The Federal Housing Finance Agency announced this week that Fannie Mae will consider a loan applicant’s rental payment history in making underwriting decisions.  According to the FHFA, the change was made as a means of expanding credit access.

The FHFA’s announcement is yet another example of the growing use of alternative data by creditors in making credit decisions.  In December 2019, the CFPB, OCC, Federal Reserve Board, FDIC, and NCUA issued an “Interagency Statement on the Use of Alternative Data in Credit Underwriting,” that forth the agencies’ recognition of the benefits of using alternative data in credit decisions.

The California Department of Financial Protection and Innovation (DFPI) has issued second modifications to its proposed regulations to implement SB 1235, the bill signed into law on September 30, 2018 that requires consumer-like disclosures to be made for certain commercial financing products, including small business loans and merchant cash advances.

SB 1235, codified at CA Financial Code (Code) sections 22800-22805, requires a “provider,” meaning a person who extends a specific offer of “commercial financing” as defined in Code section 22800(d) to a recipient, to give the recipient certain disclosures at the time the provider extends the offer.  SB 1235 requires the DFPI to issue regulations implementing the specific requirements of the disclosures that must be given to recipients.  The law contains exemptions and carve-outs for, among other things, depository institutions, financings of more than $500,000, closed-end loans with a principal amount of less than $5,000, and transactions secured by real property.  Compliance with the new disclosure requirements is not required until the DFPI’s final regulations become effective.

In September 2020, the DFPI (then the Department of Business Oversight) issued proposed regulations to implement SB 1235.  Modifications to the proposal were issued in April 2021.  The second modifications are intended to address the comments that the DFPI received on the proposed April modifications.  Comments on the second modifications must be submitted to the DFPI by August 24, 2021.

Like California, New York has enacted a law that requires consumer-like disclosures for “commercial financing” transactions.  As enacted in December 2020, the new law required disclosures for transactions of $500,000 or less and was to take effect on June 21, 2021.  Subsequent amendments expanded the new law’s reach by making it applicable to transactions of $2.5 million or less and delayed the effective date to January 1, 2022.

We look at the practices found to be unlawful by CFPB examiners in these markets, discuss what the findings signal for future scrutiny of these markets by the “new CFPB”, and share practical takeaways for companies operating in these markets.  Issues highlighted in our conversation include the CFPB’s findings regarding “unreliable furnishers,” furnisher handling of “frivolous or irrelevant” disputes, interest accrual on debts in collection, and mortgage servicer consideration of private mortgage insurance termination dates when estimating disbursements in an annual escrow analysis.

Ballard Spahr Senior Counsel Alan Kaplinsky hosts the conversation, joined by Chris Willis, Co-Chair of the firm’s Consumer Financial Services Group, and Reid Herlihy, a partner in the firm’s Mortgage Banking Group.

Click here to listen to the podcast.

With a little over a year of enforcing the California Consumer Privacy Act (CCPA) under its belt, the Office of the California Attorney General (OAG) recently held a press conference to announce updates on its CCPA enforcement efforts and promote new tools relating to California consumers’ right to opt out of the sale of their personal information.

Enforcement updates.  At the press conference, California Attorney General Rob Bonta summarized the first year of enforcement of the CCPA and provided specific examples of actions businesses have taken to rectify alleged violations following receipt of a notice of noncompliance.  The notice triggers a 30-day period for the business to cure the alleged violation, which is a prerequisite to the OAG bringing an enforcement action. Examples of actions taken by businesses include:

  • A social media platform that explained and updated its response processes to include timely request receipt confirmations and request responses;
  • An online data app that added a clear and conspicuous “Do Not Sell My Personal Information” link (DNS link) and updated its privacy policy with compliant sales disclosures;
  • A car manufacturer and seller that implemented a notice at collection to inform consumers of the use of personal information collected during vehicle test drives at the dealership and updated its privacy policy to include required disclosures; and
  • A grocery chain that amended its privacy policy to provide a notice of financial incentive to consumers participating in its loyalty programs.

Mr. Bonta noted that to date, 75% of businesses that receive a notice to cure address the CCPA violation.  The other 25% are either still within their 30-day cure window or under an active investigation.

Following the press conference, the OAG also published an illustrative list of 27 enforcement case examples summarizing situations in which it sent a notice of alleged noncompliance and steps taken by the businesses in response.  Although the summaries contain few identifying details, they provide additional insight into the OAG’s enforcement priorities.  For instance, seventeen of the 27 case examples involved non-compliant privacy policies.

Global privacy control.  A number of the case summaries also focused on proper opt-out disclosures and methods, such as the use of global opt-out settings.  In August 2020, the OAG finalized CCPA regulations that require businesses to honor user-enabled global privacy controls, such as a browser plug-in or privacy setting, device setting, or other mechanism, that communicate or signal the consumer’s choice to opt-out of the sale of their personal information.  The OAG updated its CCPA FAQs in late June 2021 to state that the Global Privacy Control (GPC), a technical standard that can automatically transmit a do-not-sell request when consumers visit a website, “must be honored . . . as a valid consumer request to stop the sale of personal information” by businesses that collect personal information from consumers online and sell personal information.

In one enforcement case example, an electronics seller failed to process consumers’ requests to opt out that were submitted via a user-enabled universal opt-out signal, such as the GPC, among other alleged compliance issues.  After being notified of alleged noncompliance, the business “worked with its privacy vendor to effectuate consumer opt-out requests and avoid sharing personal information with third parties under conditions that amounted to a sale in violation of the CCPA.”

Another summary described how a location data broker’s opt-out process improperly directed consumers to use their mobile device settings to effectuate their opt-out choices and failed to state whether the provided request webform allowed consumers to opt out of the sale of their personal information.  After being notified of alleged noncompliance, the data broker updated its opt-out webpage and clarified that adjusting mobile device settings would limit future tracking but would not effectuate a CCPA opt-out request.

The mandate on honoring requests submitted via universal opt-outs like the GPC has generated considerable  discussion.  In a July 28 letter to the OAG, a coalition of advertising industry groups raised concerns about how the mandate conflicts with the approach taken in the California Privacy Rights Act (CPRA), according to which businesses “may elect” to either provide a clear and conspicuous DNS link or allow consumers to opt out via an “opt-out preference signal sent with the consumer’s consent by a platform, technology, or mechanism, based on technical specifications to be set forth in regulations.”  This CPRA provision becomes operative in January 2023. In the meantime, absent further guidance from the OAG, covered businesses should make sure they have processes in place to respond to requests sent via universal opt-out mechanisms like the GPC.

Consumer privacy interactive tool.  During the press conference, Mr. Bonta also unveiled a new Consumer Privacy Interactive Tool (CPIT) allowing consumers to draft notices of noncompliance for businesses that they believe may have violated the CCPA’s requirement to allow consumers to opt out of the sale of their personal information.  The tool asks a series of guided questions to confirm whether the business in question is subject to the CCPA, sells personal information, provides an appropriately clear and conspicuous DNS link, provides an interactive form by which consumers may submit opt-out requests, requires consumers to create an account in order to opt out, and/or requires consumers to submit more personal information than is necessary to direct the business to not sell their personal information.  If the answers provided indicate that the business is not in compliance with the CCPA, the tool generates a draft notice of noncompliance that the consumer may then send to the business.

According to Mr. Bonta, and as confirmed later in a press release, this notice “may trigger” the 30-day period for the business to cure the alleged violation. If changes have not been made to the business’ alleged noncompliance after 30 days from the date the notice was sent, consumers can file a consumer complaint to the OAG.  Although the CPIT is currently limited to drafting notices to businesses that do not post an easy-to-find DNS link on their website, the tool may be updated in the future to include additional potential CCPA violations.

It is not clear yet the impact the CPIT will have on future CCPA enforcement by the OAG, especially given that information can be entered into the tool anonymously and there is no accountability mechanism for ensuring the information entered is accurate.  Additionally, the ability to cure violations is scheduled to go away in January 2023, when the rest of the CPRA’s updates to the CCPA enter into effect.  Nevertheless, businesses should prepare for the possibility of receiving noncompliance notices generated through the CPIT and review their privacy policies and procedures to ensure such notices are addressed within the 30-day cure period.

The California Department of Financial Protection and Innovation (DFPI) has issued proposed amendments to its regulations implementing the Pilot Program for Increased Access to Responsible Small Dollar Loans (Pilot Program).  Initially effective from 2014 to2018, the Pilot Program’s sunset date was extended to January 1, 2028.  The Pilot Program operates under the California Financing Law (CFL) and is administered by the DFPI.

CFL licensees approved by the DFPI to participate in the Pilot Program are permitted to charge specified alternative interest rates and charges, including an administrative fee and delinquency fees, on small dollar loans, subject to certain requirements.  Licensees participating in the program are also permitted to use the services of a finder as defined in Section 22371 of the CA Financial Code.

The proposal would amend the DFPI’s Pilot Program regulations to make the following key changes:

  • The Pilot Program currently allows loans with a minimum principal balance of $300 and a maximum principal balance of $2,500.  The proposal would increase the upper limit to a maximum principal balance of $7,500.
  • The Pilot Program currently only allows finders to distribute informational materials about a CFL licensee’s loans, take credit applications, and act as a communication intermediary between the lender and borrower.  The proposal would allow finders to also disburse funds on behalf of lenders, collect loan payments from borrowers, and issue notices and disclosures to borrowers.  It would also remove an existing provision prohibiting finders from discussing marketing materials or loan documents with a borrower.

 

The U.S. Department of Education has issued a new interpretation “to revise and clarify its position on the legality of State laws and regulations that govern various aspects of the servicing of Federal student loans.”  The new interpretation revokes and supersedes the ED’s 2018 preemption determination.  It was not unexpected, as the ED has taken a number of steps in recent months to reverse Trump Administration policies that hindered state oversight of federal student loan servicers.  Although the interpretation will be effective on the date of its publication in the Federal Register, the ED is seeking comment “so it can identify any additional changes that may be needed.”  Comments must be filed no later than 30 days after the publication date.

Underlying the new interpretation is the “overarching principle” that:

[T]he States have an important role to play in this area and it is appropriate to pursue an approach marked by a spirit of cooperative federalism that provides for concurrent action according to a concerted joint strategy intentionally established among Federal and State officials.  Accordingly…the Department believes that there is significant space for State laws and regulations relating to student loan servicing, to the extent these laws and regulations are not preempted by the Higher Education Act of 1965, as amended (HEA), and other applicable Federal laws.

The conclusion reached by the ED is that state laws regulating the servicing of federal student loans “are preempted only in limited and discrete aspects as further discussed in this interpretation.”  The ED finds that the 2018 interpretation’s approach to preemption is “seriously flawed” and for the reasons given in the new interpretation, the ED states that it “is changing its approach to preemption of State student loan servicing laws that was laid out in the 2018 interpretation.”

The ED gives the following key reasons for its new interpretation:

  • Preemption is at its weakest in areas where states assert they are acting under their general police powers for the purpose of protecting their citizens.  In the ED’s view, such areas include student loan servicing laws, and education has been long regarded as a subject for the exercise of predominately state powers.
  • The 2018 interpretation found that federal law preempts the entire field of law relating to federal student loan servicing.  At no time before issuing the 2018 interpretation did the ED take the view that field preemption applied to the servicing and collection of federal student loans and the courts have held that the ED did not provide persuasive reasons for its position.  After reexamining the issue of field preemption, the ED rejects the 2018 interpretation’s analysis and concludes that field preemption does not apply to the servicing and collection of federal student loans.
  • The 2018 interpretation also based preemption of state student loan servicing laws on the ground that the HEA expressly preempts state laws requiring federal student loan servicers to provide information not required by federal law.  The ED determines that the 2018 interpretation failed to distinguish between satisfying HEA disclosure requirements and conveying accurate information so as not to mislead a borrower.  In reconsidering the issue of express preemption, the ED finds that, except in the limited and specific instances expressly set forth in the HEA, state student loan servicing laws are not expressly preempted by the HEA.
  • Implied conflict preemption only applies where there is a direct conflict between state and federal law, which in the ED’s view is limited to state laws that would allow for the revocation of state licensing of federal student loan servicers.  According to the ED, recent court decisions considering conflict preemption have consistently determined that the HEA places no emphasis on maintaining uniformity in federal student loan servicing and have upheld state authority to address fraud and affirmative misrepresentations.
  • Case law does not support the uniformity argument made in the 2018 interpretation as the basis for finding that state laws prohibiting affirmative misrepresentations by servicers of loans made under the Direct Loan Program are preempted by general disclosure requirements in federal law.
  • For Federal Family Education Loan Program (FFEL Loans), while federal law preempts state laws that conflict squarely on issues such as timelines, dispute resolution procedures, and collections, the ED concludes that it does not preempt state laws relating to affirmative misrepresentations as well as other measures intended to address improper conduct that may occur in FFEL Loans and that do not conflict with federal law.
  • The 2018 interpretation sought to justify how the ED could provide adequate oversight of federal student loan servicers on its own.  A different approach in which there is a coordinated  partnership between federal and state officials is, in the ED’s reconsidered view, more likely to succeed.  In describing what this new approach means, the ED states:

Rather than viewing [State attempts to address customer service issues] as inconvenient or detrimental to its objectives, the ED now recognizes that State regulators [and State attorneys general] can be additive in helping to achieve the same objectives championed in the 2018 interpretation.  Rather than expending time and effort contesting the authority of the States in unproductive litigation, the Department intends to work with the States to share the burdens and costs of oversight to ensure that loans servicers are accountable for their performance in better serving borrowers.

The CFPB and the two trade groups challenging the CFPB’s 2017 final payday/auto title/high-rate installment loan rule (2017 Rule) have filed briefs with the Texas federal court  regarding a compliance date for the 2017 Rule’s payment provisions.  The briefs were filed in response to the court’s order that requested additional briefing “concerning what would be the appropriate compliance date if the court were to deny Plaintiffs’ motion for summary judgment and grant Defendants’ motion for summary judgment.”

In its brief, the CFPB argues that the stay of the compliance date should remain in place for no more than 30 days after the court’s decision on summary judgment.  According to the Bureau, a 30-day extension would be consistent with the Administrative Procedure Act requirement of only 30 days’ notice before a rule can take effect.  The CFPB further argues that compliance with the payment provisions is not onerous because neither of the two basic requirements imposed by the payment provisions (i.e. new authorization for withdrawals after two failed attempts and new notices) “requires any major overhaul of lenders’ operations.”  Other factors given by the CFPB in support of its position are that (1) the trade group have had ample time to comply, (2) the trade groups could not have reasonably relied on the stay of the compliance date continuing beyond final judgment, and (3) a further extension of the stay is particularly unwarranted because the only basis for the stay (i.e. the unconstitutional removal provision) vanished when the U.S. Supreme Court decided Seila Law and former Director Kraninger ratified the payment provisions.

In their brief, the trade groups argue any order lifting the stay should set the compliance date no earlier than 445 days (or, at a minimum, 286 days) from the date the court lifts the stay, reflecting the time left for compliance when the stay was sought (or entered).  As originally promulgated, the 2017 Rule gave lenders 21 months before compliance would be required.  According to the trade groups, the stay tolled the compliance period and their members reasonably relied on the stay to defer “the lengthy and costly implementation process.”  They also argue that if the stay did not toll the compliance period, the Bureau will need to set a new compliance date via notice-and-comment rulemaking.  Finally, they argue that if the court grants the CFPB’s summary judgment motion, it should maintain the stay pending appeal.

The parties have until August 16 to file responses.  The briefing order provides that the “[t]he court will consider the matter fully briefed upon receipt of the parties’ responses and no reply briefs will be necessary.”  This means that in a worst case scenario, the court could grant the CFPB’s summary judgment motion by the end of this month and compliance with the payment provisions could be required in September.

 

Last week, the California Department of Financial Protection and Innovation (DFPI) announced that it had entered into “a landmark agreement” with Meratas, Inc., a company that acts as a program manager of Income Share Agreements (ISAs) used to finance postsecondary education and training.  The agreement includes the DFPI’s finding that ISAs made solely for the purpose of financing a postsecondary education are “student loans” under the SLSA.

In April 2021, Meratas applied for a student loan servicer license under the CA Student Loan Servicing Act (SLSA).  Pursuant to the agreement, the DFPI will issue a conditional SLSA license to Meratas with a one-year term.  The agreement further provides that the DFPI will issue Meratas a regular, unconditional SLSA license following Meratas’s submission of audited financial statements in 2022.   In the agreement, Meratas has agreed that while licensed under the SLSA, and until a change in applicable law or regulation, it will report to the DFPI any ISAs that it services as “student loans” for purposes of the SLSA.

The agreement serves as the vehicle for the DFPI to publicize its finding that “ISAs made solely for use to finance a postsecondary education are “student loans” for the purposes of the SLSA.”  To reach this conclusion, the DFPI applied the California Consumer Financial Protection Law’s (CCFPL’s) broad definition of “credit,” which encompasses “contingent” obligations.  We are continuing to monitor how the DFPI uses its CCFPL authority to regulate ISA originators and other financial services providers.  Earlier this year, the DFPI initiated a rulemaking to solicit comments on these issues.  Also earlier this year, the DFPI entered into a consent order with Lambda School to settle claims brought under the CCFPL.

As a result of the license approval,  Meratas will be the first ISA program manager authorized by the DFPI to service ISAs in California.  In commenting on the agreement, Meratas noted that because the legal status of ISAs is unclear under existing federal and state laws, the company determined it was prudent to be proactive at the state level, starting with California.  Meratas expects to work with the DFPI in crafting ISA-specific regulations and, by doing so, the company hopes to take a leading role in collaborations between regulators and stakeholders in the ISA industry.

 

Despite the pendency in the Tenth Circuit of a constitutional challenge to a CFPB administrative order that requires a lender and its CEO to pay restitution and civil money penalties, a Kansas federal district court recently refused to stay enforcement of the order.

In CFPB v. Integrity Advance, LLC and James R. Carnes, the CFPB had initiated an administrative enforcement proceeding in 2015 against Integrity, a lender making short term loans, and Mr. Carnes alleging violations of the TILA, EFTA, and CFPA.  In July 2016, a hearing was held before a Coast Guard administrative law judge (ALJ) who issued a recommended decision in favor of the CFPB.  After the U.S. Supreme Court’s ruling in Lucia v. SEC that the appointment of an SEC ALJ violated the Appointments Clause of the U.S. Constitution, former CFPB Director Kraninger determined that the Coast Guard ALJ used by the CFPB had not been constitutionally appointed and remanded the matter to the CFPB’s ALJ for a new hearing.  (By the time Lucia was decided, the CFPB had its own ALJ  who was constitutionally appointed.)

The CFPB ALJ also issued a recommended decision in favor of the CFPB in which she recommended that the lender pay $132.5 million in restitution, that the CEO be held jointly and severally liable for $38.4 million of that amount, and that the lender and CEO pay, respectively, civil money penalties of $7.5 million and $5 million.  The lender and CEO appealed that decision to former Director Kraninger who issued a decision in January 2021 (after Seila Law had been decided by the Supreme Court) reducing the total restitution amount to $34.5 million.  As part of that decision, former Director Kraninger ratified the CFPB’s Notice of Charges that initiated the enforcement action.

The lender and CEO thereafter appealed former Director Kraninger’s decision to the Tenth Circuit.  In the appeal, they argue that former Director Kraninger’s ratification was not effective because the applicable statute of limitations had expired before the ratification.  They also argue that the Appointments Clause violation was not cured by the new hearing before a properly appointed ALJ because she did not in fact conduct a new hearing and instead relied on the existing record and routinely denied their requests to present evidence or make new arguments that were not raised in the first hearing.

Through its petition, the CFPB sought to enforce its final order issued pursuant to former Director Kraninger’s January 2021 decision.  The final order directed the lender and CEO to pay the required amounts within 30 days but provided that if they appealed the decision, they could instead pay the amounts into an escrow account within 30 days.  Pursuant to the CFPA, the appeal of a CFPB order to a court of appeals does not operate as a stay of the order unless a stay is specifically authorized by the appellate court.  The lender and CEO did not seek a stay of the CFPB’s order from the Tenth Circuit.

In opposing the CFPB’s petition, the CEO argued that the CFPB’s final order was not valid and enforceable.  While conceding that only the Tenth Circuit could address the merits of these arguments, he nevertheless asked the district court to exercise its discretion to delay its resolution of the CFPB’s petition pending the Tenth Circuit’s ruling on the appeal.  The district court concluded that because the CFPA did not permit it to stay enforcement of the CFPB’s order, it could not grant the CEO’s request which it considered to be “tantamount to a request for…a stay or suspension.”  Accordingly, the district court granted the CFPB’s petition and ordered the lender and CEO to comply with the final order by paying the restitution and civil money penalties.

As previously reported, the creation on June 17, 2021 of the Juneteenth National Independence Day resulted in an important change under the Truth in Lending Act (TILA) and Regulation Z. The CFPB recently issued an interpretive rule to address certain issues based on the change.

There is a specific definition of “business day” under Regulation Z for certain purposes, including the right of rescission period, the waiting periods that apply to the TRID rule disclosures, the period after which consumers are deemed to receive TRID rule disclosures that are not delivered in person, 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 creating the Juneteenth holiday amended 5 U.S.C 6103(a) to add “Juneteenth National Independence Day, June 19” as a specified legal public holiday. As a result, once the bill was signed into law by President Biden on June 17, Saturday June 19 immediately switched from being a business day to being a non- 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.)

Immediately after the bill became law, mortgage industry representatives urged the CFPB to provide guidance. 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 found the initial guidance to be unhelpful. The interpretive rule addresses the business day issue resulting from the creation of the Juneteenth holiday with regard to the right of rescission period for closed-end mortgage loans, the waiting periods that apply to the TRID rule disclosures, and the period after which consumers are deemed to receive TRID rule disclosures that are not delivered in person. The interpretive rule does not expressly address 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.

Business Day Version Approach

The CFPB notes that Regulation Z does not address which version of the specific “business day” definition applies if during a relevant time period that relies on the definition, the definition changes. The interpretive rule provides that the version of the definition of “business day” that applies to the right of rescission period, the TRID rule waiting periods, and the period after which the consumer is deemed to receive TRID rule disclosures that are not delivered in person depends on when the relevant time period began. If the relevant time period began on or before June 17, 2021, then Saturday June 19, 2021 was a business day. If the relevant time period began after June 17,2021, then Saturday June 19, 2021 was a non-business day. Each period is addressed further below.

Right of Rescission Period

For closed-end mortgage loans subject to the right to rescind, the consumer has the right to rescind the loan until midnight of the third business day following the last to occur of (1) delivery of all material disclosures, (2) consummation of the loan, and (3) delivery of the notice of the right to rescind to each consumer entitled to rescind. The notice of the right to rescind must indicate that date that the right to rescind expires. The interpretive rule provides that the date that the rescission period begins to run, and the rescission period expiration date, are determined based on the version of the “business day” definition that was in effect when the rescission period began to run. Specifically, if the rescission period began to run on or before June 17, 2021, then Saturday June 19 was a business day for purposes of the right to rescind. However, because a creditor may provide the consumer with a rescission period that is longer than three business days, even if the rescission period began to run on or before June 17, a creditor that treated Saturday June 19 as a non-business day would have provided a compliant rescission period. If the rescission period began to run after June 17, 2021, the creditor had to treat Saturday June 19 as a non-business day.

TRID Rule Waiting Periods

The TRID rule requires that a creditor must deliver or place in the mail the initial Loan Estimate at least seven business days before consummation of the transaction. The TRID rule also requires that the last day that a consumer may receive a revised Loan Estimate is four business days before consummation of the transaction, and that the consumer must receive the initial Closing Disclosure at least three business days before consummation of the transaction. The interpretive rule provides that seven, four and three business day waiting periods are determined based on the version of the “business day” definition that was in effect when the creditor delivered the Loan Estimate or Closing Disclosure, or placed the applicable disclosure in the mail. For example, if a creditor delivered or placed in the mail the initial Loan Estimate on June 14, 2021 and consummation occurred on June 22, 2021, the seven business day waiting period for the initial Loan Estimate was satisfied because Saturday June 19 was a business day. However, because a creditor may provide the consumer with the initial Loan Estimate more than seven business days before consummation, if a creditor delivered or placed in the mail the initial Loan Estimate on or before June 17 and treated Saturday June 19 as a non-business day, the creditor still would have complied with the waiting period requirement. If a creditor delivered or placed in the mail a Loan Estimate or Closing Disclosure after June 17, 2021, then the creditor had to treat Saturday June 19 as a non-business day.

Mailbox Rule Period

In cases in which a creditor mails a Loan Estimate or Closing Disclosure, the consumer is deemed to receive the disclosure three business days after it is placed in the mail. This is referred to as the “mailbox rule.” The mailbox rule also applies when a creditor provides a Loan Estimate or Closing Disclosure by a means of non-personal delivery other than the mail, such as by electronic means. (While a creditor may rely on the deemed receipt of a disclosure provided by non-personal delivery under the mailbox rule, if the creditor has evidence of actual receipt of the disclosure on a date before the date of deemed receipt, the creditor may rely on the evidence of actual receipt.)

The interpretive rule provides that the three business day period under the mailbox rule is determined based on the version of the “business day” definition that was in effect on the date that the creditor placed the disclosure in the mail. For example, if a creditor placed a Loan Estimate or Closing Disclosure in the mail on June 17, 2021, the consumer is considered to have received the Loan Estimate or Closing Disclosure on June 21, 2021. However, because a creditor may deem a consumer to have received a mailed disclosure more than three business days after the disclosure was placed in the mail, if a creditor placed in the mail a Loan Estimate or Closing Disclosure on or before June 17 and treated Saturday June 19 as a non-business day for purposes of determining when the consumer received the disclosure, the creditor still would have complied with the mailbox rule. If a creditor placed in the mail a Loan Estimate or Closing Disclosure after June 17, 2021, then the creditor had to treat Saturday June 19 as a non-business day.