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Truth in Lending: 9.6.3.2 The Relevant Date

The relevant date for selecting the average prime offer rate is not the loan date, but rather the fifteenth day of the month immediately preceding the month in which the application for an extension of credit is received by the creditor.698

Truth in Lending: 9.6.3.3 “Comparable Maturities” Defined

By referencing “comparable maturities,” the law requires that the creditor evaluate the rate for treasury bonds of the same duration as the loan.701 For example, coverage for a five-year loan will be evaluated by reference to the treasury’s five-year bond rates. Coverage for a ten-year loan will be evaluated by reference to the treasury’s ten-year bond rates, and so on.

Truth in Lending: 9.6.3.4 APR Accuracy and Tolerances

All of the “regular” TILA requirements for calculating the annual percentage rate apply to calculating the APR trigger for HOEPA purposes.709 It will be the accurate rate that controls, so the APR must be evaluated for errors.

Truth in Lending: 7.9.7.1 When Required

If the consumer submits a proper billing error notice, the creditor must determine whether a billing error occurred.1126 Before the creditor can determine that no billing error occurred, or that a different error occurred than that complained of, the creditor must conduct a “reasonable” investigation.1127 However, an investigation is not required if the creditor decides to correct the account as requested by the consumer1128 or the consumer w

Truth in Lending: 7.9.7.2 Reasonable Investigation

If the creditor is required to conduct an investigation, the investigation must be “reasonable.”1130 Generally, the issue of whether an investigation is “reasonable” is a question of fact that precludes summary judgment.1131 If the consumer requests, the creditor must provide copies of documentary evidence of the consumer’s indebtedness.1132

Truth in Lending: 7.9.7.3 Time Limits for Investigation

The creditor must investigate and resolve the billing error dispute within two complete billing cycles (or ninety days, if that is sooner).1140 If the billing error notice is received mid-cycle, as is probably the most common situation, the creditor has the rest of that cycle, and then two complete cycles, to take the proper steps—unless that time frame is longer than ninety days.1141 The creditor must meet the timeframe for investigation even if the billing error qualifies for another type

Truth in Lending: 7.9.8.1 Finality of Resolution

The creditor must make a substantive final resolution within the time limits for investigation. If a creditor fails to complete the investigation and fails to provide a written explanation as to why there was no error or a different error, or otherwise fails to comply with the error resolution procedures required in such cases, the creditor generally must credit the disputed amount and related finance or other charges to the consumer’s account.1143

Truth in Lending: 7.9.8.2 Resolution Favoring the Consumer

If the creditor determines that the billing error occurred, it must correct the error and credit the account with any disputed amount and related charges (including charges imposed for the error resolution process, documentation, etc.), and mail or deliver a correction notice to the consumer.1148 The CFPB has filed an enforcement lawsuit against a creditor that failed to refund finance charges for billing errors resolved in the consumer’s favor.1149 The correction notice may be sent separat

Truth in Lending: 7.9.8.3 Resolution Not Favoring the Consumer

If the creditor determines that there was no billing error, or a different error than that complained of, the creditor must: mail or deliver to the consumer an explanation of its reasons for concluding that the billing error asserted by the consumer was wrong in whole or in part; furnish copies of any documentary evidence if the consumer so requests; and correct any different error discovered and credit the account with any disputed amount and related charges (including charges imposed for the error resolution process, documentation, etc.).1153

Truth in Lending: 7.9.8.4 Charges for the Error-Resolution Procedure

If a billing error occurred, even if it was not the error asserted by the consumer, the creditor may not impose a charge related to any aspect of the error-resolution procedure, including charges for documentation, and the consumer’s account must be credited for all such charges previously assessed.1163 The official interpretations imply that an error-resolution charge may be assessed if there is no error, but warns that “[s]ince the Act grants the consumer error-resolution rights, the creditor should avoid any chilling effect on the good f

Truth in Lending: 7.9.10 FCBA Preemption

TILA provides that the provisions of FCBA do not preempt any state law with respect to credit billing practices except to the extent that those laws are inconsistent with FCBA.1186 This preemption standard applies to all of the FCBA’s provisions, not just the billing error protections.1187

Truth in Lending: 7.10.1.1 Introduction

The Truth in Lending Act precludes a credit card issuer from imposing liability on a customer (business or consumer) for unauthorized use of a credit card, except in narrowly defined circumstances.1196 Previously, most credit card agreements held consumers liable for any losses incurred from unauthorized use before the consumer had notified the issuer that the card was lost or stolen.1197 Congress adopted the limitation on liability for unauthorized use to respond to these agreements, so tha

Truth in Lending: 7.10.1.2.1 Protections apply to all types of credit cards, including telephone cards

Regulation Z’s unauthorized use provisions apply to all credit cards, even if they are issued for use in connection with otherwise exempt extensions of credit.1203 A 1984 amendment, aimed primarily at telephone credit cards, made this coverage clear.1204 Calling cards issued by a telephone company are subject to TILA’s unauthorized use rules even if the user is merely allowed to defer payment until the monthly bill is received, rather than rolling over the balance from one month to

Truth in Lending: 7.10.1.2.2 Exclusion for convenience checks

The protections against liability for unauthorized use do not apply if the transaction is made using a check accessing the credit card account,1213 i.e., a “convenience check.”1214 Note that this creates the anomalous result that the protections apply when the unauthorized use involves the credit card number and use of a device such as a telephone or internet,1215 but not when the device is a convenience check.

Truth in Lending: 7.10.2.2 Misuse by Authorized Users

Misuse by an authorized user is not “unauthorized use” subject to TILA’s statutory liability limit.1234 Neither is use by any person who has actual, implied, or apparent authority to use a credit card.1235 Thus, a former employee’s continued use of their employer’s corporate credit card for personal use was not “unauthorized,” since she was an “additional applicant” on the cardholder agreement.

Truth in Lending: 7.10.2.3 Is a User an Authorized User?

Whether a person has actual, implied, or apparent authority to use the card is a question of state law.1244 The card issuer has the burden of proving that the user had actual, implied, or apparent authority and that the conditions for imposing liability on the cardholder have been met.1245 Apparent authority must be proven through actions of the principal, not those of the supposed agent.1246

Truth in Lending: 7.10.3 Cardholder Cannot “Benefit” from Unauthorized Use

Unfortunately, the definition of unauthorized use leaves the cardholder open to merchant fraud. If the cardholder receives some benefit from the use of the card, even if the use is not authorized, it is not an “unauthorized use” under the definition.1263 For instance, some state statutes prohibit a car repairer from charging for work which exceeds an estimate without specific consent.1264 The garage may take an impression of a credit card before beginning work on the vehicle.

Truth in Lending: 7.10.5 Cardholder Notice to Card Issuer of Unauthorized Use

The cardholder or any other person may give the card issuer notice of the loss, theft, or possible unauthorized use of the credit card.1285 Once notice is given, the customer’s liability for unauthorized use is frozen at the amount of unauthorized use, or $50, whichever is less.1286 The notice also requires the card issuer to initiate certain investigative and other procedures.1287 Giving notice of the unauthorized use to the card issuer is n

Truth in Lending: 7.10.6 Investigation Procedures

Because unauthorized use is a type of billing error,1295 the creditor must attempt to resolve the dispute.1296 Even when the consumer has not met the requirements of FCBA’s billing error notice requirements, the creditor is required to conduct a “reasonable” investigation of an unauthorized use claim.1297

Truth in Lending: 7.10.7 Resolution; Adverse Credit Reports

The resolution process for an unauthorized use report is that used for a billing error, which is discussed in detail at §§ 7.9.6–7.9.8, supra.1313 A creditor violated these requirements by sending the consumer only a cursory, ambiguous and incomplete statement about its justifications for concluding that the consumer was liable for the use of the card.