More TILA Litigation on the Horizon? Deadline to Comply with New Reg Z Early Disclosure Rules Now July 30
The Federal Reserve's December 2008 revisions to Regulation Z (Truth in Lending Act) closed-end mortgage early disclosure requirements were to take effect October 1, 2009. However, these changes were superseded by the enactment of the Mortgage Disclosure Improvement Act of 2008 (MDIA). As a result, the Federal Reserve has revised Regulation Z to incorporate the MDIA amendments. Compliance with the revised early disclosure requirements is mandatory on July 30, 2009.
According to the FDIC's release, the revisions will include provisions that:
- Expand Reg Z's disclosure requirements to all mortgage loans secured by any dwelling of a consumer, not only a consumer's "principal" dwelling, as wells as refinancings and home equity loans.
- Require lenders to deliver corrected disclosures at least three business days before loan consummation if the APR provided in the early disclosures changes beyond the tolerances provided in Section 226.22.
- Prohibit lenders from charging a consumer any fee, except to obtain a credit report, until after the early disclosures have been provided.
- Permit consumers to expedite the closing of a mortgage loan subject to the early disclosure provisions to address a personal financial emergency, such as foreclosure.
- Require lender to inform a consumer that he or she is not required to complete the transaction because the consumer has received the early disclosures or applied for a loan.
In the wake of the financial crisis, lawsuits alleging violations of consumer protection laws (such as TILA) and other subprime-related litigation, are at all time highs. According to a report by Navigant Consulting, the number of subprime-related court filings reached an unprecedented level in 2008--totaling 576. Many of these cases alleged improper disclosures and charges under TILA and RESPA. Revised Reg Z provisions, including additional disclosures for more loan types, will present additional opportunities for single-plaintiff and class-action litigation.
