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Truth in Lending: 5.14.3.4 Final Disclosures

The creditor is required to provide the consumer with final disclosures after the consumer has accepted the loan.1517 The content of the final disclosures is similar to the approval disclosures, with the addition of information about the cancellation right.1518 The sample form has a box at the top titled “Right to Cancel” and including this statement: “You have a right to cancel this transaction, without penalty, by midnight on DATE.

Truth in Lending: 5.14.3.5 Self-Certification

The creditor must obtain a self-certification form from the consumer or the school with information about cost of attendance, the expected family contribution, and estimated financial assistance.1519 The creditor may receive the form directly from the consumer or from the consumer through the school.

Truth in Lending: 5.14.3.6 Cancellation

The consumer has a right to cancel a closed-end private education loan, without penalty, until midnight of the third business day following the date on which the consumer receives the final disclosures. No funds may be disbursed until the three-day period has expired.1529

Truth in Lending: 5.14.3.7 Remedies

Actions for violations involving private education loans may be brought one year from the date on which the first regular payment of principal is due under the loan.1530 There is a private right of action for several, but not all, of the approval and consummation disclosure requirements.1531 Congress also added the new private loan right of cancellation to the TILA rescission remedies section.1532 Lenders are not liable for failure to comply

Truth in Lending: 5.14.4 Disclosures Required for Open-End Private Student Loans

Some lenders offering private student loans may attempt to structure the transactions as open-end credit. The TILA disclosures rules applicable to private education loans discussed above only apply to closed-end consumer credit. Whether any particular student loan actually meets the TILA definition of open-end credit necessitates a careful analysis of the loan terms.

Truth in Lending: 9.10.2.2.1 Who is a “covered person”?

The transfer notice requirement is intended to apply to persons who acquire ownership of mortgage debt.1156 Thus, the rule uses the term “covered person” rather than “creditor” to describe persons subject to its requirements.1157 There are two basic requirements to be a “covered person” under the rule:

Truth in Lending: 9.10.2.2.2 What does it mean to acquire the legal title?

The rule applies even if ownership is transferred to a different legal entity based on a merger, acquisition, or reorganization.1180 Affiliates that are separate legal entities from the transferor must provide the disclosure if legal title of the loan is transferred to it.1181 If the original creditor or an assignee transfers partial interests in the loan to two or more entities, each entity becomes a covered person.1182 Assumption of t

Truth in Lending: 9.10.2.2.4 The special case of MERS

Theoretically, transfers to or from the Mortgage Electronic Registration System (MERS) should not trigger the requirement of notice.1195 MERS never owns the debt obligation; at most it is a nominee for the true holder.1196 Rather, MERS acts as a public place holder for the true owner, while the ownership of the note is transferred within the MERS system.

Truth in Lending: 9.10.2.3.1 When should the notice be sent?

The disclosures must be in writing1201 and mailed or delivered on or before the 30th calendar day following the date the covered person acquires the loan.1202 For example, if a covered person acquires a mortgage loan on March 1, the disclosure must be mailed or delivered on or before March 31.

Truth in Lending: 9.10.2.3.2 To whom is the notice sent?

The notice is to be provided to the “borrower,” a term not defined in TILA.1206 The implementing regulations use the term, “consumer,”1207 which includes anyone to whom the credit is offered or extended.1208 Thus, borrowers whose personal liability is extinguished in a bankruptcy should still be entitled to notice because the credit was originally offered and extended to them.1209

Truth in Lending: 9.10.2.4.1 Identification of the loan

The notice sent to the borrower must identify the loan that was acquired or transferred. The covered person is given flexibility on how to disclose this, such as by providing the property address and the pre-transfer loan number, or just the pre-transfer loan number, or the date when the credit was extended and the original loan amount or credit line.1211 The notice sent to the borrower also must contain disclosure of four categories of information discussed in the following subsections.

Truth in Lending: 9.10.2.4.2 New owner’s identity, address, and telephone number

The covered person under the rule who is the party acquiring the loan must disclose its name, address, and telephone number.1213 This information must be provided even if there is another party who is servicing the loan.1214 If there is more than one covered person, the information need only be provided for one person, if that person is authorized to receive notice of rescission and resolve payment issues.

Truth in Lending: 9.10.2.4.3 Acquisition date

The covered person must disclose the date that the loan was acquired.1215 The acquisition date is the date that is recognized in the books and records of the acquiring person or the date the transfer was recognized on the books of the transferring party.1216

Truth in Lending: 9.10.2.4.4 Agent’s contact information

The notice sent to the borrower must disclose how to reach an agent or party having authority to act on behalf of the covered person.1217 The notice must identify a person (or persons) authorized to receive legal notices on behalf of the covered person and resolve issues concerning the consumer’s payments on the loan.1218 The rule does not require the covered person to appoint persons for these purposes if they do not exist when the loan is acquired.

Truth in Lending: 9.10.2.4.5 Recording location

The notice must disclose “the location of the place where transfer of ownership of the debt is recorded.”1221 Because the statute refers to ownership of the debt, the FRB construed the requirement as applying only if transfer of the debt’s ownership has been recorded. This interpretation renders it meaningless because transfers of debt ownership are generally not recorded in public land records, in contrast to assignments of mortgages (though not uniformly throughout the states).1222

Truth in Lending: 9.10.2.4.6 Optional disclosures

The 2009 Act provides that the party acquiring a loan shall notify the borrower of “any other relevant information regarding the creditor.”1223 The CFPB permits creditors to determine this information in their sole discretion, although creditors may not ban borrowers from contacting them directly, instead of going through the servicer.1224

Truth in Lending: 9.10.2.5 Remedies

Actual damages, where demonstrated, statutory damages, and attorney fees should be available.1225 Statutory damages are available for section 1641(g) violations per the express language in section 1640(a).1226 Several cases, mostly in California, have erroneously concluded that statutory damages are not available for section 1641(g) violations unless the plaintiff alleges actual damages.1227 One court ruled that a section 1641(g) violat

Truth in Lending: 5.15.2.1.2 What is and is not a refinancing

Typical examples of refinancings include consolidation of several existing obligations, disbursement of additional proceeds to the consumer or the consumer’s other creditors, or the rescheduling of payments.1556 A new loan completely replacing a canceled loan is a refinancing, even if the terms of the new loan are indistinguishable from those of the old one.

Truth in Lending: 10.1 TILA Rescission Overview

In addition to being entitled to a disclosure statement prior to consummating a credit transaction, a homeowner has a right under the Truth in Lending Act to rescind most transactions for which the home is taken as collateral, other than transactions for the purchase of the home. Home equity loans, loans that refinance a home purchase loan, and home improvement credit sales are common examples of rescindable transactions.

Truth in Lending: 10.2.3 Applicability of Rescission to PACE Loans

The growing use of residential property assessed clean energy, or PACE, programs in states around the country may lead to questions as to whether the right of rescission applies to PACE transactions.58 PACE contracts in California and similar ones in other states arguably meet the definition of “credit” and are generally covered by TILA, as discussed

Truth in Lending: 10.2.4.1 Basic Definition

The second basic requirement for rescission rights to arise is that the transaction must involve a security interest in the consumer’s principal dwelling.68 Regulation Z defines “security interest” as “an interest in property that secures performance of a consumer credit obligation and that is recognized by state or federal law.”69 (Whether a transaction is excluded because the security interest was created to finance the construction or purchase of the dwelling is discussed at