There is no "one-size-fits-all" rule for curing TIL violations. Violations involving the APR or FC always trigger civil liability under Section 130(a) of the TILA. Just because you become liable for TILA penalties, that doesn't force you to take remedial action with regard to affected borrowers.
Section 130(b) provides an optional
cure procedure for those who want to wipe the slate clean and eliminate the threat of penalties. As a policy, many lenders "take the cure" whenever they discover (post-closing) a violation. Note that the cure only works for the first 60 days after you discover a violation, and it necessitates reimbursement when the violations involve understatement of the FC or APR.
If the borrower discovers the violation and sues you before you take the cure, all of the 130(a) penalties, costs, and damages (reimbursement) will apply.
If a bank regulator discovers an APR or FC understatement violation, the agency will order you to take remedial action. Limitations and procedures for enforcement actions are spelled out in the agencies' TIL Enforcement Policy and related Q & A. Generally, the tolerance provisions of both Regulation Z and the Enforcement Policy are embedded in APRWIN.
Assuming an FC or APR understatement is discovered 1) within 30 days post-closing, 2) more than 30 days post-closing, what, if any, are the remedies?
Relevant time frames are:
- Prior to consummation you can redisclose as often as you wish. The latest of these disclosures will be the one that counts.
- The moment the borrower signs the note, you move into the post-closing rules discussed above.
Am I correct that if either are overstated there is no violation and no attempt to remedy is required?
Section 226.18(d)(1) permits unlimited FC overstatement in a transaction secured by real property or a dwelling. In all other cases, FC overstatements of more than $5 or $10 (depending on loan amount) are violations.
226.22(a) discusses APR accuracy in detail. In general, overstatements exceeding the 1/8% or 1/4% tolerance constitute violations of Regulation Z and trigger civil liability under Section 130(a). Loans subject to the unlimited tolerance for FC overstatement may (or may not) enjoy additional APR tolerance. For the additional tolerance to apply, the APR error has to be related to the FC error directly. APR overstatements caused by other factors (incorrect Amount Financed or "Fed calendar" time measurements, for example) do not
enjoy this additional tolerance.
Although the technicalities and math may leave you scratching your head about the legality of overstated APRs, as a practical matter they're rarely litigated and regulators have bigger fish to fry.
No discussion of TIL error remediation is complete without mention of the TILA's criminal penalties: Whoever willfully and knowingly gives false or inaccurate information or fails to provide information which s/he is required to disclose under the TILA or Regulation Z can be fined up to $5,000 or imprisoned not more than one year, or both.
The threat of criminal penalties arises whenever systemic violations go unchecked. Once you are aware that there are TIL violations with a known cause, you must take remedial action to eliminate the cause. If you don't, the violations ratchet up to "willful and knowing" and you're one step closer to Club Fed.