C.M.R. 02, 029, ch. 240 - Truth-in-Lending, Regulation Z-3 (Regulation 38)(Ch. 138 is a joint rule with 02-030 Ch. 240)

030 Chapter 240 - BUREAU OF CONSUMER CREDIT PROTECTION

Truth-in-Lending, Regulation Z-3

SUMMARY:This regulation is part of the State of Maine's ongoing efforts to harmonize State truth-in-lending laws with federal truth-in-lending laws.It requires creditors to comply with federal Regulation Z, now codified at 12 C.F.R. Part 1026, and federal Regulation M, now codified at 12 C.F.R. Part 1013, issued by the Consumer Financial Protection Bureau (CFPB). It will thus provide additional consumer credit protections to Maine consumers, ease compliance burdens on Maine creditors, and preserve the Bureaus' ability to enforce truth-in-lending laws applicable to Maine-chartered and Maine licensed lenders.

In 2011, Maine enactedP.L. ch. 427, "An Act to Amend the Maine Consumer Credit Code to Conform with Federal Law" (Maine Conforming Act).Among other things, the Maine Conforming Act provides that, "[n]otwithstanding any other law, a creditor shall comply with the Federal Truth in Lending Act ... and its implementing regulations, Regulation Z ... and Regulation M ... including any final regulations issued on or before July 21, 2011." The purpose of enactment was, in part, to harmonize Maine's truth-in-lending laws with federal truth-in-lending laws in order to ensure the preservation of Maine's exemption under Regulation Z pursuant to law now codified at 12 C.F.R. §1026.29, thereby allowing for the continuation of state enforcement of truth-in-lending laws applicable to State-chartered and State-licensed lenders.The Maine Conforming Act also makes creditors that are not supervised financial organizations or the MaineHousing subject to certain enhanced restrictions set forth in 9-A, M.R.S. § 8-506, in addition to the requirements now set forth in federal Regulation Z, 12 C.F.R. Part 1026, and federal Regulation M, 12 C.F.R. Part 1013.Shortly after the effective date of the Maine Conforming Act, the Bureau of Financial Institutions and the Bureau of Consumer Credit Protection repealed their joint rule known as Truth-in-Lending, Regulation Z-2, because it had been superseded by the new State law.

In 2010, the federal Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-203 (Dodd-Frank Act) created the CFPB and gave it responsibility over the federal Truth-in-Lending Act and the Consumer Leasing Act.Using its new authority, the CFPB re-codified Regulation Z (Truth-in-Lending) and Regulation M (Consumer Leasing) as 12 C.F.R. Parts 1026 and 1013, respectively, and began modifying those regulations consistent with the requirements of the Dodd-Frank Act.

This promulgation, which will become known as Regulation Z-3, requires creditors to comply with the regulations issued by the CFPB in 12 C.F.R. Part 1026 and 12 C.F.R. Part 1013, including those Regulation Z and Regulation M rules issued since July 21, 2011, the majority of which become effective in January 2014.

The CFPB's new regulations include:

* 76 FR 79768, establishing a new and discrete codification of Regulation Z;

* 76 FR 78500, establishing a new and discrete codification of Regulation M;

* 78 FR 11280, implementing requirements and restrictions concerning loan originator compensation, qualifications of, and registration or licensing of loan originators, compliance procedures for depository institutions, mandatory arbitration, and financing of single-premium credit insurance;

* 78 FR 10902, regarding mortgage loan servicing;

* 78 FR 10368, requiring appraisals for "high-risk mortgages";

* 78 FR 6856, expanding the types of mortgage loans subject to the Home Ownership and Equity Protections Act of 1994 (HOEPA);

* 78 FR 6408, delineating requirements for creditors to determine a consumer's ability to repay consumer credit transactions secured by a dwelling, establishing protections from liability for "qualified mortgages," and limiting prepayment penalties;

* 78 FR 4726, lengthening the time for which mandatory escrow accounts established for higher-priced mortgage loans must be maintained;

* 78 FR 25818 which amends the ability to pay requirements for credit card accounts;

* 78 FR 30739 which clarifies and makes technical amendments to 78 FR 4726, the final rule which, among other things, lengthens the time for which a mandatory escrow account established for a higher-priced mortgage loan must be maintained;

* 78 FR 32547 regarding loan originator compensation requirements, prohibition on financing credit insurance premiums and the delay of effective date; and

* 78 FR 35430 providing an exemption from the ability to pay requirements for creditors with certain designations, loans pursuant to certain programs, certain non-profit creditors, and mortgage loans made in connection with certain federal emergency economic stabilization programs; providing an additional definition of a qualified mortgage for certain loans made and held in portfolio by small creditors; providing a temporary definition of a qualified mortgage for balloon loans, and; modifying the requirements regarding the inclusion of loan originator compensation in the points and fees calculation.

* 78 FR 44686 which clarifies the implementation dates for the adjustable rate mortgage provisions of Regulation Z, and clarifies that construction, bridge and reverse mortgages are not subject to its requirements regarding repayment abilities and prepayment penalties for higher priced mortgage loans.

* Amendments to the 2013 mortgage rules issued by the CFPB on January 13, 2013 clarifying and revising the definition of points and fees for purposes of the qualified mortgage points and fees cap and the high-cost mortgage points and fees threshold; revising two exceptions for small creditors operating predominantly in "rural" or "underserved" areas pending the Bureau's re-examination of the underlying definitions of "rural" or "underserved" over the next two years, and extending the exception to the general prohibition on balloon features for high-cost mortgages to allow small creditors to continue originating balloon high-cost mortgages if the loans meet the requirements for qualified mortgages under certain Regulation Z provisions; amending an exemption from the requirement to establish escrow accounts for higher-priced mortgage loans under certain circumstances; and making technical and wording changes to various provisions of Regulation Z.

This regulation also directs creditors subject to the enhanced restrictions in 9-A M.R.S. §8 - 506 to comply with the restrictions in 9-A M.R.S. §8 - 506 using as authority 12 C.F.R. Part 1026 rather than 12 C.F.R. Part 226.