Bureau Alleges Lender Set Borrowers Up for Failure Violating TILA
Earlier this month, the CFPB filed suit against a Tennessee-based mortgage lender alleging it did not make “reasonable, good-faith determination[s] of consumers’ ability to repay [] loans” made by the lender in violation of TILA and Regulation Z.
The Complaint, filed in Eastern District of Tennessee, discusses instances where the lender disregarded evidence that borrowers could not afford the loans, including lending to borrowers “with multiple debts in collection” and lending despite instances where “consumers may have insufficient residual income to cover other reoccurring obligations and expenses” after covering their monthly loan payments in violation of TILA, 15 U.S.C. § 1639c(a)(1), and Regulation Z, 12 C.F.R. § 1026.43(c). The Bureau further alleged that these failures to make good faith determinations regarding the borrowers’ abilities to cover the cost of their loans violated the Bureau’s own prohibition against providing a financial product not in conformity with federal law with respect to TILA and Regulation Z. According to the Complaint, the lender’s failure to make a reasonable, good-faith determination about borrowers’ abilities to repay their loans resulted in those borrowers accumulating late fees and subsequent penalties once their loans became delinquent and ultimately facing repossession of their homes once these delinquent loans went into default.
The Bureau’s Complaint seeks injunctive relief, damages, restitution, civil money penalties and costs against the lender.