What are the potential consequences if I fail to comply with TRID?
The penalties for closing even a single loan in violation of the TILA-RESPA Integrated Disclosure (TRID) regulations can far outweigh any costs incurred in ensuring compliance with the new requirements. By delaying or skimping on effective implementation of policies, processes, and training of personnel in the specifics of the new requirements, you may be inviting a “bet the bank” disaster.
Enforcement Authority Given to the CFPB
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Act) gave the Consumer Financial Protection Bureau (CFPB) broad authority to enforce compliance with nearly all federal consumer finance statutes. (12 U.S. Code § 5581). As a result, the Act arms the CFPB with a number of tools to ensure protection from violations of TRID by anyone engaged in the provision or offering of consumer financial products or services.
The Act also prohibits actions by any “related person” violating consumer products, including:
- any director, officer, or employee charged with managerial responsibility for, or controlling shareholder of, or agent for, such covered person;
- any shareholder, consultant, joint venture partner, or other person, as determined by the Bureau (by rule or on a case-by-case basis) who materially participates in the conduct of the affairs of such covered person; and
- any independent contractor (including any attorney, appraiser, or accountant) who knowingly or recklessly participates in any -
- violation of any provision of law or regulation; or
- breach of a fiduciary duty.
These tools include civil penalties, actions for damages, restitution, injunctive relief, and, more recently, the provision of a private right of action by consumers directly against violators. [12 U.S. Code § 5565. Enforcement of TRID includes private right of action provisions granted under TILA (Regulation Z)]
The Act mandates that any person that violates, through any act or omission, any provision of Federal consumer financial law penalties set out in three separate tiers:
- First tier
For any violation of a law, rule, or final order or condition imposed in writing by the Bureau, a civil penalty may not exceed $5,000 for each day during which such violation or failure to pay continues.
For any person that recklessly engages in a violation of a Federal consumer financial law, a civil penalty may not exceed $25,000 for each day during which such violation continues.
For any person that knowingly violates a Federal consumer financial law, a civil penalty may not exceed $1,000,000 for each day during which such violation continues. [12 U.S.C. § 5565(c)(2)]
Perhaps some comfort for smaller institutions may be found in a number of mitigating factors that the CFPB must take into account in determining the appropriateness of the penalty, including:
- the size of financial resources and good faith of the person charged;
- the gravity of the violation or failure to pay;
- the severity of the risks to or losses of the consumer, which may take into account the number of products or services sold or provided;
- the history of previous violations; and
- such other matters as justice may require. [12 U.S.C. § 5565(c)(3)]
However, these factors should not be relied upon as protection from the extremely punitive enforcement potential for failure to comply with TRID and other federal financial consumer protection laws and regulations. Only through complete preparation and flawless implementation and performance of the TRID requirements may lenders, brokers and others related to the provision of consumer financial products and services ensure such penalties will not be levied.
Director/Legal & Regulatory Compliance
Lenders Compliance Group