As previously reported, the creation on June 17, 2021 of the Juneteenth National Independence Day resulted in an important change under the Truth in Lending Act (TILA) and Regulation Z. The CFPB recently issued an interpretive rule to address certain issues based on the change.
There is a specific definition of “business day” under Regulation Z for certain purposes, including the right of rescission period, the waiting periods that apply to the TRID rule disclosures, the period after which consumers are deemed to receive TRID rule disclosures that are not delivered in person, the date that private education loan disclosures mailed to the consumer are deemed to be received, and the date that the right to cancel a private education loan expires. Under the specific definition, a “business day” is “all calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a) . . . .”
The bill creating the Juneteenth holiday amended 5 U.S.C 6103(a) to add “Juneteenth National Independence Day, June 19” as a specified legal public holiday. As a result, once the bill was signed into law by President Biden on June 17, Saturday June 19 immediately switched from being a business day to being a non- business day. (Although the federal government was closed on Friday June 18 in observance of the new legal public holiday, under the specific definition of “business day” in amended 5 U.S.C. 6103(a), June 18 was a business day.)
Immediately after the bill became law, mortgage industry representatives urged the CFPB to provide guidance. On June 18, Acting CFPB Director Uejio issued a statement that first addresses the significance of the new holiday, and then addresses the TILA issue as follows:
The CFPB, along with the other Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) regulators, is aware of concerns regarding implementation of the new Juneteenth Federal holiday, particularly as it relates to mortgage lender compliance with the Truth in Lending Act and TILA-RESPA Integrated Disclosure (TRID) timing requirements. The CFPB recognizes that some lenders did not have sufficient time after the Federal holiday declaration to consider whether and how to adjust closing timelines. The CFPB understands that some lenders may delay closings to accommodate the reissuance of disclosures adjusted for the new Federal holiday. The CFPB notes that the TILA and TRID requirements generally protect creditors from liability for bona fide errors and permit redisclosure after closing to correct errors. Any guidance ultimately issued by the CFPB would take into account the limited implementation period before the holiday and would be issued after consultation with the other FIRREA regulators and the Conference of State Bank Supervisors (CSBS) to ensure consistency of interpretation for all regulated entities.
Industry members likely found the initial guidance to be unhelpful. The interpretive rule addresses the business day issue resulting from the creation of the Juneteenth holiday with regard to the right of rescission period for closed-end mortgage loans, the waiting periods that apply to the TRID rule disclosures, and the period after which consumers are deemed to receive TRID rule disclosures that are not delivered in person. The interpretive rule does not expressly address the date that private education loan disclosures mailed to the consumer are deemed to be received, and the date that the right to cancel a private education loan expires.
Business Day Version Approach
The CFPB notes that Regulation Z does not address which version of the specific “business day” definition applies if during a relevant time period that relies on the definition, the definition changes. The interpretive rule provides that the version of the definition of “business day” that applies to the right of rescission period, the TRID rule waiting periods, and the period after which the consumer is deemed to receive TRID rule disclosures that are not delivered in person depends on when the relevant time period began. If the relevant time period began on or before June 17, 2021, then Saturday June 19, 2021 was a business day. If the relevant time period began after June 17,2021, then Saturday June 19, 2021 was a non-business day. Each period is addressed further below.
Right of Rescission Period
For closed-end mortgage loans subject to the right to rescind, the consumer has the right to rescind the loan until midnight of the third business day following the last to occur of (1) delivery of all material disclosures, (2) consummation of the loan, and (3) delivery of the notice of the right to rescind to each consumer entitled to rescind. The notice of the right to rescind must indicate that date that the right to rescind expires. The interpretive rule provides that the date that the rescission period begins to run, and the rescission period expiration date, are determined based on the version of the “business day” definition that was in effect when the rescission period began to run. Specifically, if the rescission period began to run on or before June 17, 2021, then Saturday June 19 was a business day for purposes of the right to rescind. However, because a creditor may provide the consumer with a rescission period that is longer than three business days, even if the rescission period began to run on or before June 17, a creditor that treated Saturday June 19 as a non-business day would have provided a compliant rescission period. If the rescission period began to run after June 17, 2021, the creditor had to treat Saturday June 19 as a non-business day.
TRID Rule Waiting Periods
The TRID rule requires that a creditor must deliver or place in the mail the initial Loan Estimate at least seven business days before consummation of the transaction. The TRID rule also requires that the last day that a consumer may receive a revised Loan Estimate is four business days before consummation of the transaction, and that the consumer must receive the initial Closing Disclosure at least three business days before consummation of the transaction. The interpretive rule provides that seven, four and three business day waiting periods are determined based on the version of the “business day” definition that was in effect when the creditor delivered the Loan Estimate or Closing Disclosure, or placed the applicable disclosure in the mail. For example, if a creditor delivered or placed in the mail the initial Loan Estimate on June 14, 2021 and consummation occurred on June 22, 2021, the seven business day waiting period for the initial Loan Estimate was satisfied because Saturday June 19 was a business day. However, because a creditor may provide the consumer with the initial Loan Estimate more than seven business days before consummation, if a creditor delivered or placed in the mail the initial Loan Estimate on or before June 17 and treated Saturday June 19 as a non-business day, the creditor still would have complied with the waiting period requirement. If a creditor delivered or placed in the mail a Loan Estimate or Closing Disclosure after June 17, 2021, then the creditor had to treat Saturday June 19 as a non-business day.
Mailbox Rule Period
In cases in which a creditor mails a Loan Estimate or Closing Disclosure, the consumer is deemed to receive the disclosure three business days after it is placed in the mail. This is referred to as the “mailbox rule.” The mailbox rule also applies when a creditor provides a Loan Estimate or Closing Disclosure by a means of non-personal delivery other than the mail, such as by electronic means. (While a creditor may rely on the deemed receipt of a disclosure provided by non-personal delivery under the mailbox rule, if the creditor has evidence of actual receipt of the disclosure on a date before the date of deemed receipt, the creditor may rely on the evidence of actual receipt.)
The interpretive rule provides that the three business day period under the mailbox rule is determined based on the version of the “business day” definition that was in effect on the date that the creditor placed the disclosure in the mail. For example, if a creditor placed a Loan Estimate or Closing Disclosure in the mail on June 17, 2021, the consumer is considered to have received the Loan Estimate or Closing Disclosure on June 21, 2021. However, because a creditor may deem a consumer to have received a mailed disclosure more than three business days after the disclosure was placed in the mail, if a creditor placed in the mail a Loan Estimate or Closing Disclosure on or before June 17 and treated Saturday June 19 as a non-business day for purposes of determining when the consumer received the disclosure, the creditor still would have complied with the mailbox rule. If a creditor placed in the mail a Loan Estimate or Closing Disclosure after June 17, 2021, then the creditor had to treat Saturday June 19 as a non-business day.
