Rick Fischer and Kathleen C. Ryan
Banking + Financial Services, Financial Institutions + Financial Services, and Financial Services Enforcement
The Consumer Financial Protection Bureau (CFPB) has posted a new compliance tool on its website - answers to frequently asked questions (FAQs) about the TILA-RESPA Integrated Disclosure Rule (“TRID Rule”). Apparently in response to industry requests for more guidance, the FAQs clarify a creditor’s obligation to provide a new three-day waiting period along with a corrected Closing Disclosure (CD) when a term previously disclosed has changed; how creditors may use model forms that do not reflect the CFPB’s 2017 amendments to the Rule; and the impact of a recent TILA amendment to the requirement for corrected disclosures. The FAQs were posted without advance notice or comment, signaling that perhaps the CFPB will dispense with lengthy processes when providing written guidance. What follows is a brief summary of the FAQs.
1. Only Three Types of Changes to Previously Disclosed Terms Require a New Three-Day Waiting Period
TRID requires a creditor to provide a consumer with a CD at least three business days before consummation. The FAQ explains that if a disclosed term changes after the CD is provided, the creditor must provide a corrected CD. The FAQ states that only three circumstances require the creditor to provide the consumer with a corrected CD at least three business days before consummation: (i) if the previously disclosed APR becomes inaccurate under Regulation Z; (ii) if the loan product type changes; or (iii) if a prepayment penalty is added to the loan. For any other changes, the creditor must provide a corrected CD at or before consummation.
2. A New Three-Day Waiting Period May Be Required If the APR Decreases
As noted, TRID requires a corrected CD and a new three-day waiting period if the previously disclosed APR becomes inaccurate under Regulation Z. The FAQ states that an APR is accurate if the difference between the APR and the actual APR is within an applicable tolerance in 12 CFR § 1026.22(a). The FAQ states that, for mortgage loans, Regulation Z provides that an APR that decreases, i.e., it is overstated, is considered accurate if the overstatement results from an overstated finance charge. See 12 CFR § 1026.22(a)(4). In such a case, the creditor must provide a corrected CD at or before consummation. However, if the APR previously disclosed is overstated for a reason unrelated to the finance charge, and no other tolerance is available under § 1026.22(a), the creditor must provide a corrected CD at least three business days before consummation.
3. The Economic Growth, Regulatory Relief, and Consumer Protection Act Does Not Change the TRID Rule’s Timing Requirements for Corrected Disclosures
The FAQs also clarify that the “No Wait for a Lower Rate” provision in Section 109(a) of the recent Economic Growth, Regulatory Relief, and Consumer Protection Act does not change TRID’s requirements for corrected disclosures. Section 109(a) states that if a creditor makes “a second offer of credit with a lower annual percentage rate, the transaction may be consummated without regard to the [waiting] period…” The CFPB points out that Section 109(a) amended TILA’s requirement for special disclosures for certain high-cost loans, and does not impact a creditor’s obligation to provide a corrected CD and a new three-day waiting period otherwise.
4. The Rule’s Model Forms Provide a Safe Harbor Even If They Do Not Reflect the CFPB’s 2017 Amendments to the TRID Rule
In 2017 the CFPB made several amendments to the TRID Rule, but did not make corresponding changes to certain model forms. The FAQ states that if a creditor properly completes the appropriate model form with accurate content, the creditor satisfies the safe-harbor standard even if the model form does not reflect the Rule’s text and staff commentary as amended in 2017. For example, the 2017 amendments direct creditors to drop any trailing zeros to the right of the decimal point when disclosing the rate for prepaid interest. Model form H-24(C), however, shows the rate for prepaid interest with trailing zeros. The CFPB states that a creditor satisfies the safe harbor by either including the trailing zeros or by dropping them.
Please contact us if you have any questions about the guidance provided in the FAQs, or about the CFPB’s TRID Rule more generally.
Public Law 115–174, 132 Stat. 1296 (2018).
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