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United States:
CFPB Issues Statement on the Juniteenth Bill Truth In Lending Act
June 28, 2021
Ballard Spahr LLP
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As previously reported, the bill signed by President Biden on June 17, 2021 to create National Independence Day in June actually leads to a major change under the Truth in Lending Act (TILA) and Regulation Z. There is a specific definition of ” Business Day “in accordance with Regulation Z for certain purposes, including the waiting periods for disclosure of the TRID Rule and the right of withdrawal, the date on which the information on private educational loans sent to the consumer is deemed to have been received and the date on which terminate the right to a private education loan expires. By the specific definition, a “business day” is “all calendar days other than Sundays and public holidays as defined in 5 USC 6103 (a) …”
The bill amends 5 USC 6103 (a) to add “Juneteenth National Independence Day, June 19th” as a specified public holiday. As a result, Saturday the 19th of June was not a Business Day without further action under the specific definition of “Business Day” in amended 5 USC 6103 (a). (Although the federal government was closed on Friday, June 18, observing the new public holiday, June 18 was a business day under the specific definition of “Business Day” as amended by 5 USC 6103 (a).)
Industry representatives asked the CFPB to provide guidance. Later on June 18, Acting CFPB Director Uejio made a statement addressing the importance of the new holiday first and then the TILA issue as follows:
The CFPB, along with the other regulators of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), is aware of concerns regarding the implementation of the new federal holiday in June, particularly with respect to compliance with the Truth in Lending Act and TILA. by mortgage lender – RESPA Integrated Disclosure (TRID) timing requirements. The CFPB recognizes that after the state holiday declaration, some lenders have not had enough time to consider whether and how the closure dates can be adjusted. The CFPB is aware that some lenders may delay the closure to accommodate the reissue of disclosures in line with the new federal holiday. The CFPB notes that the TILA and TRID requirements generally protect creditors from liability for bona fide errors and allow re-disclosure after closing to correct errors. Any guideline 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 Banking Supervisors (CSBS) to ensure a consistent interpretation for all supervised entities.
Industry members are unlikely to find the initial guidelines helpful.
According to the bona fide plea of error in accordance with TILA, a creditor or assignee cannot be held liable in a lawsuit that is brought under civil liability or avoidance regulations for a violation of TILA if the creditor or assignee can prove by predominant evidence that was not intended and resulted from an honest mistake, notwithstanding the maintenance of procedures that were appropriately adapted to avoid such mistakes. In practice, the usefulness of defense is limited. Defense is just that – a defense available to a creditor or assignee to bring up in a lawsuit over a TILA compliance issue. The defense does not provide a cure for the underlying problem. As a result, in the event of a TILA compliance issue with a loan of a type that normally affects the loan’s negotiability, investors will typically not agree to purchase the loan even if the lender claims the legitimate plea is available.
The reference in Acting Director Uejio’s statement to the TRID rule, which allows re-disclosure after closing to likely correct errors, is intended to address the possibility that the TRID rule calculation may take three business days between the date on which a Consumers requesting the initial disclosure of the deal and the date of the deal may need to be delayed in closing, making the information in this disclosure inaccurate. More important than the option of forwarding, however, is that the changed calculation of the three business day waiting period will probably make it necessary to postpone the closing date in many cases. In many cases, the obligee may reflect any applicable changes in a revised financial statement disclosure provided on the deferred closing date.
The content of this article is intended to provide general guidance on the subject. Expert advice should be sought regarding your specific circumstances.
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