Cordray Urges Federal Reserve Not to Erode Consumer Rights
(COLUMBUS, Ohio) — In a letter sent today to the Federal Reserve’s Board of Governors, Ohio Attorney General Richard Cordray urged the Fed to maintain existing protection for homeowners who currently have the right to undo loan agreements where material disclosures were not made, in violation of the law. The existing provisions that protect a consumer’s right to rescind such loan agreements – including mortgage loan agreements – could be greatly weakened through a proposed rule now under consideration by the central bank.
In the letter, Cordray outlines the effectiveness of rescission as an avenue of relief for consumers facing foreclosure as well as an important tool to enforce the various other disclosure requirements imposed by the Truth In Lending Act (TILA). Cordray urges the Federal Reserve to withdraw proposed regulations that would effectively reorder the steps to be taken when a consumer exercises the right of rescission.
The rule, as currently in effect, requires that the lender remove the mortgage lien first, providing the homeowner valuable leverage to negotiate fair terms to pay back the loan. The new rule would require the homeowner to first pay the amount demanded by the lender, before the lender removes its mortgage lien on an illegal loan.
“The Federal Reserve’s proposed regulations would not only make rescission a less useful tool for most consumers, but the regulations also would actively discourage and heavily burden consumers from exercising their rights,” Cordray stated.
The right to rescind is a longstanding provision of TILA, “to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit.” In September, the Federal Reserve proposed new regulations as part of an update to TILA, and the public comment period ends today.
Since taking office in January 2009, Ohio Attorney General Richard Cordray has made the fight against foreclosures in Ohio a top priority. He has launched an aggressive effort to hold home appraisal companies, mortgage servicers, predatory lenders and rescue scam operations accountable for the foreclosure crisis. As a result, he has filed lawsuits against mortgage servicers Carrington Mortgage Services, American Home Mortgage Servicing Inc., Barclays Capital Real Estate dba HomEq Servicing, and GMAC. These lawsuits allege violations of Ohio’s Consumer Sales Practices Act. The lawsuits, the first of their kind in the nation, aim to hold these servicers accountable for how they deal with borrowers facing foreclosure.
SOURCE: Ohio Attorney General
Comments to Notice of Proposed Rulemaking, R-1390 Regulation Z – Truth In Lending Act
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