Consumer Finance Litigation

On April 29, 2020, the Consumer Financial Protection Bureau (CFPB) issued an interpretive rule allowing certain consumers to modify to waive certain waiting periods required under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). Per the CFPB, this interpretive rule is intended to ease the way for consumers with urgent financial needs to obtain access to mortgage credit more quickly during the COVID-19 pandemic.

Ordinarily, the TILA-RESPA Integrated Disclosure (TRID) Rule imposes certain disclosure requirements and waiting periods relating to mortgage transactions. The TRID Rule generally requires creditors to deliver or mail a Loan Estimate to consumers no later than seven business days before consummation of a loan. The TRID Rule also states that consumers must receive a Closing Disclosure no later than three business days before consummation. Furthermore, the right of rescission rules contained in Regulation Z (Regulation Z Rescission Rules), which implements TILA, also give consumers at least three business days from consummation to rescind certain credit obligations secured by their principal dwelling and require creditors to disclose this rescission right.

However, under the TRID Rule and the Regulation Z Rescission Rules, a consumer who has received the required disclosures may modify or waive the waiting periods prescribed by these rules if the consumer needs credit extended to meet a bona fide personal financial emergency. In order to modify or waive the waiting periods, the rules require a creditor to have a dated written statement from the consumer that (1) describes the emergency, (2) specifically modifies or waives the waiting period, and (3) contains the signature of all consumers who are primarily liable on the loan or who are entitled to rescind.

According to the CFPB’s new interpretative rule, a bona fide personal financial emergency may be one caused by the COVID-19 pandemic. Therefore, if a consumer is experiencing a personal financial emergency stemming from the COVID-19 crisis, the consumer may so state in a written statement to the creditor seeking to modify or waive the standard waiting period. The interpretive rule also encourages creditors to voluntarily inform consumers during the COVID-19 pandemic of their ability to seek modification or waiver of the waiting period under the TRID Rule and Regulation Z Rescission Rules in the event of a bona fide personal financial emergency.

In addition, the TRID Rule requires creditors to estimate in good faith and disclose the costs that consumers will occur in connection with their mortgage transaction. The TRID Rule allows creditors to use revised estimates of such costs in certain situations, including “changed circumstances” that affect the settlement charges that consumers would occur. The CFPB’s interpretive rule specifies that the COVID-19 pandemic qualifies as a “changed circumstance” for purposes of revising estimated settlement charges, if the pandemic has affected the estimate of such charges.

The CFPB’s interpretive rule may be found here.

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