Section 36 Disclosure Requirements

• Library: Consumer Law and Practice 2010

TILA does not regulate the substance of the contract terms. TILA's purpose is to make sure the credit terms are disclosed to consumers. Barrett v. JP Morgan Chase Bank, N.A., 445 F.3d 874 (6^th Cir. 2006); Hopkins v. First NLC Fin. Servs., LLC (In re Hopkins), 372 B.R. 734 (Bankr. E.D. Pa. 2007). On the other hand, HOEPA and RESPA do provide substantive restrictions on loan terms.

Specifically, TILA requires accurate disclosures of the amount financed, the finance charges, and the APR (annual percentage rate) within certain tolerances depending on whether the loan is an open-end or closed-end loan. Typical violations of TILA include:

· inaccurate APR disclosures;

· use of the wrong disclosure form;

· failure to provide the disclosures at consummation;

· failure to identify third-party payers; and

· failure to include certain financing charges in the amount financed.

Much of TILA litigation surrounds the issue of what charges should be included as part of the amount financed. See:

· Hickey v. Great W. Mortgage Corp., No. 94 C 3638, 1995 WL 317095 (N.D. Ill. May 23, 1995) (failing to disclose a $42 Federal Express charge and a $25 discharge service fee received by lender's attorney did not violate TILA)

· Escher v. Decision One Mortgage Co., LLC (In re Escher), 369 B.R. 862, 873-74 (Bankr. E.D. Pa. 2007) (lender is not required to itemize components of a finance charge to disclose a yield spread premium)

· Bell v. Parkway Mortgage, Inc. (In re Bell), 309 B.R. 139 (Bankr. E.D. Pa. 2004) (overnight delivery fee of $45, copying fee of $30, $200 title insurance endorsement fee, and $1,289 yield spread premium would not be included in calculating points and fees for purposes of determining whether HOEPA applied)

· Hopkins, 372 B.R. at 745 (for finance charges to be excluded in accordance with the finance charge calculation of Regulation Z, they must be "bona fide and reasonable in amount" per 12 C.F.R. § 226.4(c)(7))

The content of the required disclosure varies depending on whether the credit is open-end or closed-end. Key definitions of open-end and closed-end transactions are found in 12 C.F.R. § 226.2(a)(10) and (20). TILA requires more accurate disclosures in the context of closed-end credit transactions. Variable rate loan borrowers are entitled to receive additional loan disclosures and must receive a booklet entitled Consumer Handbook on Adjustable Rate Mortgages or a suitable substitute. 12 C.F.R. § 226.19. Failure to provide TILA's material...