TRID Flashcards
Which of the following closed-end loans is subject to the right of rescission?
a. A loan to purchase a vacation home, secured by the vacation home itself
b. A loan to purchase a principal residence, secured by the residence
c. A loan to purchase furniture for use in a principal dwelling, secured by the furniture
d. A home improvement loan for the borrower’s principal dwelling, secured by the dwelling
d. A home improvement loan for the borrower’s principal dwelling, secured by the dwelling In any transaction where a security interest will be taken in a consumer’s principal dwelling and where the loan is not exempt, each consumer with an ownership interest in the home has the right to rescind the transaction. The loans to purchase a vacation home and purchase furniture are not covered because they do not involve a consumer’s principal dwelling. The loan to purchase a principal dwelling is exempt because it is a residential mortgage transaction, meaning it is used to purchase or construct the dwelling.
For how long may consumers exercise the right to rescind transactions in closed-end loans?
a. Three years after the consummation of the transaction
b. Three calendar days after the consummation of the transaction or the receipt of notice of the right to rescind, whichever is later
c. Three business days after the later of the consummation, delivery of notice of the right to rescind, or delivery of the required disclosures
d. Three business days after the receipt of the early disclosures
c. Three business days after the later of the consummation, delivery of notice of the right to rescind, or delivery of the required disclosures. This is the rule for a normal transaction. The consumer will have the right to rescind the transaction for three years after the consummation of the transaction if the lender fails to give the required disclosures or the rescission notice to the consumer in the rescindable transaction.
Which of the following disclosures is NOT required on the itemization of the amount financed?
a. The amount of proceeds distributed directly to the borrower
b. The amounts paid to others on behalf of the borrower
c. An itemization of the various types of finance charges
d. The persons to whom amounts are paid on the borrower’s behalf
c. An itemization of the various types of finance charges
The only finance charge that must be disclosed on the itemization of the amount financed is prepaid finance charges. No other types of finance charges are disclosed on this form. The other choices are required disclosures for the itemization of the amount financed.
Borrower A has a variable rate loan secured by his principal dwelling for a term of 10 years. Which of the following is NOT a TIL requirement for his loan?
a. Providing a variable rate disclosure of certain terms of the loan program at the earlier of the application time or before a nonrefundable fee is paid.
b. Limiting the number of interest rate increases in each calendar year.
c. Including an interest rate cap in the loan contract.
d. Providing a consumer handbook on ARMs to the borrower.
b. Limiting the number of interest rate increases in each calendar year. There is no requirement in Reg Z for the lender to limit the number of interest rate increases in any calendar year. However, a lifetime interest rate cap must be included in the contract and must be disclosed.
The State National Bank credit card program includes an annual fee that equals a percentage of the average balance of the account during the previous year. Of the following statements, which is true regarding the TIL requirements applicable to this fee?
a. TIL prohibits charging a fee based on a percentage of a balance.
b. The bank must disclose in the initial application or solicitation either a fee amount or the percentage amount and identify the amount against which the percentage is based.
c. The consumer must affirmatively agree in writing to pay this fee before the bank can charge it.
d. The bank must give the consumer 30 days’ notice every year before the fee is charged and allow the consumer to cancel the account before it is assessed.
b. The bank must disclose in the initial application or solicitation either a fee amount or the percentage amount and identify the amount against which the percentage is based.
Which statement is NOT true regarding the application disclosure made by the lender on a home equity plan?
a. Disclosure must be made at the time the application is provided
b. Disclosure must be in a form the borrower can keep.
c. Disclosure must describe the security interest and warn that in the event of default the borrower could lose the dwelling.
d. Disclosure must describe payment terms.
b. Disclosure must be in a form the borrower can keep. The initial disclosures provided to the borrower on a HELOC may be on the application itself and do not have to be in a form the consumer may keep.
In an open-end account that is NOT a home equity plan, which of the following does NOT have to be provided to the consumer?
a. An initial disclosure statement
b. A brochure with a transaction example of a $1,000 balance for six months
c. A periodic statement
d. A statement of billing rights
b. A brochure with a transaction example of a $1,000 balance for six months No disclosures of specific examples are required on open-end accounts other than home equity plans. The disclosures described in the other choices are required.
When must a notice be received from a consumer in order to be considered a “billing error notice”?
a. Within 30 days after the transaction that is subject of the alleged error.
b. Within 90 days after the first statement that reflected the error.
c. Within 60 days after the transaction that is subject of the alleged error.
d. Within 60 days after the first statement that reflected the error.
d. Within 60 days after the first statement that reflected the error.
Which statement is true regarding a consumer’s right to rescind an open-end credit transaction?
a. Right of rescission applies only to transactions secured by the consumer’s principal dwelling.
b. Right of rescission applies separately to each advance of funds made under a home equity plan.
c. Right of rescission can be made orally or in writing.
d. Notice of right of rescission is made only to the primary borrower.
a. Right of rescission applies only to transactions secured by the consumer’s principal dwelling. The right to rescind a transaction is required only in a transaction secured by a consumer’s principal dwelling. Once a notice of the right to rescind is given and the rescission period passes, no additional rights to rescind are granted to the consumer in a home equity plan provided the advances are made in accordance with the plan’s provisions. The exercise of the right to rescind must be in writing to be effective. A consumer cannot rescind orally by telephone. Two notices of the right to rescind must be given to each consumer with an ownership interest in the property securing the account.
When a bank makes a rescindable closed-end home improvement loan to a consumer, to which of the following may the bank advance funds before the end of the rescission period?
a. To the borrower
b. To the contractor for delivery of materials
c. To an escrow account with a third-party escrow agent
d. To an escrow account with the borrower acting as the escrow agent
c. To an escrow account with a third-party escrow agent Until the rescission period has expired and the creditor is reasonably certain that the consumer has not exercised his right to rescind, the creditor may not disburse any loan proceeds except into escrow. The escrow agent or trustee on the escrow account cannot be the consumer.
First National bank agreed to make a rescindable closed-end home improvement loan to Mr. and Mrs. Smith. The Notice of the Right to Rescind was given to the Smiths on Tuesday at the closing of the loan along with the material disclosures. The Smiths purchased a title policy and paid for a property appraisal for the bank in connection with the transaction. A lien was filed against the Smiths’ home on Tuesday afternoon. The bank funded the loan on Friday morning at the request of Mr. Smith by crediting the Smiths’ joint checking account with the loan proceeds. On Friday afternoon, Mrs. Smith had a change of heart concerning the transaction and deposits a rescission notice in the mail to the bank. The bank receives the notice on Tuesday morning. All funds have been withdrawn from the account. What should the bank do?
a. Notify the Smiths that the loan proceeds are immediately due and payable and that once the funds are repaid, the lien on the property will be released
b. Release the lien on the property immediately, then refund to the Smiths the amounts they spent for the title policy and appraisal, and then demand repayment for the loan (without interest).
c. Release the lien on the property immediately, and then send a written request to the Smiths asking for repayment of the loan proceeds (without interest).
d. Send a letter to the Smiths explaining that because the rescission notice was not sent within the proper time period, it is ineffective and the loan is still valid.
b. Release the lien on the property immediately, then refund to the Smiths the amounts they spent for the title policy and appraisal, and then demand repayment for the loan (without interest). If the consumer rescinds before midnight of the third business day after the later of (1) consummation, (2) receipt of the notice of the right to rescind, or (3) the receipt of the material disclosures, the rescission is effective. In this case, the last day to rescind would have been Friday at midnight. Therefore, Mrs. Smith’s rescission notice was effective, and the transaction was properly rescinded. Once a transaction is rescinded, the creditor must release any lien within 20 days and tender to the consumer any amounts paid in connection with the transaction, even though the money may not have represented profit to the creditor. in this case, the cost of the title policy and appraisal would have to be refunded by the bank. Once the creditor has fulfilled these responsibilities, the consumer must tender any funds advanced to him or her. The bank should have been careful not to fund the loan until it was reasonably sure the borrowers had not rescinded it.
A consumer customer reports to First National Bank’s credit card department that his credit card periodic statement contains an amount that is incorrect. What should the bank do?
a. Begin an investigation of the alleged error but require the consumer to pay the disputed amount pending the completion of the investigation
b. Conduct an investigation and mail within 30 days an acknowledgment of the error notice, a correction of the error, or a notice that there is no error
c. Complete an investigation of the error in no more than 60 days
d. Conduct a reasonable investigation of the alleged error and report the disputed amount to the credit bureau as delinquent
b. Conduct an investigation and mail within 30 days an acknowledgment of the error notice, a correction of the error, or a notice that there is no error The creditor must either mail an acknowledgment of the error within 30 days or complete its investigation and notify the consumer of its findings within 30 days. The creditor must complete an investigation of the alleged error within 2 complete billing cycles after receiving notice of the error from the consumer, but in no event more than 90 days. The creditor may not attempt to collect the disputed amount and may not make an adverse action report concerning the disputed amount until the investigation is complete and consumer has an opportunity to pay.
If a bank completes an investigation of an alleged billing error and determines that no billing error occurred and the consumer owes all or part of the amount, what must the bank do?
a. Immediately report to the credit bureau the amount that was the subject of the investigation as delinquent
b. Disallow any free-ride period normally given to the consumer on the account for amounts owing periodically and require the consumer to make the payment immediately
c. Send the consumer a notice that explains why no billing error occurred
d. Require the consumer to produce documentation for any future billing notices
c. Send the consumer a notice that explains why no billing error occurred The creditor must send a notice to the consumer explaining why the billing error alleged by the consumer is not correct. The creditor must also furnish documentation at the consumer’s request. The consumer must be given any free ride that is normally offered under the terms of the plan, and the creditor must allow the consumer time to pay the amount before reporting it as delinquent.
Which of the following situations is NOT considered a billing error?
a. The failure to credit a payment.
b. The inclusion of a charge for an item not purchased by the consumer.
c. The inclusion of a charge for an item the quality of which dissatisfied the consumer.
d. The inclusion of a charge for an item delivered to the wrong location.
c. The inclusion of a charge for an item the quality of which dissatisfied the consumer. This section does not cover disputes related to the quality of an item or service the consumer received.
For which disclosure must a bank obtain a customer’s affirmative consent before delivery?
a. A hard copy of a right-to-cancel notice.
b. An electronic credit card application disclosure.
c. An electronic disclosure statement on a car loan.
d. An electronic home equity early disclosure.
c. An electronic disclosure statement on a car loan. Consent does not need to be received for certain early disclosures or for advertisements. It also does not need to be obtained for hard copies - only for electronic disclosures
What must a married couple do to waive their right of rescission on their residential property?
a. Call the bank’s toll-free telephone number
b. Obtain the loan officer’s written approval
c. Sign the bank’s standard waiver form
d. Sign a written statement indicating the reason for the waiver.
d. Sign a written statement indicating the reason for the waiver. In order for a waiver of the right to rescind to be effective, all parties with the right to rescind must sign it, and it must describe the reason for the waiver
A creditor receives a phone application for a HELOC. Before the time period for mailing out the early disclosure and the Reg Z-mandated brochure, the creditor reviews the applicant’s credit history and discovers the applicant will not qualify for the LOC due to a bankruptcy filing last year. Which of the following BEST describes how Reg Z treats this situation?
a. The creditor may wait and send the early disclosures and brochure with the AAN required by Reg B.
b. The early disclosures and brochure must be sent out within the required time period after receipt of the telephone application, even if the loan is declined within that period.
c. If the credit denial was made within 30 days after receipt of the telephone application, the creditor does not have to send the early disclosures and brochure.
d. If the credit denial was made within the period of time Reg Z allows for mailing the early disclosures and brochure, the creditor does not have to send the early disclosures or the brochure.
d. If the credit denial was made within the period of time Reg Z allows for mailing the early disclosures and brochure, the creditor does not have to send the early disclosures or the brochure. If the bank determines that the application will be denied within the three business days and notifies the applicant, the early disclosures are not required.
In determining a prepaid finance charge for a final APR calculation, a compliance officer notes an unusual settlement agent fee. What should the compliance officer FIRST determine?
a. Whether the fee will be prepaid
b. Whether the fee is a service, transaction or delivery fee
c. Whether the fee is charged in a comparable cash transaction
d. Whether the loan will be secured by a dwelling or a residential mortgage transaction
c. Whether the fee is charged in a comparable cash transaction Fees that are charged to customers who pay cash cannot be considered a finance charge.
On Jan 10, ABC Bank decides to send an advertising piece to consumers in its local community to promote its HELOC. The ad will be sent via email. The bank’s HELOC has an interest rate based upon the national prime rate plus a 5% margin. However, the bank is offering a lower promotional interest rate that is fixed for 6 months. In the ad, the bank plans to disclose the promotional rate and the fact that it is valid for 6 months from the date of loan closing. The bank will also need to disclose an actual APR charged on this product during the previous November. Additionally, the ad will include a list of all the fees required to close the loan and the maximum APR that can be charged under the plan. Will this ad meet TILA requirements?
a. Yes, all required disclosures have been made
b. No, the ad must include the fact that a security interest will be taken on the consumer’s home.
c. No, the ad must include the specific index and margin upon which the rate is based.
d. No, the ad must disclose a rate used during the 30 days before the date the ad is transmitted.
d. No, the ad must disclose a rate used during the 30 days before the date the ad is transmitted. The rate must be “reasonably current.” For an emailed ad, “reasonably current” is a rate in effect during the 30 days before the transmission of the email.
Which of the following features is acceptable in a high-cost mortgage loan?
a. A late fee constituting 5% of the amount past due
b. A payment schedule that allows for negative amortizations
c. A prepayment penalty provision effective for the first year of the loan.
d. An unconditional demand clause.
c. A prepayment penalty provision effective for the first year of the loan. Prepayment penalties are acceptable as long as they are limited to the first 36 months of the loan.
If a loan is to be secured by a consumer’s principal dwelling, which of the following actions is prohibited with regard to an appraiser?
a. The banker does not understand the comparable values in an appraisal and asks the appraiser to clarify the information.
b. The banker tells the appraiser that the appraisal will need to show that the property is worth at least $100,000, or the bank will not be able to make the loan.
c. The banker notices that there is a factual error in the appraisal and asks the appraiser to correct it.
d. The banker refuses to pay for an appraisal submitted past the date that the appraiser agreed to provide it.
b. The banker tells the appraiser that the appraisal will need to show that the property is worth at least $100,000, or the bank will not be able to make the loan. A banker’s disclosure to the appraiser of the minimum required property value necessary to approve the loan is considered an attempt to influence or encourage the appraiser to value the property at least that amount.
How must a card issuer disclose a minimum payment on a periodic statement for an open-end credit account that is not home-secured?
a. By disclosing the actual repayment for the consumer’s account balance, rate, and terms over the remaining term of the account
b. By providing a toll-free telephone number that will respond with a generic payment example
c. By disclosing the estimated monthly payment for repaying in 36 months
d. By disclosing several generic examples that could apply to the consumer’s account
c. By disclosing the estimated monthly payment for repaying in 36 months
Which of the following charges is generally considered to be a prepaid finance charge?
a. Points paid by the borrower in cash at closing
b. An application fee of $250 paid in cash at the time of application and collected from all applicants whether or not the application is approved
c. A $300 fee for an appraisal in a real estate transaction
d. A $750 fee for a title policy in a real estate transaction
a. Points paid by the borrower in cash at closing This fee is a finance charge because it represents a payment to the creditor that is a cost of obtaining credit. The other fees are specifically exempt from the definition of finance charge. Application fees charged to all applicants, whether or not credit is actually granted, are not finance charges. The purpose of the fee is to cover the costs of services performed in processing the loan application. The other choices are for services performed in connection with a real estate loan and are excluded from the definition of finance charge.
Which of these transactions requires the earliest disclosure?
a. A $60,000 loan with a variable interest rate to purchase part of a municipal bond issue
b. A $15,000 closed-end loan with a fixed interest rate to build a swimming pool at the borrower’s residence
c. A $150,000 loan with a fixed interest rate to purchase a residence.
d. A $200,000 loan with a variable interest rate to purchase a residence
d. A $200,000 loan with a variable interest rate to purchase a residence An adjustable rate mortgage (ARM) program disclosure must be given at the time of the application when the loan will be made to purchase the borrower’s principal dwelling and will have a variable interest rate. The $60,000 loan to purchase part of a municipal bond issue with variable interest rate is not a covered transaction because it is more than $53,000 (as adjusted annually) and is not secured by real estate. The $15,000 loan to build a swimming pool at the borrower’s residence with a fixed interest rate only requires disclosures before consummation. The $150,000 loan to purchase a residence with a fixed interest rate requires the first disclosure to be made within 3 business days of the application.
If an advertisement for a lender’s mortgage loan product states that “we offer 15- and 30-year loans,” what additional disclosures are required by Regulation Z?
a. The terms of repayment, amount of the down payment (in a credit sale), and the APR.
b. The APR and an example based on a $10,000 purchase price
c. The monthly payment amount based on a $10,000 purchase price and a maturity recently offered by the bank
d. No additional disclosures are required.
a. The terms of repayment, amount of the down payment (in a credit sale), and the APR. If any triggering terms are used (including the amount or percentage of the down payment), then the APR and terms of repayment and the amount or percentage of the down payment must also be disclosed.
For how long must a lender retain evidence of compliance with TILA?
a. One year following consummation of the transaction for all transactions.
b. 25 months from the date of the application, except for mortgages, which have a 5 year retention requirement.
c. 6 months from the date the loan is repaid, except for mortgages, which have a 5 year retention requirement
d. 2 years after the disclosures are required to be made, except for mortgages, which have a 5 year retention requirement.
d. 2 years after the disclosures are required to be made, except for mortgages, which have a 5 year retention requirement.
Which of the following statements is true regarding the requirement that a creditor determine a borrower’s eligibility to repay the loan?
a. Applies only to loans secured by the consumer’s principal dwelling
b. Applies only to higher-priced loans
c. Applies to HELOCs
d. Applies to all closed-end dwelling-secured loans
d. Applies to all closed-end dwelling-secured loans
Which of the following is a “loan originator?”
a. The office manager of a manufactured home retail center who does not accept applications from customers
b. A bank teller who distributes preprinted home loan rate sheets to customers who inquire
c. A customer service representative who assists applicants that complete an application and collect application data, but does not have loan authority
d. A real estate broker who refers prospective pruchasers to a mortgage company
c. A customer service representative who assists applicants that complete an application and collect application data, but does not have loan authority
Which of the following is NOT a required disclosure on a loan secured by a dwelling?
a. APR
b. Interest rate
c. GMI
d. A statement that there is no guarantee the loan can be refinanced
c. GMI All of the alternative answers are required except for c. GMI is collected on the application. It is not disclosed on the TILA disclosure.
Sam owes a balance of $5,000 on his credit card account at Bank B. His minimum payment is $150 per month. $1,000 of his balance is accruing interest at 3% (a promotional rate); the remaining balance is accruing interest at 14%. Sam received a bonus at work and submitted an additional payment of $500 on his account this month. Which statement is true regarding the bank’s responsibility for applying the extra payment?
a. If Sam specifies the balance to which the extra payment should be applied, the bank must honor his request
b. The bank should apply the extra payment to the balance accruing at the 14% rate
c. The bank may apply the extra payment at its own discretion
d. The bank should pay off the oldest credit first, regardless of the interest rate
b. The bank should apply the extra payment to the balance accruing at the 14% rate The bank must apply extra payments to the highest accruing balance. Requests from the consumer on how to apply the payment may be honored at the bank’s discretion.
When credit card checks accessing open-end accounts (not home secured) are sent to a borrower and the finance charge terms are different than originally disclosed, when must the disclosures be displayed prominently on the front page of the checks?
a. When provided at the time the account is opened
b. When provided more than 30 days after the account is opened
c. When provided in the same envelope as the credit card
d. When provided more than 10 days after the account is opened.
b. When provided more than 30 days after the account is opened
If a bank is charging a premium rate in a credit card solicitation, how must it disclose this rate?
a. In bold type and underlined
b. In a different color ink
c. In a different font
d. In 16 point type
d. In 16 point type
A bank’s compliance officer received a complaint from a credit card customer indicating that she received her credit card statement and noted that her credit limit had been reduced to less than the balance she owes. She claims that she was charged an over-the-limit fee before she was informed. The compliance officer reviewed the statement and determined that the customer was correct. If the bank determined that the credit limit should be lowered, what should it have done?
a. Charge over the limit fees until the balance owed falls below the credit limit
b. Notify the customer that they were terminating the account
c. Provide notice 45 days before the decrease to the credit limit
d. Suspend future credit priviledges
c. Provide notice 45 days before the decrease to the credit limit. If a creditor decreases a consumer’s credit limit, no fee or penalty rate can be charged when a consumer exceeds the new limit, unless a notice of the new limit was provided orally or in writing at least 45 days before imposing the limit.
On Monday, ABC Bank received a written application from the Browns for a loan to purchase their home. Later that day ABC mailed the Browns their early TILA disclosures. On what day may ABC debit the Browns’ account for an application fee?
a. Tuesday
b. Wednesday
c. Thursday
d. Friday
d. Friday
The Reg Z Commentary explains the timing of the 3 day rule better. It says that if a creditor places the disclosure in the mail, the creditor may impose a fee after the consumer receives the disclosures, or in all cases, after midnight on the third business day following mailing of the disclosures. The example they use is where an application is received on Monday, the disclosures are mailed on Tuesday and the fee can be charged AFTER MIDNIGHT on Friday. So, in the question above, the fee can be charged after midnight on Thursday (or essentially on Friday).
Which of the following statements is true regarding providing credit cards accounts to cardholders under the age of 21?
a. Accounts can only be issued to cardholders who are at least 21.
b. Co-signers are required on credit card accounts to consumers who are under 21.
c. The consumer must submit a written application.
d. Consumers must be provided with credit counseling prior to card issuance.
c. The consumer must submit a written application. Credit card accounts may be issued to young consumers, but the issuer must obtain a written application and is required to determine if the consumer has an independent ability to make the minimum payment, or obtain a co-signer or guarantor who is at least 21 and has the ability to make the payment.
What does Reg Z cover?
Consumer credit that is subject to a finance charge or repayable in more than 4 installments; and primarily for personal, family or household purposes.
What types of loans does Reg Z exclude from coverage?
- business purpose, including governmental agencies - public utilities credit - securities or commodities accounts - home fuel budget plans - student loan programs - employee-sponsored retirement plans - tax-shelter annuities - government-deferred compensation plans
What if a disclosure statement becomes inaccurate before consummation?
The lender must provide a revised disclosure prior to consummation
Are taxes, licensing fees and registration fees finance charges?
Generally no because these are paid by cash and finance customers. There may be some instances in which a tax is a finance charge (read the question carefully to determine if it’s paid only by customers financing the credit, or if it’s paid by both cash anf
Are inspection and handling fees for the staged disbursement of construction-loan proceeds considered finance charges?
Yes
Are charges absorbed by the creditor as a cost of doing business a finance charge?
No, but if the creditor separately imposed a charge (not absorbed it) to a consumer, then yes it would be a finance charge. Also, a charge imposed by a creditor to a third party is not a finance charge.
Is forfeiture of interest a finance charge?
Yes, if a loan is secured by a CD and the creditor doesn’t pay interest on the deposit collateral, then yes, it is and it must be reflected in the loan’s APR.
When must the loan estimate be provided?
No later than the 3rd business day following receipt of the consumer’s application.
When must the closing disclosure be provided?
Must be in the consumer’s possession 3 days before consummation.
What does TRID apply to?
most closed-end consumer purposes transaction secured by real property, regardless of the lender’s interest in a dwelling.
What constitutes an “application” under TRID? HINT: 6 elementss
Name Income SSN Property address Estimated property value Loan amount sought Once these six pieces of info are collected, the LE must be sent within 3 business days!
