As previously reported, the bill signed into law by President Biden on June 17, 2021 to create the Juneteenth National Independence Day actually results in an important change under the Truth in Lending Act (TILA) and Regulation Z. There is a specific definition of “business day” under Regulation Z for certain purposes, including the waiting periods that apply to the TRID rule disclosures and right of rescission, the date that private education loan disclosures mailed to the consumer are deemed to be received, and the date that the right to cancel a private education loan expires. Under the specific definition, a “business day” is “all calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a) . . . .”
The bill amends 5 U.S.C 6103(a) to add “Juneteenth National Independence Day, June 19” as a specified legal public holiday. As a result, without further action, under the specific definition of “business day” in amended 5 U.S.C. 6103(a), Saturday June 19 was not a business day. (Although the federal government was closed on Friday June 18 in observance of the new legal public holiday, under the specific definition of “business day” in amended 5 U.S.C. 6103(a), June 18 was a business day.)
Industry representatives urged the CFPB to provide guidance. Later in the day on June 18, Acting CFPB Director Uejio issued a statement that first addresses the significance of the new holiday, and then addresses the TILA issue as follows:
The CFPB, along with the other Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) regulators, is aware of concerns regarding implementation of the new Juneteenth Federal holiday, particularly as it relates to mortgage lender compliance with the Truth in Lending Act and TILA-RESPA Integrated Disclosure (TRID) timing requirements. The CFPB recognizes that some lenders did not have sufficient time after the Federal holiday declaration to consider whether and how to adjust closing timelines. The CFPB understands that some lenders may delay closings to accommodate the reissuance of disclosures adjusted for the new Federal holiday. The CFPB notes that the TILA and TRID requirements generally protect creditors from liability for bona fide errors and permit redisclosure after closing to correct errors. Any guidance ultimately issued by the CFPB would take into account the limited implementation period before the holiday and would be issued after consultation with the other FIRREA regulators and the Conference of State Bank Supervisors (CSBS) to ensure consistency of interpretation for all regulated entities.
Industry members likely will find the initial guidance to be unhelpful.
Pursuant to the bona fide error defense under TILA, a creditor or assignee may not be held liable in any action brought under the civil liability or right of rescission provisions for a TILA violation if the creditor or assignee shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error. In practice, the usefulness of the defense is limited. The defense is just that—a defense that is available to a creditor or assignee to assert in an action based on a TILA compliance issue. The defense does not provide for a cure of the underlying issue. As a result, if there is a TILA compliance issue with a loan of a type that typically affects the loan’s salability, investors typically will not agree to purchase the loan even if the lender asserts that the bona fide error defense is available.
The reference in Acting Director Uejio’s statement to the TRID rule permitting redisclosure after closing to correct errors likely is intended to address the possibility that because the Juneteenth bill changed the calculation of the TRID rule three business day waiting period between the date when a consumer receives the initial Closing Disclosure and the date of closing, the closing might need to be delayed and thereby cause items in that disclosure to become inaccurate. However, instead of the ability to redisclose, the more significant issue is that the change in the calculation of the three business day waiting period will likely make it necessary in many cases to in fact delay the closing date. In many cases, the creditor will be able to reflect any applicable changes in a revised Closing Disclosure provided on the delayed closing date.