Industry consultants and credit union executives agreed the Supreme Court’s recent Truth in Lending Act ruling won't require credit unions to change TILA procedures. The court ruled that borrowers were only required to notify their lenders in writing within three years of an alleged disclosure violation.

“I really don’t think there is much to say,” wrote Tracy Ashfield, the founder of Ashfield and Associates in an email reply to CU Times. “The ruling is not a surprise. The TILA has a lot of teeth and compliance with TILA is of paramount importance. My take is credit unions take compliance of all regulations very seriously and will continue to do so,” Ashfield wrote.

Ashfield and Associates is a credit union consultancy that specializes in helping credit unions improve their mortgage lending.

Credit union executives contacted about the ruling agreed that they would probably not do anything different because of it.

“We already have a lender review of our closing attorney’s disclosures and a post-closing review by our loan processing department, so I don’t think we will change our process,” wrote Kyle Casburn, president and CEO of the $112 million, 12,000 member Seaboard Federal Credit Union, headquartered in Bucksport, Maine, in an email exchange with CU Times.

However, he and other executives noted the ruling left a couple of crucial questions unaddressed.

“What I found most interesting was in Scalia’s opinion that ‘Section 1635(a) nowhere suggests a distinction between disputed and undisputed rescissions, much less that a lawsuit would be required for the latter.’” Casburn continued. “So it appears that even if a lender does issue the correct TILA documents and the borrower disputes after the original three day rescission period, the borrower still has three years to rescind. It follows that we will then have to then prove the disclosures were indeed correct, in order to revert back to the original three day rescission period with proper notice."

Nevertheless, Casburn ended on an optimistic note about the decision.

“Having said all that, if a lender is following best business practices for TILA document generation (either via an attorney or mortgage processing software) and performs post-closing audits, I don’t think this will be a concern,” he concluded.

This was also the take offered by Mike McClain, senior assistant general counsel for CUNA, who said that questions about TILA disclosures most often came up when homeowners are behind on payments and trying to find some way to avoid foreclosure.

“What often happens is that the loan documents wind up with a lawyer who does an analysis and finds out that some mistake was made,” McClain said of efforts within three years from closing. He added such action was unlikely, because credit unions don’t make many mistakes and the three year limit.

When a credit discovers a TILA error more than three days after closing the loan, McClain suggested the credit union own up to the mistake, send the proper forms and restart the three-day period from that point.

Instant Insights /

Supreme Court TILA Ruling Doesn't Worry Credit Unions

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