Staying current on the Truth in Lending Act (TILA) and its associated regulations is crucial. This guide aims to demystify key aspects of TILA compliance, focusing on the TILA-RESPA Integrated Disclosure (TRID) rule. It will help you effectively manage your bank’s compliance program.  

Understanding TILA and TRID basics  

TILA, enacted in 1968, requires lenders to provide clear and accurate disclosures of loan terms and costs to consumers. The TRID rule took effect in 2015. It integrated TILA disclosures with those required under the Real Estate Settlement Procedures Act (RESPA).  

TRID applies to most closed-end consumer credit transactions secured by real property or a cooperative unit. Understanding this as a compliance officer is essential. 

Key components of TRID compliance  

Let’s cover the key concepts you need to know to support your compliance efforts.  

Loan estimate and closing disclosure  

The cornerstone of TRID compliance is the proper use of two forms:  

• Loan Estimate: You must provide the Loan Estimate to consumers within three business days of receiving a loan application.  
• Closing Disclosure: The Closing Disclosure must be provided at least three business days before loan consummation. 

Tolerance levels  

TRID establishes tolerance levels for changes in certain costs between the Loan Estimate and Closing Disclosure. Some fees have zero tolerance for increases, while others allow for a 10% cumulative increase. As a compliance officer, you should ensure your bank has systems to monitor these tolerances. Your bank should provide revised disclosures when necessary.  

Timing requirements  

TRID imposes strict timing requirements for providing disclosures. Your compliance program should include procedures to track and meet these deadlines. This entails a three-business-day waiting period before consummation after providing the Closing Disclosure.  

Implementing an effective compliance program  

To effectively manage TILA and TRID compliance, consider the following strategies:  

• Develop comprehensive policies and procedures — Create detailed, written policies and procedures. You should cover all aspects of TILA and TRID compliance. These should also include processes for generating and delivering disclosures, calculating tolerances and handling revisions. 
• Leverage technology — Implement robust compliance management software to automate disclosure generation, tolerance tracking and timing requirements. This can help reduce human error and ensure consistency across your institution.  
• Provide regular training — Conduct ongoing training for loan officers, processors and other relevant staff. Confirm they understand TILA and TRID requirements. Include real-world scenarios and case studies to illustrate common compliance challenges.  
• Perform regular audits — Establish a schedule of internal audits to review your bank’s TILA and TRID compliance. This should include reviewing a sample of loan files to ensure accurate disclosures and proper timing. Adherence to tolerance levels is also important.  
• Stay current with regulatory changes — Regularly monitor for updates on TILA and TRID regulations. The Consumer Financial Protection Bureau (CFPB) provides resources and guidance on its website. This can be valuable for staying informed about new interpretations or amendments.  

Addressing 4 common compliance challenges  

As a compliance officer, you may encounter several challenges in implementing TILA and TRID requirements:  

1. Managing multiple loan scenarios  

TRID rules can vary depending on the type of loan (e.g., purchase, refinance, construction). Ensure your compliance program addresses the nuances of each scenario.  

2. Coordinating with third-party providers  

Effective communication with settlement agents and other third-party providers is crucial for TRID compliance. Establish clear protocols for sharing information and coordinating disclosure delivery.  

3. Handling changed circumstances  

Develop procedures for identifying and documenting changed circumstances that may allow for revised Loan Estimates or reset tolerance baselines.  

4. Ensuring accurate fee disclosures  

Work closely with your bank’s operations team to maintain up-to-date fee schedules. Also make sure to accurately disclose all applicable fees.  

5. Protecting your bank’s reputation  

As a compliance officer, your role in TILA and TRID compliance is crucial for protecting your bank’s reputation. Implement a system for monitoring employee conduct related to TILA compliance and establish clear consequences for violations. Regularly report compliance metrics and any identified issues to senior management to demonstrate the effectiveness of your compliance program.  

Navigate TILA with support from BPM 

Navigating TILA and TRID compliance can be complex. However, you can effectively manage your bank’s compliance program with a comprehensive approach. You can help ensure your institution meets its TILA obligations and maintains a strong compliance posture. This can be accomplished by: 

• Developing robust policies 
• Leveraging technology 
• Providing ongoing training  
• Staying current with regulatory changes 

Remember, as a compliance officer, your role is not just to follow rules. It’s about fostering a culture of compliance that protects consumers and strengthens your bank’s reputation in the financial industry. By demystifying TILA and TRID requirements, you empower your colleagues. You also enable them to make informed decisions and contribute to your bank’s overall compliance success.  

Contact the BPM team to learn more about our services.