CFPB Provides Views On Truth In Lending Act Disclosures

Prepared by: Harrison Wadsworth (hwadsworth@wpllc.net)

CFPB Student Loan Ombudsman Rohit Chopra today held a call for affected parties to assist in preparation for changes to the Truth in Lending Act disclosures to borrowers of any type of private student loan and to borrowers of HHS health services loans about interest rates on federal Direct Loans.    All Direct Stafford and PLUS loans made on or after July 1, 2013 will have different interest rates as soon as President Obama signs H.R. 1911, which the Administration has indicated it will do soon.  (See Spark of July 31, 2013 for details on that legislation.)

Chopra made clear that the call was “off the record,” not for the press, and did not constitute legal guidance.  The CFPB is still working on its legal analysis so apparently its perspectives could change.

Some key takeaways are:

•        The CFPB is not a “gotcha agency” looking to catch people for making technically inaccurate disclosures of Direct Loan interest rates before the law takes effect or a minute afterwards. (This was repeated several times.)

•        That said, the CFPB expects lenders to already be working on systems changes and other methods, such as inserts, web site changes and emails that can be made quickly once the legislation is signed into law.

•      There probably will not be any delay provided to lenders in implementing the new disclosures.  But CFPB examiners will look favorably on lenders (this would include institutions of higher education at some point) that can show they made every effort to update their disclosures as quickly as possible.

•       The CFPB has no control over what private parties might do or what state regulators might do.

•       The CFPB has not decided if it will provide guidance in writing.

An insert into disclosures is one example of the type of steps that lenders could take to show that they are trying to be accurate on their disclosures.  The CFPB realizes that there will be challenges in working with vendors and making systems changes.  Examiners will look to see if an institution took steps to comply.

In conclusion, Chopra said: As a general matter, when you are disclosing federal loan alternatives, we would advise you at this point, that at the time you are making the disclosure that you make the best effort.  We understand there are challenges with vendors.  We will look at all the facts.  We are not the type of organization that looks to catch people one minute after the law was signed.

CFPB will notify stakeholders if they decide to publish official guidance.  In the meantime, they advise affected parties to consult counsel and move forward.