Consumer Compliance (CC)
Office of the
Comptroller of the Currency
Washington, DC 20219
Comptroller’s Handbook CC-TILA
Truth in Lending Act
December 2014
Introduction
The Office of the Comptroller of the Currency’s (OCC) Comptroller’s Handbook booklet,
“Truth in Lending Act,” is prepared for use by OCC examiners in connection with their
examination and supervision of national banks and federal savings associations (collectively,
banks).1 Each bank is different and may present specific issues. Accordingly, examiners
should apply the guidance in this booklet consistent with each bank’s individual
circumstances.
The booklet provides background information and optional expanded examination
procedures for the Truth in Lending Act (TILA) and Regulation Z, which implements TILA.
Examiners decide which of these procedures are necessary, if any, after completing a
compliance core assessment as outlined in the “Community Bank Supervision,” “Large Bank
Supervision,” and “Federal Branches and Agencies Supervision” booklets of the
Comptroller’s Handbook. Complaint information received by the Office of the Ombudsman
and the Customer Assistance Group may also be useful in completing the assessment.
Background and Summary
TILA (15 USC 1601 et seq.) was enacted on May 29, 1968, as title I of the Consumer Credit
Protection Act (Pub. L. No. 90-321). TILA, implemented by Regulation Z (12 CFR 1026),
became effective on July 1, 1969.
TILA was first amended in 1970 to prohibit unsolicited credit cards. Additional major
amendments to TILA and Regulation Z were made by the Fair Credit Billing Act of 1974,
the Consumer Leasing Act of 1976, the Truth in Lending Simplification and Reform Act of
1980, the Fair Credit and Charge Card Disclosure Act of 1988, and the Home Equity Loan
Consumer Protection Act of 1988.
Regulation Z also was amended to implement section 1204 of the Competitive Equality
Banking Act of 1987 and, in 1988, to include adjustable rate mortgage (ARM) loan
disclosure requirements. All consumer leasing provisions were deleted from Regulation Z in
1981 and transferred to Regulation M (12 CFR 1013).
The Home Ownership and Equity Protection Act of 1994 (HOEPA) also amended TILA. The
law imposed new disclosure requirements and substantive limitations on certain closed-end
mortgage loans bearing rates or fees above a certain percentage or amount. The law also
included new disclosure requirements to assist consumers in comparing the costs and other
material considerations involved in a reverse mortgage transaction and authorized the Board
of Governors of the Federal Reserve System (FRB) to prohibit specific acts and practices in
connection with mortgage transactions.
The TILA amendments of 1995 dealt primarily with tolerances for real estate secured credit.
Regulation Z was amended on September 14, 1996, to incorporate changes to TILA.
Specifically, the revisions limit lenders’ liability for disclosure errors in real estate secured
loans consummated after September 30, 1995. The Economic Growth and Regulatory
Paperwork Reduction Act of 1996 further amended TILA. The amendments were made to
simplify and improve disclosures related to credit transactions.
The Electronic Signatures in Global and National Commerce Act (E-Sign Act), 15 USC 7001
et seq., was enacted in 2000 and did not require implementing regulations. On
November 9, 2007, amendments to Regulation Z and the official commentary were issued to
simplify the regulation and provide guidance on the electronic delivery of disclosures
consistent with the E-Sign Act.
In July 2008, Regulation Z was amended to protect consumers in the mortgage market from
unfair, abusive, or deceptive lending and servicing practices. Specifically, the change applied
protections to a newly defined category of “higher-priced mortgage loans” that includes
virtually all closed-end subprime loans secured by a consumer’s principal dwelling. The
revisions also applied new protections to mortgage loans secured by a dwelling regardless of
loan price and required the delivery of early disclosures for more types of transactions. The
revisions also banned several advertising practices deemed deceptive or misleading.
The Mortgage Disclosure Improvement Act of 2008 (MDIA) broadened and added to the
requirements of the FRB’s July 2008 final rule by requiring early truth-in-lending disclosures
for more types of transactions and by adding a waiting period between the time when
disclosures are given and consummation of the transaction. In 2009, Regulation Z was
amended to address those provisions. The MDIA also requires disclosure of payment
examples if the loan’s interest rate or payments can change, as well as disclosure of a
statement that there is no guarantee the consumer will be able to refinance in the future. In
2010, Regulation Z was amended to address these provisions, which became effective on
January 30, 2011.
In December 2008, the FRB adopted two final rules pertaining to open-end (not homesecured)
credit. The first rule involved Regulation Z revisions and made comprehensive
changes applicable to several disclosures required for applications and solicitations, new
accounts, periodic statements, change in terms notifications, and advertisements. The second
was a rule published under the Federal Trade Commission (FTC) Act and issued jointly with
the Office of Thrift Supervision (OTS)2 and the National Credit Union Administration
(NCUA). It sought to protect consumers from unfair acts or practices with respect to
consumer credit card accounts. Before these rules became effective, however, the Credit
Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act) amended
TILA and established a number of new requirements for open-end consumer credit plans.
Several provisions of the Credit CARD Act are similar to provisions in the FRB’s December
2008 TILA revisions and the joint FTC Act rule, but other portions of the Credit CARD Act
address practices or mandate disclosures that were not addressed in these rules. In light of the
Credit CARD Act, the FRB, the NCUA, and the OTS withdrew the substantive requirements
of the joint FTC Act rule. On July 1, 2010, creditors were required to comply with the
provisions of the FRB’s rule that were not affected by the Credit CARD Act.
The Credit CARD Act provisions became effective in three stages. The provisions effective
first, on August 20, 2009, required creditors to increase the amount of notice consumers
receive before the rate on a credit card account is increased or a significant change is made to
the account’s terms. These amendments also allowed consumers to reject such increases and
changes by informing the creditor before the increase or change goes into effect. The
provisions effective next, on February 22, 2010, involved rules regarding interest rate
increases, over-the-limit transactions, and student cards. Finally, the provisions effective last,
on August 22, 2010, addressed the reasonableness and proportionality of penalty fees and
charges and reevaluation of rate increases.
In 2009, Regulation Z was amended following the passage of the Higher Education
Opportunity Act by adding disclosure and timing requirements that apply to lenders making
private education loans.
In 2009, the Helping Families Save Their Homes Act amended TILA to establish a new
requirement for notifying consumers of the sale or transfer of their mortgage loans. The
purchaser or assignee that acquires the loan must provide the required disclosures no later
than 30 days after the date on which it acquired the loan.
In 2010, the FRB further amended Regulation Z to prohibit payment to a loan originator that
is based on the terms or conditions of the loan, other than the amount of credit extended. The
amendment applies to mortgage brokers and the companies that employ them, as well as to
mortgage loan officers employed by depository institutions and other lenders. In addition, the
amendment prohibits a loan originator from directing or “steering” a consumer to a loan that
is not in the consumer’s interest, to increase the loan originator’s compensation.
Dodd–Frank amended TILA to include several provisions that protect the integrity of the
appraisal process when a consumer’s home is securing the loan. The statute also requires that
appraisers receive customary and reasonable payments for their services. The appraiser and
loan originator compensation requirements had a mandatory compliance date of April 6,
2011.
Dodd–Frank granted rulemaking authority under TILA to the Consumer Financial Protection
Bureau (CFPB). Title XIV of Dodd–Frank included a number of amendments to TILA, and
in 2013, the CFPB issued rules to implement them. Prohibitions on mandatory arbitration and
waivers of consumer rights, as well as requirements that lengthen the time creditors must
maintain an escrow account for higher-priced mortgage loans, were generally effective
June 1, 2013. The remaining amendments to Regulation Z were effective in January 2014.3
These amendments include ability-to-repay requirements for mortgage loans, appraisal
requirements for higher-priced mortgage loans, and a revised and expanded test for high-cost
mortgages, as well as additional restrictions on those loans, expanded requirements for
servicers of mortgage loans, refined loan originator compensation rules and loan origination
qualification standards, and a prohibition on financing credit insurance for mortgage loans.
The amendments also established new record retention requirements for certain provisions of
TILA.
In 2013, the CFPB issued a final rule revising the general limitation on the total amount of
account fees that a credit card issuer may require a consumer to pay. Effective March 28,
2013, the limit is 25 percent of the credit limit in effect when the account is opened. The
limitation applies only during the first year after account opening.
In 2013, the CFPB also issued a final rule to remove the requirement that card issuers
consider the consumer’s independent ability to pay for applicants who are 21 or older and to
permit issuers to consider income and assets to which such consumers have a reasonable
expectation of access. This change was effective May 3, 2013, with a mandatory compliance
date of November 4, 2013.
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