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Truth in Lending: 4.4.6.1 Car Dealer Practices

Often, sophisticated sales techniques, designed to maximize the car dealer’s profit, result in TILA timing violations. Finding and proving these violations requires an understanding of the way in which the car industry sells and finances car sales.

Truth in Lending: 4.4.6.2 Applicable Official Interpretations

The official staff commentary (now official interpretations) issued by the FRB in 2002 addresses these questions.321 First, the FRB explicitly rejected the argument that a creditor can provide a copy of the disclosure within a reasonable time after consummation.322 Second, where the TILA disclosures are combined with the credit contract, the creditor must give the consumer a copy of the unexecuted contract to read and sign.

Truth in Lending: 4.4.6.3 Court Cases

The Fourth Circuit has addressed TILA timing violations in car sales three times.325 The first two times, the court appeared to enunciate a bright line: the consumer must be given the TILA disclosures before the consumer signs the RISC or other documents.

Truth in Lending: 4.4.6.4 Investigating Timing Violations in Car Cases

Practitioners can ask consumers when, in the process, the dealer provided written TILA disclosures in a form the consumers could keep. Some RISC forms will have an extra copy that states it is to be given to the consumer, but many do not. Where the RISC form has the extra copy, proving the timing violation will turn on the consumer’s credibility and any corroborating evidence adduced.329 Former employees may admit to the actual practices of the dealer in depositions.

Truth in Lending: 4.4.7.1.2 Coverage until October 3, 2015 and for some mortgage loans thereafter

Prior to July 30, 2009, TILA mandated the provision of early disclosures for purchase mortgage loans secured by the consumer’s principal residence to which RESPA also applied.335 Effective July 30, 2009, coverage was extended to all transactions in which a security interest is taken in a “dwelling” to which RESPA applies.336 The date is measured by the date of application:337 applications received on or after July 30, 2009 trigger the early disclos

Truth in Lending: 4.4.7.1.3 Coverage beginning October 3, 2015 for loans subject to the TILA-RESPA integrated disclosure regime

In the Dodd-Frank Act, the Consumer Financial Protection Bureau was directed to create “a single integrated disclosure” form combining the existing HUD-1 settlement statement and TILA disclosure form.347 The CFPB finalized the forms and the accompanying regulations on December 31, 2013.348 The rule was effective October 3, 2015, and covers most closed-end consumer credit transactions secured by real property.349 Exclusions and exemptions from the T

Truth in Lending: 4.4.7.2.1.1 Timing rules for loans applied for before October 3, 2015

The early disclosures, “good faith estimates” of the final disclosures,350 must be delivered or mailed within three days after the consumer’s written application is received.351 For loans applied for before July 30, 2009, the early disclosures could be given at consummation, if less than three days elapsed between receipt of application and consummation.352 For loans applied for on or after July 30, 2009, disclosures must be delivered to the homeow

Truth in Lending: 4.4.7.2.1.2 Timing rules for loans applied for on or after October 3, 2015

Effective October 3, 2015, for loans to which the TILA-RESPA integrated disclosure rules apply, the early disclosure (“loan estimate”) requirements generally track those applicable to loans applied for on or after July 30, 2009, with some exceptions.359 Like the good faith estimate, the creditor must deliver (in person or electronically) or place the loan estimate form in the mail not later than the third business day after the creditor receives the consumer’s application.360 If the loan estimat

Truth in Lending: 4.4.7.2.2.2 Format rules for loans applied for on or after October 3, 2015

Effective October 3, 2015, for mortgage loan transactions to which the CFPB regulations combining the TILA and RESPA disclosures apply,388 the good faith estimate and early TILA disclosure are replaced by the “loan estimate.”389 The “closing disclosure” replaces the settlement statement and final TILA disclosure.390 The loan estimate and closing disclosure forms are readily comparable by the consumer and practitioners to assess bait-and-switch conc

Truth in Lending: 4.4.7.2.3.2 Fee restrictions for loans applied for on or after October 21, 2015

The TILA-RESPA integrated disclosure rules that become effective October 3, 2015,397 fairly track the fee restrictions in the previous version of Regulation Z, with one major exception.398 The only fee that a creditor may impose on the consumer before the creditor has provided the loan estimate form and the consumer has “indicated” an intent to proceed with the transaction is a bona fide and reasonable credit report fee.399 A consumer may

Truth in Lending: 4.4.7.3.2 Redisclosure for loans applied for on or after October 3, 2015

Effective October 3, 2015, the redisclosure rules for loan estimates given in transactions governed by the TILA-RESPA integrated disclosure rules are more extensive than the previous rules.411 The loan estimate delivered or mailed no later than the third business day after the creditor receives the consumer’s application is binding. Redisclosure is allowed only in the event of a limited universe of changed circumstances.

Truth in Lending: 4.5.7.1 Estimated Disclosures: General Requirements

A creditor does not have to gamble its TILA liability on information that is unknown at the time the disclosures are made.573 If any information necessary for an accurate disclosure is unknown, the creditor must make the disclosure based on the best information “reasonably available” and must state that the disclosure is an estimate.574 Where an estimate can be made, the creditor may not avoid disclosure because the exact figures were not known.575

Truth in Lending: 5.11.2.2 Coverage

Regulation Z § 1026.19(e) contains rules governing timing, waiting periods, shopping, a list of providers, predisclosure imposition of fees, the good faith standard, estimates, and changed circumstances, and related rules governing the early disclosures, now named the “Loan Estimate.” These rules are discussed at §§ 4.4.7.2.1,

Truth in Lending: 5.11.2.3 Persons Subject to the Rules

First and foremost, creditors are ultimately responsible for providing the early and final disclosures.800 The TILA definition of creditor applies rather than the RESPA definition of lender.801 Second, when a mortgage broker802 receives the consumer’s application, the broker or the creditor may provide the early TILA-RESPA combined disclosure to the applicant.803 If the broker delivers the loa

Truth in Lending: 4.4.7.4 TILA-RESPA Integrated Closing Disclosure

Effective October 3, 2015, the creditor must ensure that the consumer receives the closing disclosures no later than three business days before consummation for mortgage loans to which the TILA-RESPA integrated disclosure rules apply.432 In the context of the closing disclosure, “business day” is defined to mean all calendar days except Sundays and the legal public holidays.433 In a rescindable transaction, each consumer who has a right to rescind must be given a

Truth in Lending: 4.4.7.6 Waiver

Consumers can, in some circumstances, waive receipt of the early disclosures.462 Consumers may also waive the timing of the early disclosures. Thus, a consumer could choose to get the disclosures more than three days after application or less than seven days before closing.

Truth in Lending: 4.4.7.7 Remedies for Violations of the Early Disclosure Rules

As with the preexisting timing regulations, failure to comply with the timing requirements should give rise to a claim for actual damages.482 The question of statutory damages for timing claims is controversial and is discussed elsewhere.483 Rescission will not ordinarily be available for the failure to make the early disclosures in purchase money mortgages, since rescission is not generally available for purchase money mortgages.484

Truth in Lending: 4.4.8 Timing Rules for Variable Rate Transactions Secured by the Consumer’s Principal Dwelling

Creditors are required to provide consumers with extensive information about the variable rate feature of closed-end adjustable-rate mortgages (ARMs) secured by the consumer’s principal dwelling and with a maturity longer than one year when such loan terms are contemplated.489 These disclosures must be provided to prospective borrowers when an application form is furnished or before the payment of a nonrefundable fee, whichever is earlier.490 However, creditors may deliver disclosures, or place