoing failure—the government has taken the position that lenders are subject to $1 million per violation penalties that can be identified by whistleblowers who could in theory be entitled to recovery. Moreover, since there is no requirement for the whistleblower to have been personally injured by the violation, nearly anyone can initiate such claims. Moreover, when a claim is initiated, it is normally done without notice to the lender, giving the government potentially months to investigate an unsuspecting lender in order to determine whether cause exists to intervene in the action. Now, with lawyers encouraging such claims, compliance failures take on new potential significance and are likely to become far more frequent for lenders of all sizes and types.