Consumer Finance Litigation

It's finally here. Over the weekend, the Consumer Financial Protection Bureau's (CFPB) long awaited and oft delayed integration of the disclosures required by the Federal Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) known as the TILA-RESPA Integrated Disclosure or "TRID" for short, became effective. TRID applies to most closed-end consumer credit transactions secured by real property. Specifically, TRID applies to those who did not close on their loans, or who applied for a loan, on or after Saturday October 3, 2015. For those covered, TRID means saying good-bye to the Truth in Lending Disclosure Statement, Good Faith Estimate, and HUD-1 Settlement Statement and saying hello to the "Loan Estimate" and "Closing Disclosure." As the name implies, the Loan Estimate combines elements of the Truth In Lending Act Disclosure Statement and Good Faith Estimate into a consolidated estimate of the anticipated life of loan costs of financing a real estate purchase. The Loan Estimate is required within three days of receipt of the loan application and no less than seven days before consummation of the loan. Similarly the Closing Disclosure combines elements of the Truth in Lending Act Disclosure Statement and the HUD-1 Settlement Statement. The Closing Disclosure is required at least three days prior to consummation of the loan and cannot be delivered on the same day as the Loan Estimate. Because there are no exceptions to this three day rule, minor changes which could have been made at the closing table now require new disclosures and a new three day waiting period. The tolerances for the Loan Estimate are extremely limited (in some cases a zero tolerance) and amounts in excess of the disclosed amounts which exceed the tolerances must be refunded to the consumer within sixty calendar days. An October 1, 2015, the CFPB sent a letter to the industry, in which CFPB Director Richard Cordray made it clear that the CFPB is poised to identify and punish those who fall behind complying with the new rule. Specifically, the letter stated: "During initial examinations for compliance with the rule, the agencies' examiners will evaluate an institution's compliance management system and overall efforts to come into compliance, recognizing the scope and scale of changes necessary for each supervised institution to achieve effective compliance," CFPB Director Richard Cordray wrote in his letter. "Examiners will expect supervised entities to make good faith efforts to comply with the rule's requirements in a timely manner. Specifically, examiners will consider: the institution's implementation plan, including actions taken to update policies, procedures, and processes; its training of appropriate staff; and its handling of early technical problems or other implementation challenges." While the CFPB has indicated it will observe a certain undefined "grace period" while the industry works out the kinks during these early stages of TRID compliance efforts, the agency seems to be taking pains not to commit to anything concrete. However, there has been activity in Congress to make a formal TRID grace period official through legislation, though nothing has actually passed yet. A vote is scheduled this week in the House on H.R. 3192 which includes a TRID grace period through the end of the year. Regardless of how Congress moves on the issue, it is clear that industry members should make sure to keep vigilant about their compliance processes in the months and weeks ahead.