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Truth in Lending: 10.8.2.8 Tender of the Home to Lender

Some practitioners have argued that tendering the property to the creditor—the home—satisfies the tender requirement. This tactic is particularly appealing when the homeowner owes more than the home is worth, even after rescission, and neither sale nor refinancing are viable options.

Truth in Lending: 10.8.3.1 Reasons for the Consumer to Continue Making Payments

There are advantages if the consumer can continue making mortgage payments while the right to rescind is litigated.

First, if the consumer continues to make payments the creditor will be less likely to succeed in portraying the consumer as a deadbeat, and the court will be less likely to feel that the equities favor the creditor.1383 By continuing to pay, the consumer shows a level of responsibility that the court may weigh when deciding about equitable modification.1384

Truth in Lending: 10.8.3.2 Continuing to Make Payments to the Creditor

If the consumer makes payments to the creditor, the consumer should make it clear that the payments represent installments toward the tender amount and are made without prejudice to the rescission claim. Otherwise, the creditor may argue that the consumer waived rescission by making payments after sending the cancellation notice.1386

Truth in Lending: 10.8.3.3 Making Payments into Escrow

Instead of making payments to the creditor, it may be better for the consumer to make payments into a trust or escrow account. Making the payments into a trust or escrow account rather than directly to the creditor increases the consumer’s negotiating position, as the creditor sees a growing sum of money that it will only get if it comes to terms with the consumer. Payments into a trust or escrow account may also be the only option if the consumer is unable to make the full monthly payment, as mortgage lenders commonly refuse partial payments.

Truth in Lending: 10.8.4 Tender in Bankruptcy

Exercise of rescission rights can substantially improve the position of a debtor in bankruptcy, and may be an easier way for the debtor to manage the TILA tender. The majority of courts which have considered the question have most often concluded that the policies of both TILA and the Bankruptcy Code are served only if the lien is treated as void and the creditor treated as an unsecured creditor.

Truth in Lending: 6.6.5.6.3 Penalties that revoke an introductory rate

If an introductory rate is disclosed in the account-opening table,1096 the creditor must briefly disclose directly beneath the table the circumstances under which the introductory rate may be revoked, and the type of rate that will apply after the introductory rate is revoked.1097 Note that, for credit cards under an open-end (not home-secured) consumer credit plan, issuers are prohibited from revoking a promotional rate for outstanding or “protected”1

Truth in Lending: 6.6.5.6.4 Loss of employee preferential rate

If the creditor discloses an employee preferential rate in the account-opening table, the creditor must briefly disclose beneath the table any circumstances under which the preferential rate may be revoked, and the rate that will apply after revocation.1101 This provision includes any preferential rate for employees of the issuer, employees of a third party, or individuals with a similar affiliation to the issuer or third party, such as executive officers, directors, or principal shareholders.1102

Truth in Lending: 6.6.6.1 Comparison of Current and Post-July 2010 Scheme

Prior to July 2010, Regulation Z placed fees that can be charged in an open-end credit plan into three categories: finance charges; “other” charges; and a third category created by the official interpretations of non-disclosed fees excluded from any TILA coverage.1105 The account-opening disclosures were required to disclose the first two categories: “finance charges” and “other charges” (which are not finance charges). Indeed this is how fees are described in TILA itself.1106

Truth in Lending: 6.6.6.2.2 Fees for the issuance or availability of a card

Creditors are required to disclose any annual or other periodic fee or any one-time fee imposed for the issuance or availability of an open-end credit plan, including fees based on account activity or inactivity.1116 Note that Regulation Z’s substantive prohibitions prohibit the imposition of fees for account inactivity for credit cards under an open-end (not home-secured) consumer credit plan.1117

Truth in Lending: 6.6.6.2.3 Minimum finance charge

Creditors must disclose any fixed finance charge or minimum interest charge and a brief description of such charges.1122 A minimum interest charge is one that would be imposed when the amount of such a charge is greater than the finance charge that would otherwise be imposed for such period under the applicable APR.

Truth in Lending: 6.6.6.2.5 Cash advance and balance transfer fees

Open-end creditors are required to disclose fees for cash advances in the account-opening table.1131 This will include cash advance fees for foreign transactions.1132 However, creditors will not need to disclose any ATM fees for cash transactions imposed by a third-party ATM owner.1133 Creditors are also required to disclose any balance transfer fee the account-opening table.1134 A discussion

Truth in Lending: 6.6.6.2.7 Required credit insurance, debt cancellation, or debt suspension coverage

Creditors that require the consumer to purchase credit insurance, debt cancellation or debt suspension coverage as part of a credit card plan must disclose the fees for such coverage in the required table.1137 In addition, issuers must include a cross-reference to where the consumer can find additional information about such coverage, if applicable.1138 Another volume in this series discusses these products in detail.1139

Truth in Lending: 6.6.6.3.1 When and how disclosed

Creditors are required to disclose charges that are “imposed as part of an open-end (not home-secured) plan” regardless of whether they are finance charges or not.1140 However, if the charges are not required to be disclosed in the account-opening table, then they need not be disclosed at all at the time of account opening,1141 nor do they need to be disclosed in writing.1142 They can be disclosed at any time prior to when the consumer actual

Truth in Lending: 6.6.6.3.4 Whether certain fees for hybrid prepaid-credit cards are “part of the plan”

There are special rules for fees and charges imposed on the asset feature of a hybrid prepaid-credit card1157 and whether such fees are considered “part of the plan.” A fee imposed on the asset feature of the card is considered part of the plan if exceeds a comparable fee on a prepaid account that does not have a credit feature, but only to the extent of the amount of the fee that exceeds the comparable fee.1158 Such amounts for such fees must be disclosed at least outside of the account-ope

Truth in Lending: 6.6.6.4 Determination of the Amount of Charges

The disclosure of charges that are part of the plan must include the amount of the charge or how the amount will be determined, and the circumstances in which they may be imposed.1166 A creditor may, for example, state that it will determine the amount of the finance charge by applying a periodic rate of 1.5% per month to the average daily balance. This information should be clear enough to enable the consumer to verify the creditor’s figures.

Truth in Lending: 6.6.7.2 Grace Period Disclosure Outside of the Table

The account-opening disclosures must contain a statement of when finance charges begin to accrue,1195 which generally involves disclosure of the grace period.1196 The creditor does not need to use any particular phrase or term, but its language must be sufficiently similar to the grace period disclosures within the application/solicitation1197 and account-opening tables1198 in order to satisfy