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Truth in Lending: 2.6.3 Regularly Extends Consumer Credit

While the meaning of “consumer credit” is discussed elsewhere,180 the definition of “regularly” deserves careful attention. The burden is on the borrower to establish that the lender “regularly” extends credit.181 Because creditors have more information about the frequency of their lending activities than consumers, courts should permit discovery on these questions.182

Truth in Lending: 2.7.9.5.4 McCarran-Ferguson Act

Occasionally creditors have argued that the congressional deference to state regulation of insurance mandated by the McCarran-Ferguson Act592 prohibits application of TILA to insurance. This argument has generally failed.

Truth in Lending: 2.8.10.2 EWA Programs Extend Credit

To date there is no case law directly addressing whether earned wage advance programs create “debt” or extend “credit” within the meaning of TILA.765 The CFPB’s activity is discussed in the next section. Notwithstanding providers’ claims to the contrary, there is a strong argument that EWA providers extend credit as defined by TILA.

Truth in Lending: 2.7.9.9 Investments, Letters of Credit, and Option Contracts

The official interpretations recognize a final set of exclusions concerning letters of credit, option contracts, and investment plans.605 These exclusions appeared in the first official staff commentary to Regulation Z issued by the Federal Reserve Board in 1981. The discussion in the relevant Federal Register notices did not expand upon the FRB’s rationale for each exclusion beyond the words of the text.606 The text of these exclusions has remained unchanged since 1981.

Truth in Lending: 9.5.1 Introduction

In 2008, the Federal Reserve Board issued a new regulation addressing “higher-priced” mortgage loans.479 The rule applies to mortgage loans that have an APR exceeding a threshold, or trigger, defined in the rule. And the rule prohibits four specific acts or practices in loans exceeding the trigger.

Truth in Lending: 5.11.1 Overview

The Dodd-Frank Wall Street Reform and Consumer Protection Act (hereinafter the Dodd-Frank Act)732 added a host of new disclosure requirements for closed-end residential mortgage loans.

Truth in Lending: 5.13.4.4.3 Is negative amortization included in the finance charge?

Some courts struggling with the disclosure of negative amortization in payment option adjustable-rate mortgages (POARMs) have looked to the official staff commentary (now “official interpretations”) on graduated payment mortgages for additional guidance.1407 The negative amortization predicted on the basis of the application of the fully-indexed rate must be included in the finance charge for graduated payment mortgages.1408

Truth in Lending: 5.13.4.4.1 For loans made prior to February 1, 2011

Originally, the disclosure of negative amortization was only required for loans with a variable rate feature.1389 Prior to 2011, Regulation Z required the disclosure of negative amortization to appear only in the loan program disclosure, not on the TILA disclosure statement.1390 The required disclosure was only a basic warning of the possibility of negative amortization be given, if applicable.1391 The official interpretations, however, exten

Truth in Lending: 11.4 Who Is Liable? Creditors, Assignees, Servicers, Originators, and Others

Having determined who may bring the TILA action, the next question is who is liable for TILA violations. TILA’s civil liability provision, 15 U.S.C. § 1640(a), imposes liability upon “any creditor.” The general definition of “creditor” at section 1602(g) specifies that it is the “person to whom the debt arising from the consumer credit transaction is initially payable.” Whether a defendant qualifies as a “creditor” can also hinge on whether they extended “credit” as defined in TILA.409

Truth in Lending: 1.2.11a Constitutional Challenges to the CFPB’s Authority to Implement TILA

Ideological hostility to the CFPB existed since the agency’s inception, and recent years have witnessed a spike in judicial challenges to the Bureau’s authority. Certain broad attacks have questioned the constitutionality of virtually every function of the Bureau. If accepted, these arguments could potentially undermine the Bureau’s rulemaking authority and bring into question the validity of the CFPB’s amendments to Regulation Z.

Truth in Lending: 1.2.1 Original Act

In 1968, after years of legislative study, fact-finding, compromise, and struggle, the United States Congress adopted and President Lyndon B. Johnson signed the Consumer Credit Protection Act (CCPA), which consisted of the Truth in Lending Act (Title I) and Restrictions on Garnishment (Title III).27 Passage followed decades of developments at the state level, which informed these federal developments.28 The Truth in Lending Act was landmark legislation.

Truth in Lending: 1.2.13.2 Amendments to Other Federal Mortgage Loan Related Laws

In addition to the TILA amendments in Public Law No. 115–174, the new law also includes provisions affecting other federal statutes relevant to practitioners handling mortgage cases. As described in NCLC’s Mortgage Lending,147 these changes can be found in the SAFE Mortgage Licensing Act; the Home Mortgage Disclosure Act (HMDA); and the Financial Institutions, Reform, Recovery and Enforcement Act (FIRREA) regarding appraisal standards.

Truth in Lending: 1.2.11 The Dodd-Frank Wall Street Reform and Consumer Protection Act

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (hereinafter the Dodd-Frank Act) was signed into law.116 As part of the sweeping changes in this financial reform bill, Congress amended TILA in title XIV of the Act to include a variety of substantive provisions relating to mortgage lending and servicing, and to provide for additional damages recoveries for certain of these violations.

Truth in Lending: 1.3.3 Effective Date of Title XIV Amendments That Require Implementing Regulations

Where title XIV requires regulations, the corresponding statutory provision takes effect on the date the regulations take effect.162 The same should be the case for any provision that cannot go into effect until another statutory provision with implementing regulations also goes into effect. An example would be where one provision requires disclosure of a term that is defined in another section, but where that other section requires regulations to implement the definition.

Truth in Lending: 1.5.3.3.1 General authority

The Truth in Lending statute authorizes the CFPB to depart from the statute in several clauses. Under 15 U.S.C. § 1604(a), the CFPB may implement regulations that “contain such classifications, differentiations, or other provisions, and may provide for such adjustments and exceptions for any class of transactions,” although the statute explicitly carves out high-cost loans from this rule. (A separate statutory provision, 15 U.S.C.

Truth in Lending: 1.3.4.2 Most Court Decisions Use a January 21, 2013 Effective Date

One early federal court RESPA decision finds that Dodd-Frank § 1400(c)(3), which sets out a January 21, 2013 effective date, refers not just to paragraphs (c)(1) and (c)(2), but to any Dodd-Frank title XIV provision, whether rulemaking is required or not.183 It reached this conclusion because the title for section 1400(c) included a semi-colon instead of a colon: “Regulations; Effective Date.” The court found the use of a semicolon to mean that section 1400(c)(3) did not only refer back to paragraphs (c)(1) and (c)(2), but instead referred to

Truth in Lending: 1.5.3.1 History of Regulation Z and the FRB Interpretations

As Congress has recognized since the inception of TILA, the oversight of consumer credit is a full time job, beyond the capacity of a legislature. As a result, Congress delegated broad authority for the implementation of TILA to the Federal Reserve Board.219 The FRB responded by promulgating a comprehensive set of Truth in Lending rules known as Regulation Z, which has been in effect, in various forms, since July 1, 1969.

Truth in Lending: 1.3.4.1 Statutory Language Is Ambiguous

Dodd-Frank § 1400(c)(3) is ambiguous as to whether its January 21, 2013 effective date applies to a statutory provision where implementing regulations are not required.180 The key question is whether section 1400(c)(3) that sets the January 21, 2013 effective date refers only to section 1400(c)(1) and (c)(2) and thus to statutory provisions requiring regulations, or whether it applies to any Dodd-Frank title XIV provision, even those not requiring regulations.