The Consumer Financial Protection Bureau (CFPB) is seeking comments, until May 01, 2023, on the economic impact of the mortgage loan originator rules on small mortgage companies. Additionally, CFPB issued a determination that State Disclosure Laws on business lending are consistent with the Truth in Lending Act.
The mortgage loan originator rules, part of the Truth in Lending Act’s Regulation Z, protect homebuyers from anti-competitive practices, like double-dealing or steering activities, that lead consumers into more expensive loans. The mortgage loan originator rules cover individuals or companies that are paid to arrange, negotiate, or obtain mortgage credit for their customers. The rules prohibit dual compensation and steering practices that do not benefit borrowers, as well as prohibit compensating loan originators based on the terms of a mortgage transaction. The purpose of the review of mortgage loan originator rules is to determine whether such rules should be continued without change, or should be amended or rescinded, consistent with the stated objectives of applicable statutes, to minimize any significant economic impact of the rules upon a substantial number of such small entities.
CFPB examined the State Disclosure Laws covering lending to businesses in California, New York, Utah, and Virginia to determine if they were inconsistent with and preempted by the Truth in Lending Act. The analysis found no conflict between the State Disclosure Laws and Truth in Lending Act because the state laws extend disclosure protections to businesses and entrepreneurs that seek commercial financing and commercial financing transactions are not covered by the Truth in Lending Act. The Truth in Lending Act is intended to ensure that credit terms are disclosed in a meaningful way to consumers, so they can better compare lending options. States have broad authority to establish their own protections for their residents, both within and outside the scope of the Truth in Lending Act. The Truth in Lending Act only preempts state laws under what is known as conflict preemption.
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