American Banker Piece on Truth in Lending

by Jeff Sovern

The American Banker ran a piece I wrote in their Viewpoints section today titled "Borrowers Must Understand Their Obligations" (the American Banker's content is available only to subscribers but they offer a free two-week trial subscription if you want to read the piece).  The essay argues that Truth in Lending failed to convey to too many consumers what their payment obligations would be, thereby leading consumers to take out loans they didn't understand they would not be able to repay.  Here's how it ends:

What should we do? Policymakers have already begun revising disclosure forms to increase the likelihood that those who can learn from written disclosures will be able to determine whether a particular loan is right for them. This process should continue. But we should also recognize that some consumers are unlikely to learn from written disclosures and adopt measures that will communicate to them what they need to know. Such borrowers may need a disinterested counselor - not a mortgage broker who will profit if the loan is made - to walk them through loan terms and explain what they need to know. Perhaps we should administer tests to loan applicants to see whether they understand their loan terms; those who fail should not be permitted to borrow unless a neutral counselor certifies that they understand the terms. And it may be that some loan terms should be outlawed because they are too confusing. We need to install additional checks on lending, and one way to do this is to insure that borrowers understand their loan obligations.

Comments

[Arthur Wood]

This is pretty much B/S as the banks know the minute a consumer makes an application if they qualify for any loan. Maybe we need to administer tests to the banks to make sure they understand the terms of the loan they are making.

I recently rescinded a loan ONE BUSINESS DAY AFTER the closing. The loan should have never been funded, but it was, and Citibank refused to release the mortgage that should have never been filed. I had to sue them to effect the rescission. (they finally released the Mortgage six months into the lawsuit, which is still pending, by the way.

Then after releasing the lien they filed a lis pendens and notice of equitable lien against my property.

I believe that any attempt to enforce an invalid lien is a breach of the fiduciary duty of the lender and a violation of the TILA, RESPA, and the FDCPA, because it is a misrepresentation of the legal status of the original debt.

If anyone out there has any additional ammo I can fire at them please contact me. Thanks, Art