loanDepot asks judge to toss West Capital Lending complaint

loanDepot has asked a federal judge to dismiss a lawsuit accusing the lender of violating federal loan originator compensation rules, arguing that mortgage brokerage West Capital Lending (WCL) lacks standing to sue and is improperly trying to use consumer protection laws to pursue a competitive business dispute.

In a reply brief filed Thursday in the U.S. District Court for the Central District of California, loanDepot argued that WCL has no legal basis to bring the lawsuit because the Truth in Lending Act (TILA)’s loan officer compensation rule was designed to protect borrowers, not competing lenders, and does not provide competitors with a private right of action.

The company asked the court to dismiss the complaint with prejudice. A loanDepot spokesperson declined to comment beyond the court filing.

Lacking evidence of financial harm?

WCL sued loanDepot earlier this year, alleging the lender illegally compensated production managers in a way that allowed it to selectively lower mortgage prices and win business from competitors, in violation of TILA and California’s Unfair Competition Law.

loanDepot argues WCL has never shown that it actually lost customers or suffered a measurable financial injury, and that it “cannot establish economic injury.” According to the filing, WCL has dropped its request for monetary damages and now seeks only declaratory and injunctive relief, but it has yet to identify a single borrower it allegedly lost due to loanDepot’s practices.

“[WCL] does not identify a specific transaction, expenditure, or lost opportunity; it merely alleges that it suffered harm because loanDepot offered unspecified customers unspecified low prices,” Thursday’s filing states. “If WCL could identify a single customer it lost or is likely to lose, it would have done so already.”

loanDepot also disputes the foundation of WCL’s claims, arguing that the LO compensation rule governs how lenders pay employees, not the mortgage rates they offer consumers. It says lenders are free to match competitors’ pricing regardless of the compensation rule, meaning WCL cannot show the alleged violations caused any competitive harm.

“Accordingly, a mortgage lender can engage in the kind of pricing practice that WCL describes without violating the LO Comp Rule — it can simply direct loan originators to charge high rates and give discounts when necessary,” the filing states.

loanDepot further argued that WCL’s allegations rely heavily on declarations from former employees who either never served as production managers or left those positions years ago. Those statements, the company said, describe past practices and do not establish that any alleged misconduct is ongoing, a requirement for the forward-looking relief WCL is seeking.

“WCL obtained and relies heavily on declarations from four former production managers, yet not one demonstrates that production managers’ activities fell outside of this protected approval activity,” the filing states.

The filing also argues that only borrowers, not competitors, can sue under federal LO compensation provisions, and that California’s Unfair Competition Law cannot be used to sidestep these limits. loanDepot also said WCL failed to identify specific instances in which production managers acted as originators or steered borrowers into more expensive loans.

Thursday’s filing adds to a long legal history between the two lenders.

In a separate lawsuit filed in October 2025, loanDepot accused WCL and its founders of poaching 178 loan officers, misappropriating trade secrets and customer data, and violating LO compensation and labor laws. The complaint also alleges WCL improperly classified hundreds of loan officers as independent contractors and used revenue-sharing compensation arrangements that gave the brokerage an unfair competitive advantage.

WCL has denied the allegations and the case remains pending.

WCL is also defending a similar lawsuit filed by consumer-direct lender Griffin Funding in June 2025. Griffin alleges several former loan officers diverted company leads and customers after joining WCL, misappropriated trade secrets and caused more than $3.7 million in lost revenue, while claiming WCL benefited from the alleged misconduct.