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Truth in Lending: 8.2.1 Introduction

Creditors offering home equity lines of credit (HELOCs) must comply with all standard TILA provisions for advertising open-end credit.44 There are also special requirements for advertising HELOCs.45 Significant changes in the advertising rules took effect in 2009.46 Note, however, that TILA provides no private remedy for violations of its advertising rules.47 Nevertheless, it

Truth in Lending: 8.2.4.1 General

In the past, one of the most common abuses in advertising HELOCs was the use of “teaser rates” (more technically called “discount rates”). Creditors would often advertise very low rates for HELOCs without also clearly disclosing that the HELOCs were variable-rate plans and that the discounted teaser rates would soon be replaced by substantially higher rates based on the index and margin of the plan.

As a result, the regulations provide for special disclosures in two cases:

Truth in Lending: 8.3.1.2 Brochure

Both creditors and third parties providing applications must furnish consumers with a brochure available from the CFPB describing HELOC plans.115 The brochure describes HELOC plans, including their potential advantages and disadvantages. The brochure also provides guidance on how to compare HELOC plans with closed-end credit.

Truth in Lending: 8.3.3 Duties of Third Parties

Third-party originators (e.g., mortgage brokers) often provide HELOC applications to consumers and must provide the HELOC brochure.126 But, they need only provide the early HELOC disclosures if the creditor has provided the originator with the disclosures.127

Truth in Lending: 8.3.4.6.2 Balloon payments

Any possible balloon payment must be disclosed.151 Regulation Z states that “[a] balloon payment results if paying the minimum periodic payments does not fully amortize the outstanding balance by a specified date or time, and the consumer must repay the entire outstanding balance at such time.”152 The official interpretations say a final payment is not a balloon payment unless it is more than twice the amount of other minimum payments under the plan.153

Truth in Lending: 8.5.1.1 General Requirements

Home equity line of credit (HELOC) creditors are required to send periodic statements when the account has a debit or credit balance of at least $1 or if the creditor has imposed a finance charge.330 The provision governing periodic statements for HELOCs is found in subpart B of Regulation Z, which applies to open-end credit.

Truth in Lending: 8.6.7.3.1 Generally

A creditor may change the index and margin used under a variable rate HELOC if the original index becomes unavailable. Historically, this provision has rarely been used. But it became more relevant when the widely used LIBOR (London Interbank Offered Rate) index ceased publication on June 30, 2023.438

Truth in Lending: 8.6.7.3.2 Replacing the LIBOR due to unavailability

A creditor replacing the LIBOR may follow the general rules in § 8.6.7.3.1, supra, or another set of rules written exclusively for the LIBOR. They are slightly different. Under the LIBOR rules, creditors were authorized from April 1, 2022 to replace it and the contractual margin, rather than wait until the LIBOR became unavailable in 2023.

Truth in Lending: 8.8.3.1 Overview

In addition to any required disclosures for open-end and closed-end mortgages,534 reverse mortgage creditors must also disclose the total annual loan cost (TALC) rate.

Truth in Lending: 8.8.3.2 Calculating the TALC Rate

Before jumping into the weeds of calculating the total annual loan cost (TALC) rate, carefully review the description of the TALC rate in the previous section. Appendix K to Regulation Z is an important guide as to the nuts and bolts of the calculation. Also, the Federal Reserve Bank of New York published a friendlier description in its compliance newsletter.546 This subsection is a summary of that article. Determining the TALC rate requires some standard assumptions that make things easier:

Truth in Lending: 13.2.2.1 General

The CLA does not apply to leases where the total contractual obligation exceeds a specified dollar amount. “Total contractual obligation” is not necessarily the total of payments,14 it is not defined in Regulation M, and the term’s meaning is thus somewhat uncertain. In general, it is payments that must be made to the lessor over the term of the lease, but not those forwarded to third parties.

Consumer Arbitration Agreements: 5.4.2.1 General

Whether a particular dispute falls within the scope of an arbitration clause is a matter of contract interpretation that turns on whether the language of the agreement, which sets out the types of disputes subject to arbitration, encompasses the dispute at issue as understood “based on the complaint’s factual allegations rather than the legal causes of action asserted.”83

Consumer Arbitration Agreements: 5.6.3b Telemarketers and Others Subject to the TCPA

In many cases involving telemarketers and unwanted robocalls there is no contract at all between the parties or entities related to the parties, so there can be no arbitration requirement. For example, no arbitration clause will protect a telemarketer that makes cold calls in violation of the FCC’s do-not-call list rule, the Telephone Consumer Protection Act (TCPA)’s prohibition against prerecorded telemarketing calls to residential lines, or its prohibition of robocalls to cell phones.

Consumer Banking and Payments Law: 11.2.8.1 E-Sign Preemption of UETA and Other State Law

This section deals with the issue of when E-Sign overrides state law, when state law is relevant regardless of E-Sign, and when—in rare circumstances—state laws supersede or displace E-Sign. Generally, E-Sign is an overlay on state law, meaning that it only preempts conflicting state law, while still allowing state law that does not conflict with E-Sign to prevail.

Consumer Banking and Payments Law: 11.3.2.1 General

UETA section 5 explicitly applies only to transactions when both parties have agreed to conduct transactions by electronic means.147 E-Sign’s parallel requirement is implicit rather than explicit; the Act does not “require any person to agree to use or accept electronic records or electronic signatures, other than a governmental agency with respect to a record other than a contract to which it is a party.”148

Consumer Banking and Payments Law: 11.3.2.6 Electronic Records Can Prove the Terms of the Contract

Some courts seem to be stretching the intent of the statute of frauds by looking at exchanges of emails between contracting parties to ascertain not only the terms of contracts, but also whether the parties intend to be bound by the emails.187 In some cases, even when it appears that a final, paper-written, formal agreement to be signed by all parties was contemplated, a binding contract has been found to exist from the language, tone, signatures, and terms included in the emailed negotiations between the part

Consumer Banking and Payments Law: 11.4.1 Reasons for Special Consumer Consent Requirements

The use of electronic records in consumer transactions raises concerns requiring special consumer protections. While some consumers regularly engage in electronic transactions, this cannot be said of all consumers. Access to the internet varies considerably based on the characteristics of the user’s household. The lower the income, the less likely the user is to have access to the internet.