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“Debugging” Version 1.0

Posted in CFPB General

The CFPB is to be commended for so quickly making public the first edition of its Supervision and Examination Manual, which it has referred to as “Version 1.0.”

Unfortunately, though, as is often the case with Version 1.0 of anything, the Manual would have benefitted from a more thorough debugging prior to its release.  Not only are the HMDA checklist and the Homeowners Protection Act narrative and examination procedures all missing, but there are other glitches as well.

For example, in reviewing the TILA narrative we were surprised to see that the discussion of transactions that are exempt from TILA is seriously outdated.

The narrative and the flow chart that address exemptions both emphasize that non-residential mortgage loans over $25,000 are exempt from TILA. Not true.

Not only did the Higher Education Opportunity Act of 2008 sweep all private education loans within the scope of TILA, regardless of dollar amount, but the Dodd-Frank Act of 2010 made even more significant changes in the dollar threshold.

In place of the old $25,000 limit, Dodd-Frank established an exemption of $50,000 that took effect on July 21, 2011 and that is adjusted annually to reflect increases in the Consumer Price Index.

As one of its last acts under TILA, the FRB published a final rule and commentary addressing these changes. It states that from July 21, 2011 through December 31, 2011, the threshold amount is $50,000. Effective January 1, 2012, the threshold amount is increased to $51,800.

As the CFPB noted, “While every effort has been made to ensure accuracy [in this examination manual], examination procedures should not be relied upon as a legal reference.” Well said.