Here’s a common question:
Can a licensed loan originator pay an assistant directly (out of pocket) for work performed?
For example, Licensed LO needs clerical work performed. For the sake of ease, we can break the clerical work into two scenarios, both legit:
1) Clerical work is being performed by a W-2 employee of the company, assistant is NOT licensed and the work does not require a license.
2) Clerical work is being performed by a W-2 employee of the company, assistant is licensed and the work requires a license.
So the work assigned matches the qualifications of the assistant. Revisiting the question, the loan originator is asking if he/she can pay the assistant out-of-pocket.
Washington State has rules that speak to this issue, whether the LO is employed by a mortgage broker OR a non-bank lender. Links bring you to the statute. Here you go:
For non-bank lenders licensed under the Consumer Loan Act:
See number (8)
“(8) May I hire employees or independent contractors to assist me? No. Only the consumer loan company can hire employees or independent contractors to work for the company. This prohibition against loan originators hiring employees or independent contractors includes clerical or administrative personnel and loan processors and underwriters whose work is related to the consumer loan company’s activities.”
This next one is about the company.
Since the company is responsible for the conduct of its employees, the company is the one who needs to pay the employees.
“Am I responsible for the actions of my employees and independent contractors?
Yes. You are responsible for any conduct violating the act or these rules by any person you employ, or engage as an independent contractor, to work in the business covered by your license.”
If the loan originator assures the assistant that this is no big deal, everybody’s doing it, etc., assistant ought consider the possible consequences for violating state law and take this dilemma to a higher level of management. If the assistant is a licensed loan originator, the assistant is jeopardizing his/her license. According to state law, assistant must ask to be paid directly by the firm.
Think about if you owned the company. Would you want an assistant doing tasks for an LO on the side, without the company knowing about it? What is this assistant suppose to be doing instead of this task? How do we know the assistant has been adequately trained to perform this task?
The company is responsible for what goes on at the company. This means the management is responsible for adequately supervising all employees. If one employee is paying an assistant “on the side” to perform tasks, the work is largely unsupervised. We also have the problem of tax evasion but that’s above my pay grade.
I’d take this one step further and encourage loan originators to not give assistants “thank you” money or gifts on the down low.
Bonuses or gift cards can be paid to assistants through the company, with the authorization from your manager. Better yet, the company ought give your assistant a raise. He probably deserves it.