Reg Z: TILA Flashcards
If a creditor plans to make changes to the terms of a credit card, what must the creditor do before the changes take effect?
It must give the consumer the option to cancel the card before the changes take effect.
What are the institution’s responsibilities regarding credit balances on open-end loans?
Must make a good faith effort to return/refund the balance to the consumer if the credit is on the account for more than 6 months.
Can creditors charge a fee based on different payment methods, for example, phone payments vs online payments?
No, this is prohibited by Reg Z.
When is a loan considered a Private Education Loan?
Only if the loan is for closed-end, non-real estate secured loans in which any of the funds of the loan is to finance post secondary education.
Are there any times where a loan with a 45% DTI ratio can be a QM loan?
Yes, if it meets GSE government guarantee or insurance tests (Fannie and Freddie).
What is a bona fide emergency?
Loss of home or loss of health are generally the only two permissible bona fide emergencies per regulators.
Are there APR or finance change tolerances for open end credit?
No. Tolerances apply to closed end mortgages only.
It’s ok to charge a fee of up to $__ if the violation is a repeat violation on a credit card.
$40
For purposes of calculating an APR, an “irregular transaction” includes:
a. Multiple advance construction loans
b. A single payment loan
c. A loan with a final balloon payment
d. A loan with quarterly payments
a. Multiple advance construction loans
Which of the following is incorrect regarding credit card disclosure requirements?
a. 30 days notice for COT (rate or other significant changes)
b. Minimum payment disclosures
c. Late payment disclosures
d. Renewal disclosures for COT
a. 30 days notice for COT (rate or other significant changes)
It’s 45 days
T/F: Special early disclosure requirements for credit card solicitations and applications do NOT apply to lines of credit assessed solely by account numbers.
T
How many days does a consumer have to make payments on a credit card from when the institution mails the statement?
a. 7 days
b. 14 days
c. 21 days
d. 30 days
c. 21 days
An institution must send periodic statements on an open-end loan if there is a _____ on the account.
balance
If a creditor plans to increase the interest rate or other fees on a credit card account, or increase the required minimum payment, it must send the consumer a notice 45 days before:
a. Increasing the interest rate
b. Changing certain fees
c. Making other significant changes to the terms of the account.
d. All of the above.
d. All of the above.
Which of the following are true? Card issuers cannot impose a fee for:
a. Declining to authorize a transaction
b. Inactivity, such as when the consumer is no longer using the account.
c. Closing or terminating the account
a, b, and c. All are true.
Rescission provisions does not apply to which types of loans?
Purchase money loans.
Refi of the loan with no new money. (if new money was included, the new money would apply to ROR rules)
If the institution sells the loan, are there any disclosure requirements?
Yes, Notice of Sale of Transfer must be sent to all loans that are secured by a borrower’s principal dwelling if their loan has been sold or transferred.
The notice must be sent by the selling institution (not the transferrer) and applies when the asset is sold to affiliates.
Does the periodic rate have to appear on the periodic statement of an open-end account?
Yes. Any periodic rate that may be used to calculate the finance charge, the type of the transaction and the range of the balances to which it applies and the corresponding APR are all required on the statement, in addition to some other requirements.
What are the two types of QM?
What is the difference between the two?
Safe harbor and rebuttable presumption loan. Difference = the rate.
If the rate is above a certain standard, it will be subject only to rebuttable presumption compliance rather than safe harbor. Safe Harbor = less risky from a legal standpoint.
A credit card issuer cannot assess a fee on the consumer’s account for an over-the-limit transaction unless:
a. The card issuer gives notice describing the consumer’s right to consent or “opt in” to the payment of over-the-limit transactions
b. the creditor obtains the consumer’s consent to charge a fee to pay over-the-limit transactions.
c. Both A and B
c. Both A and B
If the loan meets the definition of HOEPA, what disclosure requirements are there?
There are additional disclosures required and home ownership counseling is required before the loan can be closed.
When are appraisals required for Reg Z?
Consumer purpose home-secured loans.
What is a prepaid finance charge?
Finance charges paid at some point in time before repayment of the loan starts.
When must the appraisal DISCLOSURE for an HPML be delivered?
Disclosure must be delivered or mailed no later than 3 business days after application.
Are QM rules required?
No
What PEL requirement is a form from the school?
Certificate in the loan file from the college or university attended. This must be received prior to funding.
Are there any restrictions about credit card payment due dates?
Yes, it must be the same date each month (for example, the 15th or the last day of the month).
What loans are covered under HOEPA?
Consumer loans secured by the consumer’s PRINCIPAL dwelling, includes HELOCs.
- TIP: There are 5 letters in HOEPA and HELOC.
When must a periodic statement be delivered by (OE that is not a credit card)?
A creditor must provide a statement within 14 days of the due date for the minimum payment.
Among other things, a change-in-terms must contain:
a. A statement that the consumer has the right to opt out of the changes.
b. The date the changes are effective.
c. A statement that changes are being made to the account and a summary of those changes.
d. All of the above.
d. All of the above.
T/F: Prison time and fines can be handed out for Reg Z violations.
T
For open-end loans, are there any subsequent disclosure requirements after an account has been opened?
Yes, for any open-end consumer credit plan (excluding home-secured lines), you must provide a written COT notice of a significant change to an account term or an increase in the required minimum periodic payment at least 45 days before the effective date of the change.
Additionally, creditors must provide a written notice if you increase the account rate because the consumer is in default or delinquent on their payments or if you have identified certain events in your account agreement that trigger the increase, such as obtaining an extension of credit that exceeds their limits, if applicable. This also must be provided 45 days before the increase takes place.
What is the prepayment penalties test for HOEPA?
More than 36 months after consummation or account opening OR in an amount more than 2% of the amount prepaid.
What is a Reg Z LO?
An individual that performs loan origination activities for compensation or other monetary gain. Activities that make a LO: - taking an application - arranging a credit transaction - assisting a consumer apply for credit - offering or negotiating terms - making an extension of credit
What loans require ATR or QM provisions?
Closed-end, first or second lien credit transactions that are secured by a dwelling.
Is an application fee to all applicants a finance charge?
No, because this is paid regardless if the loan is originated or not.
What does HPML stand for?
Higher priced mortgage loan
Is a line of credit secured by a vacation rental considered a HELOC?
Yes
Who gets the Right of Rescission?
Anyone that has an ownership interest in the dwelling AND is someone’s PRINCIPAL dwelling.
What is APOR?
Average Prime Offer Rate
What disclosure is required at the time an application is provided or a non-refundable fee is paid on an ARM loan? What if it’s a telephone app?
CHARM booklet: Consumer Handbook on Adjustable Rate Mortgages and program disclosure.
if telephone app, must be delivered within 3 business days.
What loans are not covered under Reg Z?
Certain loans above a specified amount are not covered. The dollar threshold for loans when they are not secured by real property or property that serves as the borrower’s principal dwelling is adjusted annually based on changes in the Consumer Price Index.
After being notified of a billing error, a creditor may continue to bill the consumer during the error resolution period only if the billing statement indicates that the disputed amount and related charges:
a. Will be refunded if the dispute is resolved in the cardholder’s favor.
b. Do not have to be paid before the situation is resolved.
b. Do not have to be paid before the situation is resolved.
Does a creditor have to consider the consumer’s ATR for credit cards?
Yes, but it’s not as rigorous as the mortgage ATR rules. Do not have to have reasonable documentation, can take a consumer’s word for it that they have the income.
What are the 8 minimum underwriting standards for ATR?
- Current or reasonably expected income or assets
- Current employment status
- Monthly payment on the covered transaction
- Monthly payment on any simultaneous loan
- Monthly payment for mortgage-related obligation
- Current debt obligations, alimony, child support
- Monthly DTI or residual income
- Credit history
What is the high fees test for HOEPA?
Loans total points and fees exceeds 5% if the loan amount exceeds the threshold ($20,391). 8% for smaller loan amounts less than the threshold ($20,391).
Is an appraisal or credit report fee a finance charge?
Yes, except for a real property or residential mortgage transaction.
What are the disclosure requirements on a HELOC at the time of application?
Must provide program disclosures and the booklet: What You Need to Know about Home Equity Lines of Credit.
Must be given at the time of application or within 3 business days if by phone.
What is the rate for a safe harbor QM loan?
APR is lower than the QM threshold: 1.5% (first lien) or 3.5% (second lien) above APOR.
What is an ARM?
Adjustable Rate Mortgage
What is the false statement?
a. If a credit card has a variable rate tied to an index, the rate can go up whenever the index goes up without prior notification to the cardholder.
b. A change in credit insurance carriers need not be disclosed to the cardholder
c. If a creditor plans to decrease the credit limit, notification must be given before a penalty fee or rate can be imposed for exceeding the limit.
b. A change in credit insurance carriers need not be disclosed to the cardholder
Is an overdraft line of credit accessed by a debit card considered a credit card?
No
Which of the following are permitted compensation practices for Reg Z loan originators?
a. Receiving compensation based on interest rates or points
b. Receiving compensation from a lender or another party if the originator already received compensation from the consumer.
c. Directing or steering a consumer to accept a mortgage loan that is not in the consumer’s interest in order to increase a LO’s compensation.
d. Receiving compensation based on percentage of a loan amount.
d. Receiving compensation based on percentage of a loan amount.
What are the prepayment penalty limitations for a HOEPA loan?
More than 36 months after consummation or account opening OR in an amount more than 2% of the amount prepaid
What are the special appraisal requirements for a flipping loan that is also a HPML?
Must obtain a second appraisal (at no cost to the applicant)
If a consumer fails to pay the $10 minimum payment on their credit card, what is the maximum penalty fee the creditor can charge?
$10.
Reg Z prohibits penalty fees from exceeding the dollar amount associated with the violation.
Y/N: Stan and Bernice Holland are joint account holders of a credit card with Citywide Financial. Stan has passed away. Is Citywide bound by the requirement of Reg Z to notify the administrator of Stan Holland’s estate of the balance due on the credit card account?
No
