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Flashcards in TILA Deck (52):

Congress enacted ________ in 1968 as Title I of the Consumer Credit Protection Act.

Truth-in-Lending Act (TILA)


What was the ultimate goal of CCPA?

To promote the informed use of credit by consumers.


What was the first law in which the federal government enacted disclosure requirements as a means of protecting consumers from unfair treatment by creditors?

Truth-in-Lending Act (TILA)


Primary goals of TILA

1. To protect consumers by disclosing the costs and terms of credit
2. To create uniform standards for stating the cost of credit
3. Ensure advertising for credit is truthful and not misleading
4. To provide borrowers with the right to rescind certain types of mortgage transactions


Title XIV of the Dodd Frank Act

Mortgage Reform and Anti-Predatory Lending Act


Implementing Regulations for TILA

Regulation Z


Who is primarily responsible for for implementing and enforcing TILA and Regulation Z?



What conditions must a loan adhere to in order to be covered by TILA?

1. The credit is offered to consumers.
2. The offer or extension of credit is made regularly.
3. The credit includes a finance charge or written agreement stating the loan may be repaid in more than 4 installments.
4. The credit is primarily for personal, family, or household purpose.


Open End or Closed End

"Both the borrower and the lender anticipate repeat transactions"



Open End or Closed End

"A lender gives the borrower a limit on the amount of funds that he/she can withdraw and the borrower can request a cash advance"



Open End or Closed End

"The borrower may have the option of requesting an increase in the credit amount"



Open End or Closed End

"Payments depend on the interest due on the amount withdrawn"



Open End or Closed End

"A lender disburses all of the funds at closing and demands repayment within a specified time frame"



Open End or Closed End

"Borrowers may not receive an increase in the principle amount of a loan"



"Natural persons or business and financial organizations that extend consumer credit, make credit subject to finance charges, receive the initial payments on the debt a borrower assumes"



"The submission of a consumer's financial information for the purposes of obtaining an extension of credit"



Regarding a mortgage transaction, a complete application includes what pieces of information?

1. Consumer's Name
2. Social Security Number
3. Income
4. Address of property to secure the loan
5. An estimate of the value of the property
6. Loan Amount Sought


"The time that a consumer becomes contractually obligated on a credit transaction"



Two uniform standards defined by TILA pertaining to the cost of credit.

1. The Finance Charge
2. The Annual Percentage Rate


Regulation Z defines Finance Charge as:

"the cost of credit as a dollar amount"


Regulation Z defines Annual Percentage Rate as:

"a measure of the cost of credit, expressed as a yearly rate"


Is this fee included or not included in the Finance Charge?

"Fees paid to third parties or retains a portion of the fee, when the creditor requires the service"



Is this fee included or not included in the Finance Charge?

"Charges of Credit Life, Disability, or Employment Insurance, if optional and voluntarily chosen by the borrower"

Not Included


Is this fee included or not included in the Finance Charge?

"Mortgage Broker Fees"



Accuracy Tolerances for Open-End Loans

Regulation Z does not establish tolerances for Open-End loans.


The creditor will need to redisclose amounts when:

the charges are not accurate within tolerances that the regulation establishes for closed-end credit.


Inaccurate disclosures of the finance charge or the annual percentage rate give consumers a basis for exercising _________________.

the right to rescind a loan up to three years after consummation.


For closed-end loans:
"A measure of the cost of credit, expressed as a yearly rate, that relates to the amount and timing of the value received by the consumer to the amount and timing of payments made"

Annual Percentage Rate


For open-end loans:
"Annual Percentage Rate shall be computed by multiplying each ___________ by the number of periods in a year"

periodic rate


For closed-end loans, the APR is considered accurate if it is within _____ of the disclosed APR.

1/8th of a percent


For irregular loans, the APR is considered accurate if it is within _____ of the disclosed APR.

1/4 of a percent


Disclosures for ARMs provide consumers with:

1. Summaries of loan costs and lending terms
2. Warnings related to the inherent risks of adjustable interest rates
3. Advance notice of rate changes that will impact the amount of future loan payments


CHARM Booklet is due to the borrower _________.

no later than three business days after a consumer submits an application.


When a consumer applies for an ARM, the creditor must provide loan program disclosures ____________.

for each variable-rate mortgage product in which the applicant has expressed an interest in.


Rate Change Disclosure for ARMS are required:

at least 60, but no more than 120, days before the first payment is due at an adjusted interest rate.


Post consummation disclosure requirements apply to ARMS that are:

1. Closed-end loans
2. Secured by the borrowers principal residence


An exception to the Rate Change Disclosure requirement:

required at consummation if the first payment at the adjusted interest rate is due within 210 days of consummation.


Regulation and Section governing Home Equity Plans

Regulation Z, Section 1026.40


A ______________ is a form of revolving credit that is secured by a mortgage on the borrower's home.

Home Equity Plan


A legal remedy that voids a contract between two parties, restoring each to the position held prior to the transaction.



Intended to give a borrower the opportunity to reconsider whether he/she wants a loan, and the ability to cancel the loan by simply providing the lender with a timely notice of the cancellation.

Three business-day rescission period


Available to a borrower who did not receive a notice of the right to rescind or accurate Truth in Lending disclosures at the time that he/she entered an agreement for a mortgage loan.

Three-year rescission period


Loans not covered under the Right to Rescind:

1. Temporary loans
2. A loan that has been refinanced as a new transaction.
3. A lending transaction with a state agency
4. An advance or series of advances for a construction loan.
5. A renewal of optional insurance products.


Creditors must provide two copies of ___________ to each party with an ownership interest in the principal dwelling that serves as security for the loan.

Notice of the Right to Rescind


Advertising Trigger Terms for Open-End Credit:

1. Finance Charge
2. Other Charges (late payment, title, appraisal, credit report fees)
3. Taxes imposed on the credit transaction
4. Payment terms


A ____________ is an initial APR that is not based on the index and margin used to make rate adjustments for Adjustable Rate Home Equity Plans.

discounted or premium rate


Advertising Trigger Terms for Closed-End Credit:

1. Amount or percentage of a down payment
2. number of payments or the period of repayment
3. payment amounts
4. the finance charge


Regulation __ includes a list of seven prohibited practices when advertising closed-end credit secured by a dwelling.



Penalties for criminal liability for violations of TILA include:

fines of up to $5000 and or up to one year in prison.


For closed-end loans secured by a dwelling, the Civil Liability penalty for violations of TILA is:

no less than $400, no more than $4000.


Individual actions for violations of TILA and Regulation Z may lead to:

1. Actual Damages
2. twice the amount of the finance charge
3. monetary penalties
4. the costs of bringing the action and attorney fees


In class actions for violations of TILA, the amount of recovery possible is limited to:

$1,000,000 or 1% of the creditor's net worth, whichever is less.