2010 Department of Labor Ruling Shows Up in CFPB Final Rule

A few astute people may have noticed the official commentary in the Consumer Financial Protection Bureau’s (CFPB’s) new final rule updating the Mortgage Loan Originator (MLO) compensation includes a list of “permissible methods of compensation” in the section regarding 1026.36(d).

While there are a number of permissible methods, readers should take note of one in particular:

“C. An hourly rate of pay to compensate the originator for the actual number of hours worked.”

The commentary makes no mention of salary pay to compensate the originator, and this is because of the U.S. Department of Labor’s Administrator’s Interpretation from March 24, 2010.

While the U.S. Department of Labor does not have the power to change federal law, it does have the power to interpret the application of the Administrative Exemption of the Fair Labor Standards Act with regard to employees who perform the typical job duties of a MLO.

Administrator’s Interpretation No. 2010-1 makes a significant statement in the conclusion drawn by the Administrator:

“Based upon a thorough analysis of the relevant factors, the Administrator has determined that mortgage loan officers who perform the typical duties described above have a primary duty of making sales for their employers and, therefore, do not qualify as bona fide administrative employees exempt under section 13(a)(1) of the Fair Labor Standards Act, 29 U.S.C. § 213(a)(1).”

This means credit unions will need to take a careful look at the primary duties of mortgage (and other) loan officers. If the loan officers do not qualify for the Administrative Exemption of the Fair Labor Standards Act, then they could be non-exempt employees who would qualify for minimum wage and overtime.

To qualify for the Administrative Exemption, the employee must meet the following criteria:

  1. The employee must be compensated on a salary or fee basis as defined in the regulations at a rate not less than $455 per week.
  2. The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers.
  3. The employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance (29 C.F.R. § 541.200).

The second test is the key to the Administrator’s ruling. Do your loan officer’s duties include internal management and general business operations of your credit union? Do they provide advice regarding internal operations or marketing? Do they service the loans and help with collections? Or are they “an employee whose primary duty is selling financial products?”

There is no clear-cut, black and white answer to whether your MLO qualifies for the Administrative Exemption. Credit unions cannot rely on job title and will need to take a hard look at the job duties of their employees to determine if they qualify or not.

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

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