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Consumer Banking and Payments Law: 6.6.2 EFTA Application to P2P Services

The specific international remittance provisions of the EFTA do not apply to domestic remittances. However, the primary EFTA provisions governing electronic fund transfers will apply if the transaction meets the definition of an “electronic fund transfer” in the EFTA and Regulation E.321 That definition covers transfers to and from an account, which includes a “prepaid account,” such as a mobile wallet or money transfer service that can store funds.322

Consumer Banking and Payments Law: 6.6.4.4 Cancellations and Refunds of Funds Not Transmitted

In some states, such as California and Texas, the state money transmitter law requires funds to be refunded if they are not transmitted within ten days of receipt.393

Texas also permits a customer to cancel the currency transaction before leaving the premises of the currency transmission business, but not later than thirty minutes after the time the currency transmission was initiated, and not after the recipient of the transmission has received the currency or its equivalent.394

Consumer Banking and Payments Law: 6.7.1 Overview

Article 4A of the Uniform Commercial Code governs funds transfers between “banks” and other financial institutions.414 The definition of “funds transfer” is quite broad, but transfers that are covered by the Electronic Fund Transfer Act (EFTA) are excluded from UCC Article 4A.415 Most consumer funds transf

Consumer Banking and Payments Law: 6.7.2 Bank-to-Bank Wire Transfer Systems

There are three wire transfer systems that receive payment orders from financial institutions and transmit funds back to them in accordance with those orders. Fedwire is operated by the Federal Reserve banks and is used to transmit funds in U.S. dollars within the United States between banks that are in the Federal Reserve System.

Consumer Banking and Payments Law: 6.7.6.1 Each Party Responsible for Their Own Errors

Article 4A addresses two kinds of errors—(1) those caused by the originator (i.e., the consumer sending a wire transfer) and (2) those caused by others in the transfer chain. Errors can occur, for example, due to a mistaken or ambiguous description of the order by the originator or due to an inadvertent alteration of the order by the originator’s bank or by one of the subsequent banks or parties sending that order through the system.

Consumer Banking and Payments Law: 6.7.7 Timeline to Dispute Transfers

Article 4A contains a “bank statement rule” that places duties upon the originator similar to those placed on bank customers under UCC Article 4.541 The bank customer must review any bank statements or notifications provided by the bank for any errors or unauthorized transfers. Under U.C.C.

Truth in Lending: 5.15.2.2.2 Loan-splitting and 80/20 transactions

Another version of loan-splitting involves a creditor splitting a mortgage loan into two transactions, signed on the same day or within a short period of time from each other. One loan is a large mortgage loan that usually refinances a first mortgage and, perhaps, consolidates other debts. This mortgage is typically made at about an eighty percent loan-to-value ratio. The second is a small home-equity line of credit, often at a high interest rate, and is secured by the remaining twenty percent of equity in the home. This second loan often funds the closing costs on the big mortgage loan.

Truth in Lending: 5.15.4 APR Reduction

A new obligation that has a lower annual percentage rate than the original obligation with a corresponding change in the payment schedule is not considered a refinancing.1585 Examples would include a shortened maturity date, reduced number of payments, or smaller required payments; however, the official interpretations make clear that this exception does not apply if the maturity is lengthened or if the payment amount or number of payments is increased beyond that remaining on the existing transaction.

Truth in Lending: 5.15.5 Court Agreements

Another exception to the general refinancing disclosure rules covers agreements made in the context of litigation.1588 Examples of such agreements include reaffirmation of debts discharged in bankruptcy,1589 settlement agreements, and postjudgment agreements.1590 It is important to note that these agreements, which are basically voluntary agreements between the parties and are not considered refinancings, are distinguished from court judgment

Truth in Lending: 5.15.7 Insurance Renewals

Sometimes “optional” insurance, such as credit insurance, is renewed prior to the expiration of the obligation and the cost of the new insurance premium (and the cost of financing that premium) is added to the payment schedule.

Truth in Lending: 5.15.9.2 “Existing” Residential Mortgage Transaction

Despite the plain words of Regulation Z, the official interpretations take the position that “existing” residential mortgage transaction refers to the new transaction rather than the original transaction. It gives the example of a consumer who buys a house for vacation purposes (so it is not a “residential mortgage transaction”) and sells it to a consumer who assumes the mortgage and will use the house as a principal dwelling (which is a “residential mortgage transaction”).

Truth in Lending: 5.15.9.4 Assumption Disclosures

If the transaction is an assumption for TILA purposes, the creditor must make new TILA disclosures to the subsequent consumer based on the “remaining obligation.”1640 All of the disclosures required in any credit transaction governed by TILA must be given (except for those assumptions that only require abbreviated disclosures).1641 The official interpretations give a few clues as to what those full disclosures should contain.

Truth in Lending: 5.15.9.5 Abbreviated Disclosures

Some assumptions do not require the full range of TILA disclosures and require only abbreviated disclosures. Abbreviated disclosures for assumptions may be made if the finance charge in the original transaction was calculated by the add-on or discount method (“precomputed”)1647 as opposed to the application from time to time of an interest rate to the unpaid balance (“interest-bearing”).1648

The abbreviated disclosures include only: