The Office of the Comptroller of the Currency (OCC) released today the "Truth in Lending Act" (TILA) handbook

Consumer Compliance (CC) Office of the Comptroller of the Currency Washington, DC 20219

Comptroller’s Handbook CC-TILA

Truth in Lending Act

December 2014

Introduction The Office of the Comptroller of the Currency’s (OCC) Comptroller’s Handbook booklet, “Truth in Lending Act,” is prepared for use by OCC examiners in connection with their examination and supervision of national banks and federal savings associations (collectively, banks).1 Each bank is different and may present specific issues. Accordingly, examiners should apply the guidance in this booklet consistent with each bank’s individual circumstances. The booklet provides background information and optional expanded examination procedures for the Truth in Lending Act (TILA) and Regulation Z, which implements TILA. Examiners decide which of these procedures are necessary, if any, after completing a compliance core assessment as outlined in the “Community Bank Supervision,” “Large Bank Supervision,” and “Federal Branches and Agencies Supervision” booklets of the Comptroller’s Handbook. Complaint information received by the Office of the Ombudsman and the Customer Assistance Group may also be useful in completing the assessment. Background and Summary TILA (15 USC 1601 et seq.) was enacted on May 29, 1968, as title I of the Consumer Credit Protection Act (Pub. L. No. 90-321). TILA, implemented by Regulation Z (12 CFR 1026), became effective on July 1, 1969. TILA was first amended in 1970 to prohibit unsolicited credit cards. Additional major amendments to TILA and Regulation Z were made by the Fair Credit Billing Act of 1974, the Consumer Leasing Act of 1976, the Truth in Lending Simplification and Reform Act of 1980, the Fair Credit and Charge Card Disclosure Act of 1988, and the Home Equity Loan Consumer Protection Act of 1988. Regulation Z also was amended to implement section 1204 of the Competitive Equality Banking Act of 1987 and, in 1988, to include adjustable rate mortgage (ARM) loan disclosure requirements. All consumer leasing provisions were deleted from Regulation Z in 1981 and transferred to Regulation M (12 CFR 1013). The Home Ownership and Equity Protection Act of 1994 (HOEPA) also amended TILA. The law imposed new disclosure requirements and substantive limitations on certain closed-end mortgage loans bearing rates or fees above a certain percentage or amount. The law also included new disclosure requirements to assist consumers in comparing the costs and other material considerations involved in a reverse mortgage transaction and authorized the Board of Governors of the Federal Reserve System (FRB) to prohibit specific acts and practices in connection with mortgage transactions. The TILA amendments of 1995 dealt primarily with tolerances for real estate secured credit. Regulation Z was amended on September 14, 1996, to incorporate changes to TILA. Specifically, the revisions limit lenders’ liability for disclosure errors in real estate secured loans consummated after September 30, 1995. The Economic Growth and Regulatory Paperwork Reduction Act of 1996 further amended TILA. The amendments were made to simplify and improve disclosures related to credit transactions. The Electronic Signatures in Global and National Commerce Act (E-Sign Act), 15 USC 7001 et seq., was enacted in 2000 and did not require implementing regulations. On November 9, 2007, amendments to Regulation Z and the official commentary were issued to simplify the regulation and provide guidance on the electronic delivery of disclosures consistent with the E-Sign Act. In July 2008, Regulation Z was amended to protect consumers in the mortgage market from unfair, abusive, or deceptive lending and servicing practices. Specifically, the change applied protections to a newly defined category of “higher-priced mortgage loans” that includes virtually all closed-end subprime loans secured by a consumer’s principal dwelling. The revisions also applied new protections to mortgage loans secured by a dwelling regardless of loan price and required the delivery of early disclosures for more types of transactions. The revisions also banned several advertising practices deemed deceptive or misleading. The Mortgage Disclosure Improvement Act of 2008 (MDIA) broadened and added to the requirements of the FRB’s July 2008 final rule by requiring early truth-in-lending disclosures for more types of transactions and by adding a waiting period between the time when disclosures are given and consummation of the transaction. In 2009, Regulation Z was amended to address those provisions. The MDIA also requires disclosure of payment examples if the loan’s interest rate or payments can change, as well as disclosure of a statement that there is no guarantee the consumer will be able to refinance in the future. In 2010, Regulation Z was amended to address these provisions, which became effective on January 30, 2011. In December 2008, the FRB adopted two final rules pertaining to open-end (not homesecured) credit. The first rule involved Regulation Z revisions and made comprehensive changes applicable to several disclosures required for applications and solicitations, new accounts, periodic statements, change in terms notifications, and advertisements. The second was a rule published under the Federal Trade Commission (FTC) Act and issued jointly with the Office of Thrift Supervision (OTS)2 and the National Credit Union Administration (NCUA). It sought to protect consumers from unfair acts or practices with respect to consumer credit card accounts. Before these rules became effective, however, the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act) amended TILA and established a number of new requirements for open-end consumer credit plans. Several provisions of the Credit CARD Act are similar to provisions in the FRB’s December 2008 TILA revisions and the joint FTC Act rule, but other portions of the Credit CARD Act address practices or mandate disclosures that were not addressed in these rules. In light of the Credit CARD Act, the FRB, the NCUA, and the OTS withdrew the substantive requirements of the joint FTC Act rule. On July 1, 2010, creditors were required to comply with the provisions of the FRB’s rule that were not affected by the Credit CARD Act. The Credit CARD Act provisions became effective in three stages. The provisions effective first, on August 20, 2009, required creditors to increase the amount of notice consumers receive before the rate on a credit card account is increased or a significant change is made to the account’s terms. These amendments also allowed consumers to reject such increases and changes by informing the creditor before the increase or change goes into effect. The provisions effective next, on February 22, 2010, involved rules regarding interest rate increases, over-the-limit transactions, and student cards. Finally, the provisions effective last, on August 22, 2010, addressed the reasonableness and proportionality of penalty fees and charges and reevaluation of rate increases. In 2009, Regulation Z was amended following the passage of the Higher Education Opportunity Act by adding disclosure and timing requirements that apply to lenders making private education loans. In 2009, the Helping Families Save Their Homes Act amended TILA to establish a new requirement for notifying consumers of the sale or transfer of their mortgage loans. The purchaser or assignee that acquires the loan must provide the required disclosures no later than 30 days after the date on which it acquired the loan. In 2010, the FRB further amended Regulation Z to prohibit payment to a loan originator that is based on the terms or conditions of the loan, other than the amount of credit extended. The amendment applies to mortgage brokers and the companies that employ them, as well as to mortgage loan officers employed by depository institutions and other lenders. In addition, the amendment prohibits a loan originator from directing or “steering” a consumer to a loan that is not in the consumer’s interest, to increase the loan originator’s compensation. Dodd–Frank amended TILA to include several provisions that protect the integrity of the appraisal process when a consumer’s home is securing the loan. The statute also requires that appraisers receive customary and reasonable payments for their services. The appraiser and loan originator compensation requirements had a mandatory compliance date of April 6, 2011. Dodd–Frank granted rulemaking authority under TILA to the Consumer Financial Protection Bureau (CFPB). Title XIV of Dodd–Frank included a number of amendments to TILA, and in 2013, the CFPB issued rules to implement them. Prohibitions on mandatory arbitration and waivers of consumer rights, as well as requirements that lengthen the time creditors must maintain an escrow account for higher-priced mortgage loans, were generally effective June 1, 2013. The remaining amendments to Regulation Z were effective in January 2014.3 These amendments include ability-to-repay requirements for mortgage loans, appraisal requirements for higher-priced mortgage loans, and a revised and expanded test for high-cost mortgages, as well as additional restrictions on those loans, expanded requirements for servicers of mortgage loans, refined loan originator compensation rules and loan origination qualification standards, and a prohibition on financing credit insurance for mortgage loans. The amendments also established new record retention requirements for certain provisions of TILA. In 2013, the CFPB issued a final rule revising the general limitation on the total amount of account fees that a credit card issuer may require a consumer to pay. Effective March 28, 2013, the limit is 25 percent of the credit limit in effect when the account is opened. The limitation applies only during the first year after account opening. In 2013, the CFPB also issued a final rule to remove the requirement that card issuers consider the consumer’s independent ability to pay for applicants who are 21 or older and to permit issuers to consider income and assets to which such consumers have a reasonable expectation of access. This change was effective May 3, 2013, with a mandatory compliance date of November 4, 2013. [...]