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Truth in Lending: 10.8.2.2 Tender in Cash

Easiest, of course, are the rare instances when the loan proceeds are still available or the family has sufficient savings to tender with cash. In such a case, the creditor might be informed that the tender obligation is being placed in escrow pending confirmation that the creditor’s duties have been performed. If the consumers are planning to sell the house, the tender might be paid from the loan proceeds.1354

Payments into escrow (or directly to the creditor) while the case is pending will also build up cash for tender.

Truth in Lending: 10.8.2.3 Tender by Third-Party Refinancing

Some consumers may be in a position to refinance the rescinded credit transaction at more favorable terms from another lender, using the proceeds of the refinancing to fulfill the tender.1355 Even consumers in financial distress should be counseled to explore refinancing at better terms if their income is regular, since the more favorable terms may make their debt payments entirely manageable.1356 This is especially worth exploring where the loan being rescinded was a high-rate, heavily

Truth in Lending: 10.8.2.4 Tender Through a Reverse Mortgage for Older Homeowners

A reverse mortgage may be an appropriate option for an older consumer in some circumstances.1360 Reverse mortgages are secured loans designed to let older homeowners get the equity out of their homes without being saddled with monthly repayment demands on fixed incomes. In most cases, the homeowners do not have to repay the debt so long as they live in the home, and repayment comes solely from the property—the borrowers are not personally liable. As with any plan which sounds almost too good to be true, there are drawbacks.

Truth in Lending: 10.8.2.5 Tender Through a Loan Modification

The consumer also could use the rescission right to negotiate a new, affordable payment plan with the original creditor.1364 Lenders will often agree to a workable loan modification, refinancing, or other workout scenario, as long as it is presented in a way that illustrates the pragmatic benefits of such a settlement. For example, a reasonable compromise between the basic tender amount and what the lender would get in a chapter 13 proceeding may be appealing to all parties.

Truth in Lending: 10.8.2.7 Tender Through Sale of the House

Sometimes, no matter how low the tender amount goes, remaining in the home is no longer feasible for the borrower. This may be because the borrower has no funds to make any payments. It may be because the borrower’s health or the condition of the home has declined during the course of litigation.

Truth in Lending: 10.8.2.8 Tender of the Home to Lender

Some practitioners have argued that tendering the property to the creditor—the home—satisfies the tender requirement. This tactic is particularly appealing when the homeowner owes more than the home is worth, even after rescission, and neither sale nor refinancing are viable options.

Truth in Lending: 10.8.3.1 Reasons for the Consumer to Continue Making Payments

There are advantages if the consumer can continue making mortgage payments while the right to rescind is litigated.

First, if the consumer continues to make payments the creditor will be less likely to succeed in portraying the consumer as a deadbeat, and the court will be less likely to feel that the equities favor the creditor.1383 By continuing to pay, the consumer shows a level of responsibility that the court may weigh when deciding about equitable modification.1384

Truth in Lending: 10.8.3.2 Continuing to Make Payments to the Creditor

If the consumer makes payments to the creditor, the consumer should make it clear that the payments represent installments toward the tender amount and are made without prejudice to the rescission claim. Otherwise, the creditor may argue that the consumer waived rescission by making payments after sending the cancellation notice.1386

Truth in Lending: 10.8.3.3 Making Payments into Escrow

Instead of making payments to the creditor, it may be better for the consumer to make payments into a trust or escrow account. Making the payments into a trust or escrow account rather than directly to the creditor increases the consumer’s negotiating position, as the creditor sees a growing sum of money that it will only get if it comes to terms with the consumer. Payments into a trust or escrow account may also be the only option if the consumer is unable to make the full monthly payment, as mortgage lenders commonly refuse partial payments.

Truth in Lending: 10.8.4 Tender in Bankruptcy

Exercise of rescission rights can substantially improve the position of a debtor in bankruptcy, and may be an easier way for the debtor to manage the TILA tender. The majority of courts which have considered the question have most often concluded that the policies of both TILA and the Bankruptcy Code are served only if the lien is treated as void and the creditor treated as an unsecured creditor.

Truth in Lending: 6.6.5.6.3 Penalties that revoke an introductory rate

If an introductory rate is disclosed in the account-opening table,1096 the creditor must briefly disclose directly beneath the table the circumstances under which the introductory rate may be revoked, and the type of rate that will apply after the introductory rate is revoked.1097 Note that, for credit cards under an open-end (not home-secured) consumer credit plan, issuers are prohibited from revoking a promotional rate for outstanding or “protected”1

Truth in Lending: 6.6.5.6.4 Loss of employee preferential rate

If the creditor discloses an employee preferential rate in the account-opening table, the creditor must briefly disclose beneath the table any circumstances under which the preferential rate may be revoked, and the rate that will apply after revocation.1101 This provision includes any preferential rate for employees of the issuer, employees of a third party, or individuals with a similar affiliation to the issuer or third party, such as executive officers, directors, or principal shareholders.1102

Truth in Lending: 6.6.6.1 Comparison of Current and Post-July 2010 Scheme

Prior to July 2010, Regulation Z placed fees that can be charged in an open-end credit plan into three categories: finance charges; “other” charges; and a third category created by the official interpretations of non-disclosed fees excluded from any TILA coverage.1105 The account-opening disclosures were required to disclose the first two categories: “finance charges” and “other charges” (which are not finance charges). Indeed this is how fees are described in TILA itself.1106

Truth in Lending: 6.6.6.2.2 Fees for the issuance or availability of a card

Creditors are required to disclose any annual or other periodic fee or any one-time fee imposed for the issuance or availability of an open-end credit plan, including fees based on account activity or inactivity.1116 Note that Regulation Z’s substantive prohibitions prohibit the imposition of fees for account inactivity for credit cards under an open-end (not home-secured) consumer credit plan.1117

Truth in Lending: 6.6.6.2.3 Minimum finance charge

Creditors must disclose any fixed finance charge or minimum interest charge and a brief description of such charges.1122 A minimum interest charge is one that would be imposed when the amount of such a charge is greater than the finance charge that would otherwise be imposed for such period under the applicable APR.

Truth in Lending: 6.6.6.2.5 Cash advance and balance transfer fees

Open-end creditors are required to disclose fees for cash advances in the account-opening table.1131 This will include cash advance fees for foreign transactions.1132 However, creditors will not need to disclose any ATM fees for cash transactions imposed by a third-party ATM owner.1133 Creditors are also required to disclose any balance transfer fee the account-opening table.1134 A discussion

Truth in Lending: 6.6.6.2.7 Required credit insurance, debt cancellation, or debt suspension coverage

Creditors that require the consumer to purchase credit insurance, debt cancellation or debt suspension coverage as part of a credit card plan must disclose the fees for such coverage in the required table.1137 In addition, issuers must include a cross-reference to where the consumer can find additional information about such coverage, if applicable.1138 Another volume in this series discusses these products in detail.1139

Truth in Lending: 6.6.6.3.1 When and how disclosed

Creditors are required to disclose charges that are “imposed as part of an open-end (not home-secured) plan” regardless of whether they are finance charges or not.1140 However, if the charges are not required to be disclosed in the account-opening table, then they need not be disclosed at all at the time of account opening,1141 nor do they need to be disclosed in writing.1142 They can be disclosed at any time prior to when the consumer actual