Definition of 'Amount'
The Reg. Z amendment concerning the term "amount" was designed to correct the U.S. Court of Appeals for the Seventh Circuit's 2003 decision in Carmichael v. The Payment Center, Inc. In that case, the borrowers argued that they were entitled to rescind their construction loan because the final balloon payment amount was described as "the balance of unpaid principal and interest to be paid in full" and did not contain a dollar amount of the payment. The court found that the disclosure of the balloon payment amount was acceptable, relying on the fact that various dictionary definitions of the term "amount" suggest that it does not always mean a numerical amount and that in other settings, Regulation Z specifically requires the disclosure of a "dollar amount."
The revision to Reg. Z provides in the rules of construction that the term "amount" as used in Reg. Z refers to a numerical amount. Similarly, the Board amended the Commentary to provide that the numerical amount must be a dollar amount unless otherwise indicated, noting that in some instances, the amount should be expressed as a percentage. For example, in open-end credit disclosures before the first transaction, in explaining how the amount of any finance charge will be determined, where a cash advance fee is a percentage of each cash advance, the amount of the finance charge for that fee should be expressed as a percentage.
Guidance on Rescission
The existing Commentary provided that a creditor could designate an agent to receive rescission notices from borrowers as long as the agent's name and address were provided to the borrower on the rescission form. The revised Commentary provides that where the creditor fails to provide an address for delivery of rescission notices, a rescission notice mailed to the person or address to whom the borrower has been advised to send payments constitutes delivery to the creditor or the creditor's assignee. In addition, the revised Commentary provides that where the creditor fails to provide an address for delivery of rescission notices, whether the borrower's delivery of a rescission notice to an entity other than the person or address to whom the borrower has been advised to send payments constitutes delivery to the creditor or assignee is a matter to be determined under state law.
The revised Commentary also addresses the effect of rescission. The revised Commentary provides that neither the sequence of procedures following rescission (creditor's tender of money or property given to anyone in connection with the transaction within a specified time and the consumer's duty to return any money or property that the creditor delivered to the consumer) nor a court's modification of those procedures, such as where the consumer is in bankruptcy or where the equities of the situation dictate, affect the consumer's substantive right to rescind and to have the loan amount adjusted.
'Clear and Conspicuous' Requirement
In its December 2003 proposal, the Board sought to amend the definition of "clear and conspicuous" for purposes of disclosure requirements in several of its consumer financial services and fair lending regulations to make the definition more uniform and to provide guidance on how to satisfy the definition. The Board used Regulation P, the regulation implementing the privacy provisions of the Gramm-Leach-Bliley Act, as a model for its proposed definition because it found that definition to be more precise than the definition of "clear and conspicuous" in its other regulations. According to the Board, most of the comment letters it received were related to the proposed definition of and guidance related to the "clear and conspicuous" standard. The proposal was criticized by industry commenters as being too burdensome and by consumer representatives as being insufficient. The Board staff will continue to review the issues raised by the comment letters and is considering options to address the many concerns raised.
Debt Cancellation/Suspension Products
The Board requested information about debt cancellation and debt suspension products and questioned whether additional guidance was needed on the applicability of TILA and Reg. Z to these types of products. The Board received about 25 comments on its request for information on debt cancellation and debt suspension products, which confirmed that such products are being made available by more and more creditors in connection with more and more types of credit and on a wide variety of terms. Most commenters favored changes to the rules with regard to debt cancellation and debt suspension products. The Board intends to continue to solicit comments on these types of products before deciding whether or not to propose changes to Reg. Z or the Commentary.
To view all other Basis Points Articles, click here.
Basis Points® is a concise, easy-to-read, monthly legal update for the mortgage lending industry. Basis Points® addresses complex legal issues from an industry perspective and keeps you informed on new legal developments affecting your business. Written in plain English, Basis Points® provides familiar factual scenarios, identifies the legal issues involved, presents real court resolutions and suggests how you might avoid similar legal pitfalls. Topics featured in Basis Points® include: Predatory Lending; Yield-Spread Premiums; RESPA - Fee Splitting and Up charges; Privacy; RESPA - Joint Venture; Bankruptcy; Fair Lending and Discrimination; and Truth in Lending/ Regulation Z. Basis Points® is published by CounselorLibrary.com, LLC, an affiliate of the Hudson Cook, LLP law firm. The CounselorLibrary.com, LLC is also the publisher of CARLAW®, HouseLaw®, Spot Delivery®, and the Counselor Library Series. For more information, please visit: www.counselorlibrary.com.
RSS