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On September 26, the OCC issued Bulletin 2018-31, which updates the “Truth in Lending Act” (TILA) booklet of the Comptroller’s Handbook, which previously was issued in December 2014. The booklet provides guidance for OCC examiners to be used in connection with the examination and supervision of national banks and federal savings associations, which offer or extend consumer credit products covered by TILA. The updates reflect changes made to Regulation Z, TILA’s implementing regulations, since the booklet’s previous release, and includes procedures implementing the CFPB’s TILA-RESPA integrated disclosure rule (TRID). Additional updates include, among other things, (i) special provisions on certain construction loans; (ii) special provisions relating to small creditors and rural or underserved areas; (iii) changes regarding appraisals for higher-priced mortgage loan exemptions; (iv) updates to mortgage origination examination procedures; and (v) updates to mortgage servicing rules and the small creditor definition.
With the issuance of the new booklet, the OCC rescinds (i) OCC Bulletin 2014-61, “Truth in Lending Act: Revised Comptroller’s Handbook Booklet and Rescissions”; (ii) The TILA sections of OCC Bulletin 2015-27, “Revised Interagency Examination Procedures for Consumer Compliance”; and (iii) OCC Bulletin 2015-42, “Initial Examinations for Compliance With TILA-RESPA Integrated Disclosure Rule.”
On May 15, the CFPB released the 2018 updated versions of the “Know Before You Owe” mortgage disclosure rule Small Entity Compliance Guide (versions 4.1 and 5.2) and Guide to Forms (versions 1.5 and 2.1). Because the optional compliance period with the 2017 TILA-RESPA Integrated Disclosure Rule (TRID) extends through October 1, the CFPB updated both versions of each guide. Additionally, all four versions are updated with the 2018 TRID changes (covered by InfoBytes here), which will become effective prior to the end of the 2017 optional compliance period.
3rd Circuit reverses district court’s decision, rules TILA provisions misapplied to unauthorized-charge suit
On May 16, the U.S. Court of Appeals for the 3rd Circuit reversed a district court’s decision, holding that the lower court, among other things, misapplied a TILA provision under Regulation Z that requires cardholders to dispute charges within 60 days of the “first periodic statement that reflects the alleged billing error.” According to the opinion, the plaintiff-appellant filed a suit against the bank after he was allegedly rebilled for a $657 fraudulent money transfer charge that originally appeared on his statement in July 2015. The charge was originally removed from his account but reappeared in mid-September of that year after the bank claimed the charge was valid after verifying transaction details. The plaintiff-appellant challenged the decision in writing, and later filed a complaint against the bank, alleging he had “timely submitted a written notice of billing error,” and that the bank “had neither credited the charge nor conducted a reasonable investigation” and imposed liability of more than $50. The district court dismissed the complaint with prejudice for failure to state a claim, which the plaintiff appealed.
At issue, the three-judge panel determined, were two provisions under TILA: (i) the “Fair Credit Billing Act” (FCBA), which stipulates that creditors must “comply with particular obligations when a consumer has asserted that his billing statement contains an error,” and (ii) the “unauthorized-use provision,” which requires certain conditions to be met before a credit card issuer can hold the cardholder liable, up to a limit of $50, for any unauthorized use. The panel first addressed the district court’s finding that the bank’s obligations under FCBA were “never triggered” because his written notice came 63 days after the July statement first included the charge. The panel held that, because the plaintiff-appellant’s August billing statement showed a credit to his account for the charge and that “there was no longer anything to dispute” and no reason to believe his statement contained a billing error, the 60-day time limit should have started when the bank rebilled him in September. In addressing the second issue, the district court held that plaintiff-appellant was not entitled to “reimbursement” under the unauthorized-use claim. However, the panel opined that he was not seeking reimbursement but rather “actual damages,” for which the statute does provide relief. “We conclude that a cardholder incurs ‘liability’ for an allegedly unauthorized charge when the issuer, having reason to know the charge may be unauthorized, bills or rebills the cardholder for that charge,” the panel wrote.
On April 19, the Federal Reserve Board (Fed) issued a consumer affairs letter (CA 18-3) announcing revised interagency examination procedures for Regulation X (RESPA) and Regulation Z (TILA) that supersede procedures previously issued in September 2015. The updated procedures account for amendments to mortgage servicing rules under Regulations X and Z that took effect October 19, 2017 (see previous InfoBytes coverage here), as well as amendments to Regulation Z published by the CFPB through April 2016, including rules concerning small creditors’ mortgage lending to rural and underserved areas. However, the Fed stated in its letter that, at this time, the updated procedures do not incorporate Regulation Z amendments concerning the CFPB’s TILA-RESPA integrated disclosure rule or those regarding prepaid accounts. These amendments will be addressed in a future update.
CFPB updates mortgage servicing Small Entity Compliance Guide, releases mortgage servicing coverage chart
On March 29, the CFPB released version 3.1 of its mortgage servicing Small Entity Compliance Guide. The updated guide supports the implementation of the 2016 Mortgage Servicing Final Rule, including the amendment to the Rule released earlier this month. The Rule replaces the previous single-billing-cycle exemption with a single-statement exemption when servicers transition to providing modified or unmodified periodic statements and coupon books to consumers entering or exiting bankruptcy. See previous InfoBytes coverage here. The Bureau also released a mortgage servicing coverage chart, which summarizes the mortgage servicing rules that will be in effect as of April 19.
On March 20, the CFPB released updated FAQs to support the implementation of the 2016 Mortgage Servicing Final Rule. Specifically, the updated FAQs pertain to the mortgage-servicing provisions regarding bankruptcy, which are effective April 19. The CFPB released ten bankruptcy-related question and answers. The bankruptcy topics include periodic statements, coupon books, reaffirmation, successors in interest, and timing of compliance.
Virginia Attorney General sues pension sale lender who targeted retired veterans and government employees; obtains full restitution for customers of online lender
On March 7, the Virginia Attorney General took action against Delaware- and Nevada-based installment lenders (defendants) for allegedly making illegal loans with excessive annual interest rates that were disguised as “lump sum” cash payouts to Virginia consumers, in violation of the Virginia Consumer Protection Act (VCPA). According to the complaint, the defendants disguised the high interest loans to Virginia pensioners as “Purchase and Sale Agreements” involving a “sale” or “pension advance” in an effort to bypass consumer lending laws, including TILA and Regulation Z disclosure requirements. Furthermore, the complaint alleges that the loans charged interest rates as high as 183 percent, far exceeding the state’s 12 percent annual usury cap, but because they were misrepresented as sales, defendants avoided potential private actions brought by consumers to recover excessive interest payments. The complaint seeks injunctive and monetary relief.
Separately, on February 23, the Virginia Attorney General announced a settlement with a group of affiliated online lenders and debt collectors (defendants) to resolve violations of the VCPA through the offering of unlawful open-end credit plan loans and engaging in illegal debt collection practices. According to the Assurance of Voluntary Compliance approved earlier in February, between January 2015 through mid-June 2017, the defendants (i) offered open-end credit plan loans and imposed bi-monthly “service fees” that—when calculated with the advertised interest—greatly increased the loan’s cost and exceeded the state’s 12 percent annual limit; (ii) imposed illegal finance charges and other service fees on borrowers during the required 25-day grace period; (iii) contacted consumers in an effort to collect on these loans; and (iv) contacted the consumers' employers to implement wage assignments and garnish wages from consumers' paychecks. Under the terms of the settlement, defendants will provide nearly $150,000 in restitution and debt forgiveness, pay $105,000 in civil penalties and attorneys’ fees, and are permanently enjoined from consumer lending and debt collection activities in the state.
On March 6, the CFPB released its annual list of rural counties and rural or underserved counties for lenders to use when determining qualified exemptions under certain TILA regulatory requirements. In addition to these lists, the Bureau also directed lenders to use its web-based Rural or Underserved Areas Tool to assess whether a rural or underserved property qualifies for safe harbor for purposes of Regulation Z.
On March 8, the CFPB issued a final rule updating technical aspects of the upcoming periodic statement requirements for borrowers in bankruptcy under Regulation Z. The Bureau adopted the proposed rule, released in October 2017, without revision (previously covered by InfoBytes here). Specifically, the final rule changes the transition rules for borrowers who enter or leave bankruptcy by replacing the previous single-billing-cycle exemption with a single-statement exemption for the next periodic statement or coupon book that a servicer would otherwise have to provide, regardless of when in the billing cycle the triggering event occurs. The Bureau also added new commentary to clarify the operation of the single-statement exemption. The rule is effective April 19.
On January 24, the CFPB released updates to the final rule governing prepaid accounts (Rule) delaying the effective date of the rule by one year, to April 1 2019. In December, as previously covered by InfoBytes, the Bureau announced its plan to delay the effective date and adopt final amendments to the Rule. In addition to certain clarifications and other minor adjustments, the updates include: (i) finalizing that the requirement for consumers to register their accounts to receive fraud and error protection benefits will only be applied prospectively, after a consumer’s identity has been verified; and (ii) creating a limited exception to certain provisions of the Rule for instances where traditional credit card accounts, subject to Regulation Z open-end credit rules, are linked to digital wallets.