Today, the US federal Bureau of Consumer Financial Protection, ("CFPB") announced, through a letter from CFPB Director Richard Cordray in response to a bipartisan letter from Congress, that the CFPB will "be sensitive to the progress" made by entities who "have squarely focused on making good-faith efforts to" comply with the new TILA-RESPA Integrated Disclosure Rule ("TRID") on its effective date of August 1, 2015. While this appears to potentially ease the regulatory implementation burden of affected institutions and entities, we generally advise that this good-faith period should not be relied on by financial institutions, and implementation schedules should not be delayed past TRID's August 1, 2015 effective date. Dentons' leading Consumer Finance team in the Firm's Capital Markets practice summarizes its key observations of today's CFPB announcement.
As a threshold matter, the CFPB's announcement does not formally move the effective date of TRID, or conclusively state that the CFPB will not enforce TRID requirements. TRID's effective date remains the same; thus, most importantly, all potential statutory liability for violations still apply to applications taken on or after August 1, 2015. This means that private rights of action under the federal Truth-in-Lending Act ("TILA") by consumers against lenders and investors are still valid as of August 1, 2015. Simply announcing a good-faith efforts implementation period from a regulatory enforcement view, does not equally extend to private rights of action from consumers and borrowers, which can equally impact both the primary and secondary mortgage markets given TILA's liability provisions. Therefore, regulated institutions should make every effort to fully comply with TRID to mitigate their legal and regulatory risks arising from such private rights of action.
Second, the CFPB did not provide any examples of or define what it would consider to be a "good-faith effort" to comply with TRID's requirements. Without a clear picture of what constitutes a good-faith implementation and compliance effort, financial institutions should continue to attempt to be in maximum compliance as possible with TRID starting on August 1, 2015.
Third, while the CFPB noted that it, as a regulatory body, would "be sensitive" to implementation issues, other federal and state regulators have not, as of yet, echoed the CFPB's words. While the assumption might arise that other regulators will follow suit, it is by no means clear that other federal and state regulators will be likewise "sensitive" to the good-faith TRID implementation efforts of financial institutions.
While the initial market reaction to this announcement has been overwhelmingly positive and met with sighs of relief, we caution that there are still real concerns for an organization that is not in compliance with TRID as of August 1, 2015.