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    What Consumers Should Know About the Truth in Lending Act (TILA)

    It is important consumers get accurate information when they enter a lending agreement. A federal law was created to make certain this happens. It is known as the Truth in Lending Act (TILA). The truth in lending act California is applied to many types of consumer credit loans. This includes everything from mortgage refinancing to home equity loans and more. It has been written to  ensure the financial information given to consumers meets certain standards and is consistent for every such transaction.

     

    Disclosures
     
    There are various types of disclosures a lender must provide a consumer. If this is not done, the lender could be held liable and required to pay damages. The amount paid by the lender may be equal to the sum of any actual damages experienced by a consumer as a result of the lender's failure to disclose. A consumer may also be entitled to statutory damages. This could be the result of a lender failing to properly disclose the amount financed, finance charge, payment schedule, and more. TILA holds the lender strictly responsible for such violations. Thus, a TILA wrongful foreclosure can result in damages that will be imposed no matter what the intention of the lender.

    Right of Rescission

    It's possible to use TILA to stop foreclosure in certain situations. This an important remedy provided to consumers by the truth in lending act California. This provision of TILA gives a consumer the right to rescind the loan they've taken out. It is required for it to involve a lien on a consumer's primary residence. Rescission is something that must be done within a three-day period after the delivery of the disclosures or consummation of the loan, whichever occurred later. When a consumer exercises this right, the lender must refund all the charges paid, fees as well as remove any security interest associated with the loan. This is only applicable to a home improvement loan, home equity line of credit or when refinancing a current mortgage.

    Foreclosure

    The right of rescission provided in TILA is a strong weapon that can be used to successfully defend against foreclosure. This makes it possible to void a lender's lien on a house. Thus, a lender's may not foreclosure on a lien that has been voided. This is something that can ultimately eliminate the leverage possessed by a lender in a foreclosure situation. This is a way for TILA to stop foreclosure.

    Rescission During Foreclosure

    A consumer is permitted to rescind a loan during a foreclosure. This is possible when the mortgage broker fee is not included within the amount of the finance charge and should have been. It's also possible when a lender fails to provide an acceptable form for notice of rescission. Lenders are responsible for making certain their finance charge disclosure is accurate. The law permits very little room for mistakes if a loan goes into foreclosure. There is a statute of limitations for the use of the right of rescission in a foreclosure. It is three years from the date the loan is consummated.

    Regulation Z

    Regulation Z is a rule from the Federal Reserve Board which makes it mandatory for lenders to provide consumers the cost of credit in writing prior to them borrowing any money. In many cases, TILA and Regulation Z are used interchangeably.

     

    Safe Harbor Provision

    It is possible for lenders to decrease their chances of experiencing TILA violations by following the law's safe harbor provision. If a lender uses a board's model form in good faith or operates in compliance with Regulation Z, or the official interpretations in place at the time of the consummation of the agreement, the lender won't be made liable for a TILA violation. This does not apply to numerical disclosures that are wrong and beyond the tolerance level for errors.

     

    Improvement

    TILA has benefited many consumers. Financial institutions know it is less expensive to comply with the law or regulations than to ignore them. Trying to avoid TILA violations has caused most lenders to be very diligent when it comes to ensuring their operation is in compliance.

    Meet Your Attorney

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    Michael Avanesian

    Michael Avanesian primarily focuses in the field of corporate restructuring and litigation. Mr. Avanesian has a wide range of experience in Chapter 11 bankruptcy cases and has represented corporate and individual debtors, secured creditors, unsecured creditors, lessors, lessees, trustees and other interested parties in bankruptcy cases and related litigation.

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