CFPB Provides Guidance on the TILA-RESPA Integrated Disclosures Rule

by Ballard Spahr LLP
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On June 17, 2014, the CFPB staff and Federal Reserve co-hosted a webinar on the final TILA-RESPA Integrated Disclosures Rule that will be effective for applications received by creditors or mortgage brokers on or after August 1, 2015. The webinar is the first in a planned series intended to help creditors, mortgage brokers, settlement agents, software developers, and other stakeholders familiarize themselves with the rule’s architecture and its substantive and procedural disclosure requirements. The CFPB staff used the initial webinar to provide a basic overview of the final rule and new disclosures that we have previously covered here

According to the CFPB staff, subsequent webinars on the final TILA-RESPA Integrated Disclosures rule will function entirely as a spoken Q&A to answer questions that have been posed to the Bureau. This is in contrast to the CFPB staff’s previous approach of providing private one-on-one interpretive guidance on implementing the Title 14 mortgage rules concerning the Ability-to-Repay and Qualified Mortgage rules. Although the CFPB staff does not plan to issue written Q&A, the staff believes this approach will help facilitate clear guidance on the new rules in an accessible way. 

At the end of the hour long session, the CFPB staff addressed several questions posed by stakeholders. The CFPB staff explained that a creditor is allowed to request additional information along with the six pieces of information that constitute an application, but once the six items are received the three business day timeframe to issue the Loan Estimate is triggered whether or not other requested information is provided. The CFPB staff also noted that a creditor must follow pre-disclosure restrictions set forth in 12 C.F.R. § 1026.19(e)(2), such as the prohibitions on creditors requiring consumers to submit verifying information and imposing fees other than a bona fide and reasonable fee for obtaining a credit report before providing the Loan Estimate.

The CFPB staff added that a fee is considered “imposed by” a creditor if the creditor requires a consumer to provide a method for payment, even if the payment is not made at that time.  For example, according to the commentary, if a creditor requires a consumer to provide a $500 check to pay for a “processing fee” before the consumer receives the required disclosures and indicates an intent to proceed, the request is not in compliance with the rule even if the creditor had stated that the check will not be cashed until after the consumer has received the disclosures and indicated an intent to proceed. There are similar restrictions with respect to a creditor requesting credit card numbers in advance of providing disclosures, although there is an exception that allows a creditor to obtain a consumer’s credit card number before the consumer receives the necessary disclosures for the purpose of charging a reasonable and bona fide fee for obtaining the consumer’s credit report if the creditor abides by certain requirements. 

In addition, the CFPB staff stated that with respect to the Loan Estimate generation requirement, a creditor does not have to collect all six pieces of information that constitute a completed application at once. Accordingly, a creditor is allowed to sequence the order of the application process to control when the obligation to issue a Loan Estimate is triggered. The CFPB staff noted that they expect some creditors to hold off on collecting items like a consumer’s social security number to run a credit report until they have other information that they are interested in from the consumer. The CFPB addresses the sequencing of information in the supplementary information to the final rule. We find it odd that for purposes of what is a completed application under the integrated disclosure rule, the CFPB decided not to include the seventh element in the current rule under Regulation X (any other information required by the loan originator), and then provides guidance on how creditors can avoid triggering an application by sequencing the collection of information.

The CFPB staff also stated that the rule permits creditors to provide an early estimate to a consumer prior to receiving an application, as long as it contains a disclaimer to prevent confusion with the Loan Estimate. The small entity compliance guide to the final rule states that the disclaimer is required for advertisements.  According to the CFPB staff, that statement is a “technical glitch.” The CFPB staff noted that the regulatory text of 12 C.F.R. § 1026.19(e)(2)(ii) makes clear that the pre-disclosure estimate disclaimer requirement applies only to written information specific to a consumer. Accordingly, advertisements, which are targeted at a general audience, are not covered by the rule.

We look forward to future CFPB staff webinars on the topic of the final TILA –RESPA Integrated Disclosures Rule and applaud the efforts on the part of the CFPB to provide greater clarity as the rule is implemented.

The entire presentation can be viewed here.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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