Compliance Blog

Posted by Sarah Loats

Just a friendly reminder that compliance with MDIA is coming up - effective for applications received on or after July 30, 2009. Below is a brief reminder of the requirements.

• The credit union must deliver early disclosures, which are good faith estimates of the Truth in Lending disclosures, for closed-end dwelling-secured consumer loans. Note that this extends the requirements beyond purchase-money mortgages for the consumer's principal dwelling (i.e., refinances, second mortgages, and loans secured by second homes are all covered by these requirements). They must be delivered or placed in the mail not later than the 3rd business day after the credit union receives the application. For this purpose, “business day” means a day on which the credit union’s offices are open to the public for carrying on substantially all of its business functions.
• The credit union may not impose a fee, except a bona fide and reasonable fee for obtaining a credit report, before the consumer has received the early disclosures.
• The disclosures must be delivered not later than the 7th business day before consummation of the loan. For this purpose, “business day” means all calendar days except Sundays and the legal public holidays.
• If the APR becomes inaccurate, the credit union must provide corrected disclosures with all changed terms. The consumer must receive these no later than three business days before consummation of the loan. For this purpose, “business day” means all calendar days except Sundays and the legal public holidays.
• The term "consummation" is defined by Reg Z as "the time that a consumer becomes contractually obligated on a credit transaction." The Staff Commentary explains that Reg Z does not make the determination when this occurs - state law does. Usually this will occur at closing, but not necessarily. The big question is - when is the consumer contractually obligated to the credit terms.
• Both the early disclosures and corrected disclosures must contain a statement to the effect that the consumer is not obligated to complete the transaction because the consumer signed an application or received the disclosures.
• If your credit union makes loans for timeshare plans, there are also early disclosure rules for such loans.