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Truth in Lending: 9.6.2.3.2 Is HOEPA’s definition independent of the general definition of “creditor”?
Section 1602(g) (formerly section 1602(f)) which contains HOEPA’s special definition of “creditor,” starts with a general definition of the term. To meet the general definition, a person must, among other things, regularly extend consumer credit which is payable by agreement in more than four installments or for which payment of a finance charge is or may be required.
Truth in Lending: 9.6.2.4.1 Purchase and construction credit until January 10, 2014
For loan applications received prior to January 10, 2014, “residential mortgage transactions” are exempt from HOEPA.659 That term is generally defined by TILA to include purchase money security interests to finance the acquisition or initial construction of the consumer’s dwelling.660 Consequently, HOEPA applied to refinancing and other home equity loans that meet its cost triggers, but not to purchase and construction loans.661 This exemptio
Truth in Lending: 9.6.2.4.2 Purchase and construction credit no long exempt on or after January 10, 2014
One of the Dodd-Frank Act’s most dramatic changes to HOEPA is its deletion of this limitation.
Truth in Lending: 9.6.2.4.3 Reverse mortgages
When HOEPA was enacted, it contained explicit exemptions for reverse mortgages.
Truth in Lending: 9.6.2.4.6 Agency authority to exempt other mortgage transactions
In addition, the CFPB has discretionary authority under the Act to exempt specific mortgages or categories of mortgages from some of the prohibitions under the Act, but not from the disclosures.682 This authority is significantly more limited than the general “adjustment” authority.683 In order to create an exemption, the Bureau must find that the exemption is in the interest of the borrowing public and is granted only to products that maintain and strengthen home ownership and equity protec
Truth in Lending: 9.6.3.1.1 Trigger spreads effective January 10, 2014
For loans with applications received prior to January 10, 2014, advocates should refer to the archived version of Chapter 9 available online as companion material to this treatise. For loans with applications received on or after January 10,2014, the APR trigger is based on the average prime offer rate (APOR),690 rather than U.S. Treasury securities.
Truth in Lending: 9.6.3.1.2 Trigger spreads: Summary of effective dates
| First Liens | Second Liens | |
|---|---|---|
| Between Oct. 1, 1995 and Oct. 1, 2002 | 10 percentage points | 10 percentage points |
| Between Oct. 1, 2002 and Jan. |
Truth in Lending: 9.6.3.2 The Relevant Date
The relevant date for selecting the average prime offer rate is not the loan date, but rather the fifteenth day of the month immediately preceding the month in which the application for an extension of credit is received by the creditor.698
Truth in Lending: 9.6.3.3 “Comparable Maturities” Defined
By referencing “comparable maturities,” the law requires that the creditor evaluate the rate for treasury bonds of the same duration as the loan.701 For example, coverage for a five-year loan will be evaluated by reference to the treasury’s five-year bond rates. Coverage for a ten-year loan will be evaluated by reference to the treasury’s ten-year bond rates, and so on.
Truth in Lending: 9.6.3.4 APR Accuracy and Tolerances
All of the “regular” TILA requirements for calculating the annual percentage rate apply to calculating the APR trigger for HOEPA purposes.709 It will be the accurate rate that controls, so the APR must be evaluated for errors.
Truth in Lending: 7.9.7.1 When Required
If the consumer submits a proper billing error notice, the creditor must determine whether a billing error occurred.1126 Before the creditor can determine that no billing error occurred, or that a different error occurred than that complained of, the creditor must conduct a “reasonable” investigation.1127 However, an investigation is not required if the creditor decides to correct the account as requested by the consumer1128 or the consumer w
Truth in Lending: 7.9.7.2 Reasonable Investigation
If the creditor is required to conduct an investigation, the investigation must be “reasonable.”1130 Generally, the issue of whether an investigation is “reasonable” is a question of fact that precludes summary judgment.1131 If the consumer requests, the creditor must provide copies of documentary evidence of the consumer’s indebtedness.1132
Truth in Lending: 7.9.7.3 Time Limits for Investigation
The creditor must investigate and resolve the billing error dispute within two complete billing cycles (or ninety days, if that is sooner).1140 If the billing error notice is received mid-cycle, as is probably the most common situation, the creditor has the rest of that cycle, and then two complete cycles, to take the proper steps—unless that time frame is longer than ninety days.1141 The creditor must meet the timeframe for investigation even if the billing error qualifies for another type
Truth in Lending: 7.9.8.1 Finality of Resolution
The creditor must make a substantive final resolution within the time limits for investigation. If a creditor fails to complete the investigation and fails to provide a written explanation as to why there was no error or a different error, or otherwise fails to comply with the error resolution procedures required in such cases, the creditor generally must credit the disputed amount and related finance or other charges to the consumer’s account.1143
Truth in Lending: 7.9.8.2 Resolution Favoring the Consumer
If the creditor determines that the billing error occurred, it must correct the error and credit the account with any disputed amount and related charges (including charges imposed for the error resolution process, documentation, etc.), and mail or deliver a correction notice to the consumer.1148 The CFPB has filed an enforcement lawsuit against a creditor that failed to refund finance charges for billing errors resolved in the consumer’s favor.1149 The correction notice may be sent separat
Truth in Lending: 7.9.8.3 Resolution Not Favoring the Consumer
If the creditor determines that there was no billing error, or a different error than that complained of, the creditor must: mail or deliver to the consumer an explanation of its reasons for concluding that the billing error asserted by the consumer was wrong in whole or in part; furnish copies of any documentary evidence if the consumer so requests; and correct any different error discovered and credit the account with any disputed amount and related charges (including charges imposed for the error resolution process, documentation, etc.).1153
Truth in Lending: 7.9.8.4 Charges for the Error-Resolution Procedure
If a billing error occurred, even if it was not the error asserted by the consumer, the creditor may not impose a charge related to any aspect of the error-resolution procedure, including charges for documentation, and the consumer’s account must be credited for all such charges previously assessed.1163 The official interpretations imply that an error-resolution charge may be assessed if there is no error, but warns that “[s]ince the Act grants the consumer error-resolution rights, the creditor should avoid any chilling effect on the good f
Truth in Lending: 7.9.9 Remedies for Billing Error Violations
A sample FCBA complaint and sample discovery are included in Appendix E and Appendix F, infra.
Truth in Lending: 7.10.1.1 Introduction
The Truth in Lending Act precludes a credit card issuer from imposing liability on a customer (business or consumer) for unauthorized use of a credit card, except in narrowly defined circumstances.1196 Previously, most credit card agreements held consumers liable for any losses incurred from unauthorized use before the consumer had notified the issuer that the card was lost or stolen.1197 Congress adopted the limitation on liability for unauthorized use to respond to these agreements, so tha
Truth in Lending: 7.10.1.2.1 Protections apply to all types of credit cards, including telephone cards
Regulation Z’s unauthorized use provisions apply to all credit cards, even if they are issued for use in connection with otherwise exempt extensions of credit.1203 A 1984 amendment, aimed primarily at telephone credit cards, made this coverage clear.1204 Calling cards issued by a telephone company are subject to TILA’s unauthorized use rules even if the user is merely allowed to defer payment until the monthly bill is received, rather than rolling over the balance from one month to
Truth in Lending: 7.10.1.2.2 Exclusion for convenience checks
The protections against liability for unauthorized use do not apply if the transaction is made using a check accessing the credit card account,1213 i.e., a “convenience check.”1214 Note that this creates the anomalous result that the protections apply when the unauthorized use involves the credit card number and use of a device such as a telephone or internet,1215 but not when the device is a convenience check.
Truth in Lending: 7.10.2.2 Misuse by Authorized Users
Misuse by an authorized user is not “unauthorized use” subject to TILA’s statutory liability limit.1234 Neither is use by any person who has actual, implied, or apparent authority to use a credit card.1235 Thus, a former employee’s continued use of their employer’s corporate credit card for personal use was not “unauthorized,” since she was an “additional applicant” on the cardholder agreement.