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Truth in Lending: 1.2.13.1 Mortgage Lending Amendments to TILA

In 2018, Congress passed the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018,144 creating a handful of exceptions to Dodd-Frank’s TILA protections for mortgage borrowers. The TILA-related provisions are discussed below, followed by an analysis of the applicable effective dates.

Truth in Lending: 1.5.3.4.7 Other post-2010 rulemaking

The CFPB published an interim final rule on appraiser independence on October 28, 2010, effective in part on December 27, 2010, and in part on April 1, 2011.328

In 2012, in order to conform to an adverse court decision, the CFPB adopted an interim final rule that permits subprime fee harvester credit cards to charge pre-account opening fees that exceed the cap on fees that Congress enacted in 2009.329 It finalized the revision in 2013.330

Truth in Lending: 1.1.2 The Role of Truth in Lending Act in Consumer Advocacy

A working knowledge of the Truth in Lending Act (TILA) can help attorneys evaluating clients’ prospective credit transactions. A TILA analysis will reveal whether a transaction is a sound value, a Christmas tree loan, loaded with expensive and unnecessary charges,13 or a potential disaster for the borrower, such as a loan with an unaffordable balloon payment or an unmanageable variable rate feature.14

Truth in Lending: 1.5.3.2 Validity of Regulation Z and Official Interpretations

The authority of the various FRB interpretations of TILA and Regulation Z has been the subject of substantial litigation.230 The issue first reached the Supreme Court in 1973 in Mourning v. Family Publications Service,231 in which the court upheld the FRB’s authority to promulgate the “four installment rule” in Regulation Z as a measurement for when a business “regularly” extends credit and is therefore subject to TILA.

Truth in Lending: 1.2.7 The Higher Education Opportunity Act of 2008 (HEOA)

The Higher Education Opportunity Act of 2008 (HEOA)86 eliminated the $25,000 TILA limit for private education loans87 and exempted some transactions.88 The HEOA also added numerous new disclosure requirements to TILA that apply to private student loans.89 The Federal Reserve Board issued regulations in August 2009.90 Effective February 14, 2010, lenders making pri

Truth in Lending: 1.5.4 Case Law

The importance of case law to the Truth in Lending Act is similar to its importance in other fields of law; the courts are the final arbiters of how to interpret TILA and its associated regulations.334 One difficulty is determining the value of the numerous pre-Simplification cases335 under the current law. There is no one answer to this problem because the amendment of TILA and Regulation Z was not uniform.

Truth in Lending: 1.5.3.4.2 Open-end credit review

There were five stated goals of the open-end credit review: (1) to improve the effectiveness and usefulness of open-end disclosures; (2) to consider concerns about information overload; (3) to study alternatives for improving the format of disclosures; (4) to improve the substantive protections included in the act, most notably, those addressing inaccurate and unfair credit card and billing practices; and (5) to facilitate creditor compliance and to reduce unnecessary regulatory burden.301

Truth in Lending: 1.5.5 Treatises

Luckily for both the practitioner facing the consumer credit maze for the first time and the experienced practitioner considering some of the more arcane points of credit disclosure, there are some treatises and law review articles on TILA. This treatise is one such reference. It is updated regularly online and new paper editions are published every few years. Truth in Lending has been cited in over a hundred law reviews, journals, and continuing legal education publications, and numerous reported decisions.338

Truth in Lending: 1.3.4.3 The Case for a July 22, 2010 Effective Date

If section 1400(c)(3) refers only to paragraphs (c)(1) and (c)(2) and thus applies only to provisions requiring rulemaking, then Dodd-Frank title XIV provisions not requiring rulemaking go into effect on the Dodd-Frank Act’s default effective date of July 22, 2010.190 The two major arguments against such an interpretation are a number of RESPA cases holding to the contrary with little or no analysis and the statement by Senator Dodd referred to at

Truth in Lending: 1.5.3.4.3 Closed-end credit review

The FRB began its work on the second phase of its review of Regulation Z by suggesting major improvements in the closed-end disclosures for real-estate-secured transactions.309 The FRB noted in its announcement that the practice of recognizing extensive exceptions to the finance charge is seriously flawed and that it creates an incentive for lenders to unbundle the costs of credit and add junk fees.

Truth in Lending: 1.2.13.3 Effective Dates for TILA Amendments

The effective dates of the TILA amendments depend on various factors, such as, whether the statute directs the CFPB to issue regulations. Where the statute is silent on an effective date and Congress did not explicitly require regulations, the amendment takes effect on the date of enactment.148 The presumed date of enactment for federal statutes is the date when the statute is signed into law by the president.149 The president signed S. 2155 into law on May 24, 2018.

Truth in Lending: 1.2.9 The Mortgage Disclosure Improvement Act

In July 2008, Congress amended TILA with the Mortgage Disclosure Improvement Act to require early disclosures for extensions of credit secured by a dwelling.104 Early disclosures, in the same format as the final TILA disclosures, must be provided for all closed-end loans secured by a “dwelling of a consumer,” whether or not a principal dwelling. Disclosures must be delivered three business days after application (the current law for purchase mortgage transactions), but no less than seven business days before closing.

Truth in Lending: 1.5.1 Introduction

One of the complications of handling Truth in Lending Act issues is the number of sources of law. These include TILA itself, the Consumer Financial Protection Bureau’s Regulation Z, which implements the Act, the Official Interpretations of Regulation Z, legislative204 and regulatory205 history, and case law,206 which must be divided into post-Simplification cases and pre-Simplification cases. Finally, there are treatises and law review articles.

Truth in Lending: 1.2.2 Truth in Lending Simplification

Both legal services attorneys on behalf of low-income consumers and a segment of the private bar developed significant TILA practices. Creditors who did not comply with the Act found themselves defendants in thousands of lawsuits filed on the basis of TILA noncompliance and found themselves losing what had previously been routine collection actions because of TILA counterclaims.

Truth in Lending: 1.5.3.3.4 Waiver authority for trial disclosure programs

The Dodd-Frank Act grants the CFPB authority to allow a covered person to conduct a trial program for the purpose of providing trial disclosures to consumers that are designed to improve upon any model form issued by the agency, so long as the program is limited in time and scope and is subject to specified standards and procedures.270 During the limited trial period, the covered person conducting the trial disclosure program is deemed to be in compliance with, or may be exempted from, a requirement of a rule or an enumerated consumer law.

Truth in Lending: 1.2.10 The Helping Families Save Their Homes Act of 2009

The Helping Families Save Their Homes Act of 2009 amended the Truth in Lending Act in two ways. First, it added a requirement that borrowers be notified whenever ownership of their mortgage loan is transferred.110 The new owner or assignee must notify the borrower in writing, within thirty days after the loan is sold or assigned, of its identity, address, telephone number, and the date of transfer and location where the transfer is recorded.

Truth in Lending: 1.4 Outline of the Truth in Lending Act

The Truth in Lending Act is codified at 15 U.S.C. §§ 1601–1666j. It is technically title I of the Consumer Credit Protection Act. TILA is divided into five “parts” (if you are reading the U.S. Code) or “chapters” (if you are reading the pamphlet published by the FRB).195

Truth in Lending: 1.2.4 The Home Ownership and Equity Protection Act of 1994

The next major consumer protection amendment to TILA came with the Home Ownership and Equity Protection Act of 1994 (HOEPA).59 It defines a group of high-rate closed-end mortgage transactions and singles them out for special regulation, including advance disclosure requirements, prohibition of abusive terms, and special liability rules.

Truth in Lending: 1.5.2.1 General

The basic source of Truth in Lending law is, of course, the statute itself,207 reprinted at Appendix A to this treatise. As a practical matter, however, the statute will seldom provide quick answers to everyday Truth in Lending Act questions.