Truth in Lending (Reg Z) Flashcards
What MUST be included in mortgage training as it relates to TILA-RESPA Integrated Disclosure (TRID)?
A. Disclosures must be provided at the time of application
B. Disclosures must be provided within three business days of application
C. Disclosures must be provided within five days of application
D. Disclosures must be provided within seven business days of application
B. Disclosures must be provided within three business days of application
Under the TRID provisions of Regulation Z, a Loan Estimate disclosure must be provided within three business days of the lender’s receipt of an application.
Which of the following would be considered a potential finding for credit cards?
A. Account payments were credited on the date received
B. Account payoff quotes were good for five business days
C. An account was reported “past due” after 30 days of nonpayment
D. An account had a credit balance for more than 60 days
D. An account had a credit balance for more than 60 days
According to Regulation Z, credit balances must be returned to the consumer in no more than seven business days if requested by the consumer. A credit balance of more than 60 days has the potential to be in violation of this provision; thus, it is a finding. Each of the other choices is not a finding as there is no potential regulatory violation in any of them.
A loan officer makes a purchase-money mortgage loan to enable a newlywed couple to purchase a 4-unit residential building. The couple will live in one unit and rent the other three units to low- and moderate-income families. The loan is for $800,000 for five years. Regulation Z does NOT apply to this loan because the loan is:
A. Covered under CRA.
B. For only five years.
C. For a business purpose.
D. For a multi-family dwelling.
C. For a business purpose.
Which of the following is the MOST helpful when validating an APR understatement?
A. The disclosed APR and actual APR
B. Total amount of payments on the TIL
C. Amount of prepaid finance charges
D. Amount of the collateral pledged
A. The disclosed APR and actual APR
To determine whether an APR has been understated, the two obvious data points are the disclosed APR and actual APR. Only then can you determine whether the difference is a compliance issue under Regulation Z. examining the total payments on the TIL disclosure and amount of prepaid finance charges are not enough to make that determination. And the amount of collateral has no bearing at all on an APR understatement.
A bank posted a complete set of the credit card agreements offered to customers on its public website. The compliance professional discovered that the bank made changes to the customer credit card agreements on June 30 and followed all the change-in-terms requirements. What else needs to be done in this situation?
A. Update the customer credit card agreements on the public website and submit the revised agreements to the CFPB no later than the first business day on or after July 1
B. Update the customer credit card agreements on the public website and submit the revised agreements to the CFPB no later than the first business day on or after July 31
C. Update the customer credit card agreements on the public website and submit the revised agreements to the CFPB no later than the first business day on or after December 31
D. Update the customer credit card agreements on the public website; the bank is not required to submit the revised agreements to the CFPB as long as the CFPB has the original agreements
B. Update the customer credit card agreements on the public website and submit the revised agreements to the CFPB no later than the first business day on or after July 31, 2023
Regulation Z requires that banks post on their public websites all their current credit card agreements. If changes have been made to any of those agreements, the changed agreements must be posted as well as providing the revised agreements to the CFPB no later than July 31 (30 days later). This is the requirement, not immediately (July 1) or by the end of the year (December 31).
A bank’s attorneys have drafted a new security agreement containing a “dragnet clause” stating that collateral securing previous loans will also secure any new loan made by the bank to the same customer. Which of the following statements describes Regulation Z’s requirements concerning disclosure involving this type of language?
A. Regulation Z does not deal with this type of disclosure, since this is a matter of state law.
B. Each time a subsequent loan is made, the bank must list the loan number and collateral of the former loan on the disclosure statement, and the borrower must initial that section.
C. At the time a subsequent loan is made, the bank must disclose that collateral securing previous loans will also secure this loan.
D. Collateral securing other loans may not be pledged to secure subsequent loans as set forth in Regulation Z.
C. At the time a subsequent loan is made, the bank must disclose that collateral securing previous loans will also secure this loan.
When evaluating a new student loan product, the compliance professional needs to verify that the offer of credit is valid for at least how long?
A. 15 days
B. 30 days
C. 45 days
D. 60 days
B. 30 days
Under Regulation Z’s requirement for Private Education Loans (PELs), rates and terms must be valid for at least 30 days.
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.
True/False: Creditors can charge a fee based on different payment methods, for example, phone payments vs online payments.
False.
For credit card accounts under an open-end (not home-secured) consumer credit plan, a creditor may not impose a separate fee to allow consumers to make a payment by any method, such as mail, electronic, or telephone payments, unless such payment method involves an expedited service by a live customer service agent.
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.
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.
Lenders can charge a fee of up to $__, or $__ if the violation is a repeat violation on a credit card.
$32, $43
The limits apply to penalty fees other than late fees for all card issuers (small or large), as well as late fees imposed by smaller card issuers.
Repeat violations means occurring during the same billing cycle or in one of the next 6 billing cycles.
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.
True
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 credit card creditor plans to change terms, 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.
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
D. All of the above
D. All of the above
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 a 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 additional requirements are there? Select all that apply
A. Disclosure of HOEPA (warning and informs applicant they don’t have to go through with the transaction)
B. Prepayment penalty limitations, including a prohibition on penalties after 36 months since consummation
C. Fee limitations
D. Home ownership counseling
A, B, C, and D
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.
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.
True
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 _____ months after consummation or account opening OR in an amount more than ______% of the amount prepaid.
36 months, 2%
What is a Reg Z loan originator?
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.
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?
A. Total points-and-fees exceed 8% if the loan amount exceeds the threshold ($26,092), or 10% for smaller loans under the threshold.
B. Total points-and-fees exceed 8%.
C. Total points-and-fees exceed 5% if the loan amount exceeds the threshold ($26,092), or 8% for smaller loans under the threshold.
D. Total points-and-fees exceed 5%.
C. Total points-and-fees exceed 5% if the loan amount exceeds the threshold ($26,092), or 8% for smaller loans under the threshold.
When is an appraisal or credit report fee a finance charge?
A. Real property transaction
B. Residential mortgage transaction
C. All other transactions
C. All other transactions
Appraisals and credit report fees are finances charges except for real property or residential mortgage transactions.
Which of the following are accurate disclosure requirements on a HELOC at the time of application? Select all that apply.
A. Provide program disclosures
B. Provide the booklet: What You Need to Know about Home Equity Lines of Credit.
C. Must be given at the time of application or within 3 business days if by phone.
D. Must be given prior to the application.
A, B, and C.
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 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 Reg Z to notify the administrator of Stan Holland’s estate of the balance due on the credit card account?
No
Which of the following statements about Reg Z credit card rules is false?
A. A card issuer may never open a credit card account for a consumer under 21 years of age.
B. Reg Z prohibits credit card issuers from using two-cycle (or double-cycle) billing.
C. The total fees charged to a credit card account during its first year generally cannot exceed 25% of the initial credit limit.
A. A card issuer may never open a credit card account for a consumer under 21 years of age.
Individuals under the age of 21 can open a credit card account if they have a cosigner or show they are able to make payments on their own.
Double-cycle billing is a prohibited method of calculating credit card interest in which the interest is applied to the average of the prior two months’ outstanding balance.
The 25% credit limit on first year fees does not apply to penalty fees, such as late payment fees.
Formatting rules for periodic disclosures require that:
A. The due date must be disclosed on the first page of the statement
B. The amount of the late payment fee and the APR(s) must be stated in close proximity to the due date
C. The ending balance must be disclosed in close proximity to the minimum payment due.
D. All of the above
D. All of the above
If a loan is an HPML, what are the 3 requirements?
- Can’t make the loan without considering the borrowers ATR (remember these are old rules, before ATR as we know it today) from sources other than the home’s value.
- Prepayments are restricted.
- Escrowing is required for taxes and homeowners insurance if the lien is a first lien (must be in place for 5 years, must provide an opportunity to opt out after 5 years)
Which of the following are true? In regard to credit card bills, generally, a credit card company must:
A. Mail or deliver a credit card bill at least 21 days before a payment due date
B. Use the same due date each month
C. Use a cut-off time for the due date that is no earlier than 5 pm.
A, B, and C
T/F: Creditors are NOT allowed to charge inactivity fees.
T. This is prohibited by Reg Z.
When is a HPML considered a flipped property?
If the seller acquired the home within 180 days prior to the date of the applicant’s purchase agreement and the sale price exceeds the seller’s acquisition price by:
- 10% for properties acquired within the past 90 days
- 20% for properties acquired between 91 and 180 days earlier.
The 180 day time period is measured from the day after the date the seller acquired (became the legal owner of) the property up to and including the purchase date (the date the seller and buyer signed the sales agreement).
T/F: A card issuer cannot assess a fee for an over-the-limit transaction without obtaining the consumer’s consent to pay such transactions.
T
What is the definition of a HPML?
Closed-end loans secured by the consumer’s PRINCIPAL dwelling in which the APR exceeds the APOR by more than a specified percentage depending on the lien position.
First lien: APR exceeds APOR by 1.5%
Second lien: APR exceeds APOR by 3.5%
T/F: Creditors must provide account-opening disclosures in the form of a table with the headings, content and format substantially similar to the application and solicitation disclosures.
T
Rescission period runs until midnight of the third business day after:
A. Consummation of the loan
B. Delivery of 2 copies of the notice of the Right to Rescind to each eligible party
C. Delivery of material disclosures to each eligible party
D. Three business days from when all of the above are completed.
D. Three business days from when all of the above are completed.
If there is a COT on an open-end account, when must a COT be delivered to consumers?
At least 45 days before the adverse change.
For HELOCs, what early disclosures must be provided?
“What You Should Know About Home Equity Lines of Credit.”
This must be provided at the time of application or if the app is take by phone, the Bank must send this disclosure within 3 business days.
For mortgage loans, there is a $___ tolerance for underdisclosing finance charges.
$100
T/F: A card issuer is prohibited from using offset on a cardholder’s deposit account to pay for or secure a credit card account unless the account was specifically secured by the deposit account when the credit card was created.
T
T/F: A disclosure pertaining to when an introductory rate may be revoked and e rate that will apply after it has been revoked (if applicable) must be included INSIDE the table on the account opening disclosures.
F. This information should appear directly below the table.
Are there any special credit card requirements for consumers 21 and under?
Must ensure independent ability to repay that loan (trust fund, job or co-signer)
What is the definition of finance charge?
The dollar amount the credit will cost you.
