Guaranteed Rate Lawsuit: False Claims Settlement, EFAA, and FLSA Cases

Guaranteed Rate, the Chicago-based mortgage lender that rebranded as “Rate” in July 2024, has been involved in a series of major lawsuits: a $15.06 million federal False Claims Act settlement in 2020, an active sexual harassment and gender discrimination case that produced a landmark New Jersey arbitration ruling in December 2025, a federal wage-and-hour class action brought by California loan officers, and a wave of suits the company itself has filed against departing employees over signing-bonus clawbacks and alleged breaches of fiduciary duty.

The $15 Million False Claims Act Settlement

On April 29, 2020, the U.S. Department of Justice announced that Guaranteed Rate had agreed to pay $15.06 million to resolve allegations that it violated the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act of 1989. The settlement was filed in the U.S. District Court for the Northern District of New York as Case No. 17-cv-637 and covered conduct dating back to January 2008 involving loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs.¹

As part of the settlement, the company admitted that its FHA underwriters had received commissions and gifts in violation of program rules, that government underwriters were at times instructed not to review documents relevant to their decisions, and that the company had certified loans for government insurance that were not actually eligible. The government alleged the lender had systematically failed to maintain quality control programs to catch underwriting problems, failed to self-report materially deficient loans, and allowed conflicts of interest to corrupt the underwriting process.²

The case began as a qui tam whistleblower suit filed by a former Guaranteed Rate employee, who received $2,443,000 from the settlement.¹

McDermott v. Guaranteed Rate and the EFAA Ruling

In February 2024, former loan officer Megan McDermott sued Guaranteed Rate, regional manager Joseph Moschella, and loan officer Jon Lamkin in New Jersey state court. Her complaint alleged pervasive sexual harassment, gender-based pay discrimination, hostile work environment, constructive discharge, and various wage and contract claims. McDermott alleged that Lamkin made explicit sexual comments about her family and regularly directed gender-based slurs at her and other female employees, that she reported the behavior to Moschella (who allegedly asked her not to file a formal complaint) and to HR in 2019, and that no investigation followed. She resigned in November 2022, claiming constructive discharge, and further alleged she was denied retention bonuses given to male colleagues and that the company misappropriated her likeness after she left.³

Guaranteed Rate moved to compel arbitration under a mandatory clause in McDermott’s employment agreement. The trial court kept the sexual harassment claims in court but sent her other claims to arbitration.⁴

On December 26, 2025, the New Jersey Superior Court, Appellate Division, rejected that split approach in a published opinion. Writing for the court, Judge Arnold Natali held that under Section 402(a) of the federal Ending Forced Arbitration of Sexual Assault and Harassment Act of 2021, pre-dispute arbitration agreements are unenforceable as to all claims in a case where the plaintiff has pled a viable sexual harassment claim. Because McDermott pled a viable harassment claim, none of her other claims — wage disputes, breach of contract, tortious interference — can be forced into arbitration either. Her entire case proceeds in court.⁴

The court also rejected Guaranteed Rate’s argument that McDermott’s harassment claims were time-barred. Applying the continuing violation doctrine under the New Jersey Law Against Discrimination, it held that the limitations period did not begin to run until the last act in the alleged pattern of harassment, which the court found continued through her November 2022 resignation.⁴

The Appellate Division consolidated McDermott’s appeal with Rivera-Santana v. CJF Shipping, LLC (Docket No. A-1568-24), a separate case raising the same bifurcation issue. The single published opinion established binding precedent in New Jersey that employers cannot use arbitration clauses to peel off non-harassment claims when a viable sexual harassment allegation anchors the lawsuit.⁴

Peters v. Guaranteed Rate: FLSA Overtime Class Action

On October 31, 2023, former mortgage loan officer Robert Peters filed a class-action lawsuit against Guaranteed Rate in the U.S. District Court for the Northern District of California (Case No. 23-cv-05602), alleging violations of the Fair Labor Standards Act and California labor law. The complaint alleged that the company paid its mortgage loan officers on a commission-only basis and did not compensate them for overtime hours, which the suit said regularly exceeded eight hours per day and often exceeded twelve. Peters also alleged the company failed to pay for time spent on meetings, administrative tasks, and booting up work computers, and failed to provide paid rest periods and timely final commission payments.⁵

On August 19, 2024, the court conditionally certified the case as a collective action for California-based mortgage loan officers, with a February 1, 2025 deadline for other eligible workers to opt in. Guaranteed Rate has denied the allegations, asserting that the loan officers were properly classified as exempt and are subject to mandatory arbitration agreements. As of mid-2026, the case remained in early phases with no determination on the merits.⁶

Suits Against Former Employees

Guaranteed Rate has also been a frequent plaintiff, pursuing former employees who leave before completing required tenure or who allegedly take confidential information to competitors. According to the Wall Street Journal, hundreds of former Guaranteed Rate employees received signing-bonus clawback demands in 2023 after the refinancing boom subsided.⁷

A representative example is Richard Faust, a former vice president of mortgage lending. Faust signed a 2022 compensation plan that included a $1.4 million signing bonus paid in two installments, subject to repayment if he did not complete two years of continuous employment. He resigned in July 2023 after 16 months. In March 2024, Guaranteed Rate sued him in federal court in California seeking $533,712, plus legal fees and interest at nine percent per year.⁷

Guaranteed Rate Affinity, the company’s joint venture with Anywhere Real Estate, has pursued a similar strategy. In August 2022, it sued former divisional manager Jonathan Engler in the District of Nevada, alleging he orchestrated the near-simultaneous resignation of himself and eight direct reports, including six regional managers, all of whom joined Cardinal Financial Company. The lawsuit alleged Engler used confidential information about top-performing employees for a competitor’s benefit.⁸ The affiliate has filed at least two additional California suits against former loan originators to recover advanced signing bonuses and commissions.⁹

Guaranteed Rate v. Mott

One of the more fully litigated departure cases involved Rebecca Mott, a former employee who left for CrossCountry Mortgage. Guaranteed Rate sued Mott for breach of contract, breach of fiduciary duty, conversion, and violations of wiretapping and eavesdropping statutes. Mott filed counterclaims under the Illinois Right to Publicity Act and the Illinois Wage Payment and Collection Act, among others.¹⁰

An arbitrator found that Mott breached her fiduciary duty by providing CrossCountry with confidential client data and compensation details of Guaranteed Rate employees while still employed. The arbitrator awarded Guaranteed Rate $332,760.97 in compensatory damages (primarily based on lost profits from departed loan customers), $238,494.09 in attorney fees, and $24,375.65 in costs. On Mott’s counterclaims, the arbitrator awarded her $19,000 under the Illinois Right to Publicity Act and $54,642.43 for wage payment violations.¹⁰

The Cook County Circuit Court confirmed the compensatory damages but vacated the attorney fee and cost awards. On December 24, 2025, the Illinois Appellate Court reversed that decision and reinstated the full award, holding there was “no authority to vacate even awards that are illogical or inconsistent” absent a gross error of law.¹⁰

The Chicago Tribune Workplace Investigation

In June 2024, the Chicago Tribune published an investigation by reporters Lizzie Kane and Talia Soglin drawing on interviews with nearly 80 former employees along with court records, internal emails, exit interviews, and text messages. The report described what former staff characterized as a volatile, sex-driven, and misogynistic work environment under CEO Victor Ciardelli.¹¹

Former employees told the paper that Ciardelli frequently berated and swore at staff during meetings, calling employees “failures” or “stupid.” Women described an atmosphere they called a “boys club,” reporting unsolicited sexual comments from managers, unwanted advances, and objectification. One former employee said she contacted a suicide hotline in 2023 after verbal abuse from an executive. Others said human resources was ineffective or complicit.¹¹

Ciardelli and Guaranteed Rate denied all the allegations, calling them the product of disgruntled former employees or competitors. The company provided more than 80 testimonials from current and former staff and cited a February 2024 internal survey that gave its culture an 8.49 out of 10 rating. The company also threatened the Tribune with defamation litigation. In a written statement provided through outside counsel, Ciardelli said the company holds its team to “an incredibly high standard” and is “not apologetic about that,” adding that “we are not for everyone.”¹²

Trademark and State Regulatory Matters

In 2025, Guaranteed Rate sued LIT Financial Corp. in the U.S. District Court for the Eastern District of Michigan, accusing the smaller lender of a “predatory marketing scheme” that traded on the Guaranteed Rate name through mailers and text messages sent to known Guaranteed Rate borrowers. The suit alleged violations of the federal Lanham Act and Michigan trademark laws and was dismissed with prejudice on May 13, 2026, after a confidential settlement.¹³

Guaranteed Rate has also entered into settlement agreements with the New York State Department of Financial Services on at least two occasions, in August 2012 and February 2015, according to the agency’s public enforcement records. The specific terms and violations addressed in those agreements are not publicly detailed in the available records.¹⁴

1
U.S. Department of Justice. Guaranteed Rate to Pay $15 Million to Resolve Allegations It Knowingly Caused False Claims
2
HUD Office of Inspector General. Guaranteed Rate to Pay $15 Million to Resolve Allegations It Knowingly Caused False Claims
3
HousingWire. G-Rate Sued for Gender Discrimination, Sexual Harassment, Unpaid Comp
4
New Jersey Courts. McDermott v. Guaranteed Rate, Inc.
5
Yahoo Finance. Ex-Employee Files Class Action
6
Swartz Legal. Guaranteed Rate FLSA Overtime Lawsuit
7
National Mortgage News. Guaranteed Rate Sues Former Exec for Breaching Bonus Clawback Clause
8
HousingWire. Guaranteed Rate Affinity Sues Divisional Manager for Causing Mass Departure
9
HousingWire. Guaranteed Rate Affinity Sues Former Originators Over Advanced Compensation
10
Appellate Court of Illinois. Guaranteed Rate v. Mott, 2025 IL App (1st) 241574-U
11
Chicago Tribune. Guaranteed Rate Toxic Environment
12
Ragan Communications. Crisis Communications Guaranteed Rate Lessons
13
Bloomberg Law. Rate, LitFinancial Resolve Dispute Over False Ads to Refinance
14
New York Department of Financial Services. Enforcement Actions – Mortgage