Articles Posted in THE CLOSING DISCLOSURE (Combined HUD-1 and TILA forms)

The 8th Circuit Court of Appeals overturned a district court decision in the Charvat v. Mutual First Federal Credit Union case. The case involved a violation of the Electronic Fund Transfer Act (“EFTA”) 15 U.S.C. §1693 where the Charvat’s made several ATM withdrawals from two Nebraska banks. The 8th Circuit stated “The EFTA requires ATM operators to provide two forms of notice, one “on or at” the ATM machine and another on-screen during the ATM transaction, if the bank operators charged a ATM transaction fee. The ATM machines in question failed to provide the required notice disclosure on the “on ATM machine” and this was the basis for the class action.

The 8th Circuit held that “[D]ecisions by this Court and the Supreme Court indicate that an informational injury alone is sufficient to confer standing, even without an additional economic or other injury.” The 8th Circuit further stated that Charvat identified a variety of instances where the denial of a statutory right to receive information was sufficient to establish standing and cited to the Fed. Election Comm’n v. Akins case and more importantly the Dryden v. Lou Budke’s Arrow Fin. Co. which was a Truth-In-Lending Act case.

The citing of the Dryden case is particularly important because the 8th Circuit said ” “f [borrower] proved that the disclosure provisions of [TILA] and Regulation Z were violated in connection with the January 26 transaction, [lender] is liable for statutory damages.”).” The 8th Circuit said the EFTA creates a right to a particular form of notice before an ATM transaction fee could be levied. If that notice was not provided and a fee was nonetheless charged, an injury occurred, and the statutory damages are directly related to the consumer’s injury.”

The Consumer Financial Protection BureauCFPB” and the United States Department of JusticeDOJ” formally entered into an Memorandum of Understanding AgreementMOU” pursuant to Section 1054(d)(2)(B) of the Dodd-Frank Wall Street Reform and Consumer Protection Act which mandated the two agencies to establish an agreement between themselves to help prevent enforcement conflicts and help streamline fair lending law litigation under Federal law. The MOU involves Federal fair lending laws such as the Equal Credit Opportunity Act, Home Mortgage Disclosure Act, and Truth In Lending Act.

The MOU outlined three key areas for this cooperative agreement:

1. Information sharing and confidentiality issues: the agencies will be sharing information in matters that the CFPB refers to the Justice Department, in joint investigations under the ECOA, and in order to coordinate fair lending enforcement. The MOU establishes strict confidentiality protections for this shared information.

The Consumer Financial Protection Bureau “CFPB” has proposed a Three Day Delivery Requirement rule with respect to the issuance of the new Closing Disclosure Statement form to borrowers. The Closing Disclosure Statement is the new name for the integrated HUD-1 Settlement Statement and Truth In Lending Act “TILA”. The Three-Day Requirement rule is being proposed because the CFPB wants to try and eliminate the opportunity for some in the industry to spring new fees or charges onto the unsuspecting consumer at the closing table. The CFPB also believes the Three-Day Requirement rule will give borrowers more time to educate themselves about their transaction.

The Three-Day Delivery Requirement proposal mandates The Closing Disclosure Statement be delivered to and recieved by the borrower in most residential closed-end mortgage transactions at least three days prior to the consumation of the transaction. The Three-Days are calculated as three “Business Days” which are defined as all days except for Sunday and legal Federal holidays.

If during the Three-Day Delivery before the but before the scheduled closing date, a fee or charge that the borrower will pay increases or decreases the borrower must be given a new updated Closing Disclosure Statement form and wait three additional business days before consumation of the transaction.

§ 1026.19(f) on page 738 of the Integrated Mortgage Disclosures under the Real Estate Settlement Procedures Act (Regulation X) and the Truth In Lending Act (Regulation Z) proposal states “the creditor shall ensure that the consumer recieves the disclosures required under paragraph (f)(1)(i) of this section no later than three business days before consumation.”

The CFPB is proposing that delivery of The Closing Disclosure Statement must be provided to the borrower either: (1) in person, (2) by mail/Federal Express/courier, or (3) by email at least three business days prior to the closing.
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