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Weekly Rewind...News from Your Regulators

TILA and Regulation Z: Top 10 Material Violations

By: Justin Hosie[1] and Cliff Cook[2]

June 5, 2022

Excerpt from presentation at the 2022 ACUIA Convention:

3. Failing to calculate the APR based on the underlying legal obligation

The word “obligation” appears almost 800 times in Regulation Z (the federal regulation implementing TILA). If there’s any question, that means that if you’re going to get the TILA disclosures correct, it’s important to know and understand the obligation between the creditor and consumer. In calculating the disclosures, including the APR, one bedrock requirement is that the disclosures must “reflect the terms of the legal obligation between the parties.” If you disagree with your favorite regulator or plaintiff about the consumer’s repayment obligations, the varying interpretations could be the source of real problems for your disclosures. So, make sure your legal obligation is clear and unambiguous on the face of your consumer disclosures. One of the most common ambiguities regarding the legal obligation, concerns the due dates.

CFPB Issues ANPRM on Credit Card Fees

Credit Card Late Fees – The CFPB issued an ANPRM seeking information from credit card issuers, consumer groups, and the public regarding credit card late fees and late payments and card issuers’ revenue and expenses.

From the CFPB

Human Trafficking - The CFPB issued a final rule to help survivors avoid some of the financial consequences of human trafficking. The CFPB has established, among other things, a method for survivors of trafficking to submit documentation to credit reporting companies that identifies any adverse item of information that resulted from human trafficking. The rule prohibits credit reporting companies from providing a report containing the adverse items of information.

AML/CFT/CPD Jurisdictions - FinCEN is informing U.S. financial institutions that the Financial Action Task Force (FATF), an intergovernmental body that establishes international standards for anti-money laundering, countering the financing of terrorism, and countering the financing of proliferation of weapons of mass destruction (AML/CFT/CPF), has issued public statements updating its lists of jurisdictions with strategic AML/CFT/CPF deficiencies following its plenary meeting this month. U.S. financial institutions should consider the FATF’s stance toward these jurisdictions when reviewing their obligations and risk-based policies, procedures, and practices.

From the FinCEN

Independent ATM Owners - FinCEN issued a statement to remind institutions that not all independent ATM owners or operators pose the same level of money laundering, terrorist financing, or other illicit financial activity risk, and not all independent ATM owners or operators are automatically higher risk, the agency said. Institutions that operate in compliance with applicable Bank Secrecy Act/anti-money laundering regulatory requirements and reasonably manage and mitigate risks related to the unique characteristics of customer relationships are neither prohibited nor discouraged from providing banking services to independent ATM owners or operators, including those that are Independent Sales Organizations.

Enforcement Actions – The FDIC barred an ex-senior vice president and commercial loan officer for identity theft and loan fraud.

State of WA DFI

Annual Assessment - All Money Transmitters and Currency Exchangers Annual Assessments are due by close of business on July 1, 2022. In order to avoid late fees and penalties, all assessment reports and payments must be filed by close of business (5pm Pacific Standard Time) on July 1, 2022. This means you must have submitted your annual assessment online, uploaded all necessary documents into NMLS, attested to the accuracy of the report, and made your electronic payment through the system by that deadline. We suggest you begin the process early to ensure a timely filing.

[1] Justin B. Hosie is a partner and practice group leader at Hudson Cook, LLP, a nationwide law firm focused on compliance with consumer protection laws governing financial services. Justin provides day-to-day compliance advice on various laws including the Federal Truth-in-Lending Act. Among various publications, Justin is co-authoring the “Annual Percentage Rates” chapter of the forthcoming American Bar Association’s Truth in Lending Manual, 2023 edition. He is AV rated by Martindale Hubbell and is recognized in The Best Lawyers in America for Financial Services Regulation Law.

[2] Cliff E. Cook is an Executive Consultant with Compliance Services Group. Cliff began his banking and compliance career in 1974, and has since been widely recognized by the Banking, Credit Union, Consumer Loan, Payday Loan, and Title Loan industries as an authoritative source for Truth-in-Lending Act compliance, with particular expertise in assisting lenders in complying with the Annual Percentage Rate requirements, as well as issues related to product development, loan agreements, loan origination systems, and loan servicing systems. Recently, Cliff has been assisting commercial lenders and law firms to comply with the new state-required commercial loan APR disclosures.

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