Last month a group of more than 200 members of Congress sent a bipartisan letter to the Consumer Financial Protection Bureau (CFPB), requesting a grace period for the implementation of the Truth in Lending Act (TILA) – Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure (TRID) rule. The rule is scheduled to go into effect on Aug. 1. The letter urged the bureau to implement a grace period for entities that were attempting to comply in good faith.
On June 3, CFPB Director Richard Cordray wrote a reply, stating that the bureau will be watchful for those companies that are trying to comply.
“I have spoken with our fellow regulators to clarify that our oversight of the implementation of the rule will be sensitive to the progress made by those entities that have squarely focused on making good faith efforts to come into compliance with the rule on time,” Cordray wrote.
“My statement here of this approach is intended to ease some of the concerns we have heard about this transition to new processes in the coming months and is consistent with the approach we took to implementation of the Title XIV mortgage rules in the early months after the effective dates in January 2014, which has worked out well,” he continued.
Before the Title XIV mortgage regulations went into effect, Cordray told Congress that the bureau was not expecting flawless compliance right away. Instead, the bureau was looking for “good faith compliance” and “good faith efforts to come into substantial compliance by” the deadline.
What this means for TILA-RESPA compliance is that the CFPB is probably not going to require immediate perfection once that Aug. 1 deadline rolls around. However, that does not mean that there is an official grace period where compliance is not required. The rule is going into effect in August as planned, and the bureau is requiring a good faith effort to comply by the deadline.
The members of Congress suggested in their letter that an understanding of how to comply with the regulation will only be truly clear once the industry has had the opportunity to use the forms and gain real-life experience. However, under the TILA-RESPA rule, lenders cannot use the new forms until the Aug. 1 implementation date, which means that they cannot actually gain experience utilizing the forms until they are already required to comply. Because of this, the members of Congress indicated that a grace period should be granted from Aug. 1 until the end of the year for all entities who seek to comply in good faith. The letter further suggested that, during the grace period, the industry could send data to the bureau about the issues it comes across when attempting to use the new forms.
There have been indications amongst some in the industry that there may not be enough time to get the required software ready before the TRID rule goes into effect.
In his response letter, Cordray did not set out a clear time frame for the grace period but did indicate that the bureau would continue to work with the industry after the Aug. 1 implementation date in order to provide guidance and ensure a smooth transition. Cordray also highlighted the steps the bureau has already taking in order to assist the industry in the transition including: inter-agency coordination; publishing guides and other resources; publishing amendments to the rule in response to industry concerns; providing unofficial staff guidance; engaging with stakeholders; conducting instructional webinars; and clarifying misunderstandings.
It is clear from the letter that the bureau will be mindful of attempts to comply but without an official grace period, it is likely best for companies to be ready to be in full compliance as soon as possible after Aug. 1.
Compliance resources for TRID are available here: http://www.consumerfinance.gov/regulatory-implementation/tila-respa/