Insights

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the Consumer Financial Protection Bureau to establish a single form to comply with the loan application and loan closing disclosure requirements under the Truth-in-Lending Act ("TILA") and the Real Estate Settlement Procedures Act ("RESPA"). The CFPB issued a final rule with the new form in November of 2013. The CFPB amended the rule on January 18, 2015.

The new requirements are scheduled to become effective on August 1, 2015. However, the CFPB has determined that the implementation date must be delayed because the CFPB failed to comply with a notice requirement under the Congressional Review Act (the "CRA"). Under the CRA, a "major rule" may not take effect until 60 days after the agency publishes the rule in the Federal Register and submits it to Congress. The TILA-RESPA integrated disclosure rule ("TRID") is a "major rule," but the CFPB did not report the rule to Congress until June 16, 2015. As a result, the rule may not take effect until August 15, 2015.

The CFPB has proposed to delay the effective date an additional seven weeks, until October 3, 2015. The CFPB believes that creditors will benefit from the additional time to prepare their systems for the transition to the new forms. At the same time, the CFPB recognizes that the delay may impose additional costs on businesses that planned to comply with the new rules beginning in August. The new effective date would be on the same day of the week (Saturday) and in the same part of the month as the original August 1 date.

The new rules under TRID fall into two categories for timing purposes. Some of the new rules impose requirements on a creditor after the creditor receives an application. These new rules will apply to an application for a mortgage loan received by the creditor on or after October 3. These rules include the requirement to provide the new Loan Estimate and Closing Disclosure and the requirement to provide the new special information booklet. Other rules would take effect on October 3 regardless of when the creditor receives an application. These rules include the limitation on fees charged to the consumer and the prohibition against requiring documents to verify application information before the consumer has received certain disclosures.

The comment period for the proposed rule closed on July 7. Many of the comments support the proposed delay in implementation of the new rules. A number of the comments ask the CFPB to allow for a period of adjustment before beginning full enforcement of the new rules. These comments argue that an adjustment period is necessary because some aspects of a business's systems for complying with the new rules require "live" testing. Other comments argue against the delay. These comments state that the delay will harm businesses that have prepared for an August implementation date.

Eric D. Mulligan is an associate in the Hanover, MD office of Hudson Cook, LLP. Eric can be reached at 410-865-5402 or by email at emulligan@hudco.com.