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Truth in Lending: 8.6.7.2 Change in Terms for Events Provided for in the Contract

A creditor may implement changes set forth in the contract that are contemplated on the occurrence of an event, as long as the triggering event and the resulting change are stated with specificity.434 For example, in an employee loan program, the contract could provide for a higher rate if the consumer’s employment with the creditor ends. Similarly, a creditor also could have a step rate schedule in which specified changes in the rate would occur on certain dates.

Truth in Lending: 8.6.7.3.1 Generally

A creditor may change the index and margin used under a variable rate HELOC if the original index becomes unavailable. Historically, this provision has rarely been used. But it became more relevant when the widely used LIBOR (London Interbank Offered Rate) index ceased publication on June 30, 2023.438

Truth in Lending: 8.6.7.3.2 Replacing the LIBOR due to unavailability

A creditor replacing the LIBOR may follow the general rules in § 8.6.7.3.1, supra, or another set of rules written exclusively for the LIBOR. They are slightly different. Under the LIBOR rules, creditors were authorized from April 1, 2022 to replace it and the contractual margin, rather than wait until the LIBOR became unavailable in 2023.

Truth in Lending: 8.6.7.4 Changes Made by Written Agreement

Creditors may change the terms after a plan is opened if the consumer expressly agrees in writing to the change at that time.450 For example, a consumer and creditor could agree in writing to change repayment terms from interest-only payments to amortizing payments that reduced the principal balance.451 The written agreement, however, remains subject to the other provisions of Regulation Z.

Truth in Lending: 8.6.7.5 Beneficial Changes

After the plan has been entered into, creditors may make changes that “unequivocally benefit” the consumer for the remainder of the plan.455 Examples of such beneficial changes include offering the consumer the option of lower monthly payments, extending the plan on the same terms, and temporarily reducing rates or fees (as long as they are not increased later to levels higher than originally disclosed).456 But a change-in-terms notice may be required if, after a temporary reduction, the credito

Truth in Lending: 8.6.7.6 Insignificant Changes

The Act allows unilateral changes in “insignificant terms,” while Regulation Z permits “insignificant changes” to terms.459 Regardless of that distinction, this exception is “intended to address operational problems that would otherwise result if literal compliance with the blanket prohibition were required.”460 It includes changes in the creditor’s billing address, billing cycle date, and payment due date (as long as the grace period, if any, is not reduced).

Truth in Lending: 8.6.7.7.2 Notice and duration of temporary suspensions of credit and reductions of credit

The creditor must give each affected consumer written notice with “specific reasons” for the action when prohibiting additional extensions of credit or reducing the credit limit for one of the above reasons.481 (Creditors are not required to provide this notice when freezing or reducing a credit limit in lieu of termination and acceleration for one of the reasons listed in Regulation Z § 1026.40(f)(2), as described in the official interpretations to that paragraph.482) When providing the specifi

Truth in Lending: 8.6.7.7.3 Challenging the creditor’s temporary suspensions of credit and reductions of credit

Consumers may dispute a creditor’s decision to restrict credit privileges by requesting reinstatement of the privilege.485 If the restriction was imposed for one of the reasons listed in Regulation Z § 1026.40(f)(3)(i) or (vi),486 the creditor must provide a written a notice with specific reason for the creditor’s action.487 If the creditor requires the consumer to request reinstatement of the privileges, the notice will explain the procedure for d

Truth in Lending: 8.6.8 High-Cost HELOCs

HELOCs, like other mortgage loans, are considered “high cost” if they meet a threshold, or “trigger,” based on either the APR or the total points and fees included in the loan.

Truth in Lending: 8.7 TILA Damages and Rescission Are Available for HELOC Violations

Statutory damages, actual damages, and attorney fees are available for violations of TILA’s disclosure requirements, to the extent the disclosures are mandated by 15 U.S.C. § 1637a.510 To the extent the disclosures are mandated under the general open-end credit rules under 15 U.S.C. § 1637, the analysis is more complicated. Actual damages and attorney fees are still available, but the availability of statutory damages depends on which provision of section 1637 requires the disclosure at issue.

Truth in Lending: 8.8.1 Overview

Reverse mortgages are non-recourse loans intended to allow older homeowners to convert the equity in their homes into cash, while deferring repayment.513 The loan principal in a reverse mortgage may be advanced as a lump-sum, in monthly payments, as a line of credit, or a combination of these options. Unlike a “forward” mortgage, a reverse mortgage borrower is not expected to repay the principal or interest until maturity.

Truth in Lending: 8.8.3.1 Overview

In addition to any required disclosures for open-end and closed-end mortgages,534 reverse mortgage creditors must also disclose the total annual loan cost (TALC) rate.

Truth in Lending: 8.8.3.2 Calculating the TALC Rate

Before jumping into the weeds of calculating the total annual loan cost (TALC) rate, carefully review the description of the TALC rate in the previous section. Appendix K to Regulation Z is an important guide as to the nuts and bolts of the calculation. Also, the Federal Reserve Bank of New York published a friendlier description in its compliance newsletter.546 This subsection is a summary of that article. Determining the TALC rate requires some standard assumptions that make things easier:

Truth in Lending: 8.8.4 Other Reverse Mortgage Disclosures

In addition to the TALC rate, reverse mortgage creditors must provide a notice saying the consumer is not required to complete the transaction merely because the consumer received the disclosures or signed a loan application.556 Creditors must also provide an explanation of the TALC rate table and an itemized list of the loan terms, charges, age of the youngest borrower, and the appraised value of the property.557 These disclosures must be in a form substantially similar to the model form in Reg

Truth in Lending: 8.8.5 Reverse Mortgage Remedies

Failure to comply with Regulation Z’s requirements for reverse mortgages, may subject creditors to civil liability under TILA, including the remedy of rescission.561 Regulation Z does not provide an accuracy tolerance for TALC rate disclosures, as it does for APR disclosures, so the smallest variation from the actual rate should be a violation, triggering actual and statutory damages.562

Truth in Lending: 12.1 Introduction

Several defenses against TILA actions are available to creditors. The defenses apply, for the most part, to both open-end and closed-end credit transactions.

Truth in Lending: 12.2.1 Generally and Private Suits

The Truth in Lending Act (TILA) provides separate limitations periods for private suits and actions by government entities. The limitations period for government actions is discussed in the next section. Most private actions for civil liability under TILA must be filed within one year after the date of the violation.6 A small number of other provisions carry a three-year limitations period.7 The date of the violation depends on the requirements of the statute.

Truth in Lending: 12.2.3.1 General

The limitations period for filing suit under TILA begins the day after the occurrence triggering the running of the period.40 This is consistent with Federal Rule of Civil Procedure 6(a).41 The period ends one year later for most claims and three years later for others, as provided in section 1640(e). Thus, for example, where a violation occurred on April 1, 2020, a complaint must be filed no later than April 1, 2021.

Truth in Lending: 12.2.3.2 Violations Involving Closed-End Credit

Many (but not all) closed-end credit disclosures and other obligations are required before consummation,51 so a violation of those duties will run from the date of consummation itself.52 If a disclosure required before consummation is never made, the consummation date remains the triggering date.53 Consummation occurs when the consumer is contractually obligated to the loan under state law, i.e., when the creditor extends the credit and the cons

Truth in Lending: 12.2.3.3.2 Fair Credit Billing Act violations

The limitations period may not begin to run until a later time for some Fair Credit Billing Act (FCBA)85 violations. The Fair Credit Billing Act is part of the Truth in Lending Act to which the one-year statute of limitations generally applies. When a consumer sends a notice of a billing error, FCBA provides that the creditor:

Truth in Lending: 12.2.3.4.2 Suits for damages related to rescission

Beyond the question of enforcing a valid rescission, the failure to rescind in response to a valid request violates TILA and entitles the consumer to damages.101 The deadline is one year after the creditor fails to respond.102 Because the creditor has twenty days to respond to a valid rescission notice, a cause of action accrues at the end of that twenty-day period, and the limitations period expires a year later.103