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Truth in Lending: 4.3.9 Manner of Delivering Electronic Notices

E-Sign does not address how electronic information should be delivered, except to say that states that pass UETA cannot circumvent the federal statute by imposing nonelectronic delivery methods. As a result, delivery methods required by TILA and Regulation Z remain in effect. While TILA’s language about how disclosures must be made was written without electronic means of transmission in mind, it still provides some safeguards.262

Truth in Lending: 4.3.10 Penalties for Violation of Electronic Disclosure Safeguards

One subsection of the provision on E-Sign consent provides that the legal effectiveness, validity, or enforceability of a consumer contract shall not be denied solely because of the failure to obtain electronic consent or confirmation of consent.266 This language only means the failure to obtain E-Sign consent is not in and of itself sufficient to undermine the validity of the underlying contract.

Truth in Lending: 4.4.1 Why Timing Matters

The statute requires that closed-end disclosures be made “before the credit is extended.”271 Regulation Z uses the phrase “before consummation.”272 The requirement is important because the disclosures are supposed to guide the consumer in making a rational economic choice about the financial attractiveness of the transaction prior to entering into it, and to facilitate comparison shopping.273

Truth in Lending: 4.4.2 When Must the Disclosures Be Made?

While special timing rules have been added to TILA over the years requiring the delivery of disclosures at specific times,278 the general rule is that disclosures handed to the consumer even one second before consummation meet TILA’s requirement that the disclosures be delivered pre-consummation.279 Nonetheless, many creditors fail to deliver the documents until after consummation.280

Truth in Lending: 4.4.3 Special Timing Rules

Special timing rules that apply in closed-end consumer credit transactions secured by real property and subject to the Real Estate Settlement Procedures Act—and those governed by the TILA-RESPA integrated disclosure regime since October 3, 2015—are discussed at § 4.4.7, infra.287 Special timing rules for adjustable-rate mortgages are discussed at

Truth in Lending: 4.4.4.1 General

Consummation is defined as “the time that a consumer becomes contractually obligated on a credit transaction.”289 For there to be consummation for TILA purposes, the consumer must be “legally obligated to accept a particular credit arrangement.”290 Whether—or when—a consumer becomes contractually and legally obligated is an issue of state law.291

Truth in Lending: 4.4.4.2 Financial Investment May Not Be Enough for Consummation

The thrust of the official interpretations is that there is consummation when the creditor could successfully sue the consumer for breach of contract if the consumer defaulted on the terms. It is not enough that the consumer has made a psychological or financial investment in the transaction from which there is no return, “unless, of course, applicable law holds otherwise.”297 The example of such an investment in the official interpretations is the payment of a nonrefundable fee.

Truth in Lending: 4.4.6.1 Car Dealer Practices

Often, sophisticated sales techniques, designed to maximize the car dealer’s profit, result in TILA timing violations. Finding and proving these violations requires an understanding of the way in which the car industry sells and finances car sales.

Truth in Lending: 4.4.6.2 Applicable Official Interpretations

The official staff commentary (now official interpretations) issued by the FRB in 2002 addresses these questions.321 First, the FRB explicitly rejected the argument that a creditor can provide a copy of the disclosure within a reasonable time after consummation.322 Second, where the TILA disclosures are combined with the credit contract, the creditor must give the consumer a copy of the unexecuted contract to read and sign.

Truth in Lending: 4.4.6.3 Court Cases

The Fourth Circuit has addressed TILA timing violations in car sales three times.325 The first two times, the court appeared to enunciate a bright line: the consumer must be given the TILA disclosures before the consumer signs the RISC or other documents.

Truth in Lending: 4.4.6.4 Investigating Timing Violations in Car Cases

Practitioners can ask consumers when, in the process, the dealer provided written TILA disclosures in a form the consumers could keep. Some RISC forms will have an extra copy that states it is to be given to the consumer, but many do not. Where the RISC form has the extra copy, proving the timing violation will turn on the consumer’s credibility and any corroborating evidence adduced.329 Former employees may admit to the actual practices of the dealer in depositions.

Truth in Lending: 4.4.7.1.2 Coverage until October 3, 2015 and for some mortgage loans thereafter

Prior to July 30, 2009, TILA mandated the provision of early disclosures for purchase mortgage loans secured by the consumer’s principal residence to which RESPA also applied.335 Effective July 30, 2009, coverage was extended to all transactions in which a security interest is taken in a “dwelling” to which RESPA applies.336 The date is measured by the date of application:337 applications received on or after July 30, 2009 trigger the early disclos

Truth in Lending: 4.4.7.1.3 Coverage beginning October 3, 2015 for loans subject to the TILA-RESPA integrated disclosure regime

In the Dodd-Frank Act, the Consumer Financial Protection Bureau was directed to create “a single integrated disclosure” form combining the existing HUD-1 settlement statement and TILA disclosure form.347 The CFPB finalized the forms and the accompanying regulations on December 31, 2013.348 The rule was effective October 3, 2015, and covers most closed-end consumer credit transactions secured by real property.349 Exclusions and exemptions from the T

Truth in Lending: 4.4.7.2.1.1 Timing rules for loans applied for before October 3, 2015

The early disclosures, “good faith estimates” of the final disclosures,350 must be delivered or mailed within three days after the consumer’s written application is received.351 For loans applied for before July 30, 2009, the early disclosures could be given at consummation, if less than three days elapsed between receipt of application and consummation.352 For loans applied for on or after July 30, 2009, disclosures must be delivered to the homeow

Truth in Lending: 4.4.7.2.1.2 Timing rules for loans applied for on or after October 3, 2015

Effective October 3, 2015, for loans to which the TILA-RESPA integrated disclosure rules apply, the early disclosure (“loan estimate”) requirements generally track those applicable to loans applied for on or after July 30, 2009, with some exceptions.359 Like the good faith estimate, the creditor must deliver (in person or electronically) or place the loan estimate form in the mail not later than the third business day after the creditor receives the consumer’s application.360 If the loan estimat

Truth in Lending: 4.4.7.2.2.2 Format rules for loans applied for on or after October 3, 2015

Effective October 3, 2015, for mortgage loan transactions to which the CFPB regulations combining the TILA and RESPA disclosures apply,388 the good faith estimate and early TILA disclosure are replaced by the “loan estimate.”389 The “closing disclosure” replaces the settlement statement and final TILA disclosure.390 The loan estimate and closing disclosure forms are readily comparable by the consumer and practitioners to assess bait-and-switch conc

Truth in Lending: 4.4.7.2.3.2 Fee restrictions for loans applied for on or after October 21, 2015

The TILA-RESPA integrated disclosure rules that become effective October 3, 2015,397 fairly track the fee restrictions in the previous version of Regulation Z, with one major exception.398 The only fee that a creditor may impose on the consumer before the creditor has provided the loan estimate form and the consumer has “indicated” an intent to proceed with the transaction is a bona fide and reasonable credit report fee.399 A consumer may