We have a rescindable loan with an understated APR and finance charge, both are over the tolerance. I have calulated lump sum reimbursement under the .25 tolerance as well under zero tolerance. This amounts to a reimbursement of $94 vs 450+. Because the error occured since our last federal exam I understand we don't have to redisclosure or reimburse (right?). The loan was made in September 2003.

If we would decide to reimburse to limit our civil liability, would it be necessary to reimburse based on the zero tolerance? How long does the customer's right to sue and claim damages run?

You need to review section 130 of the TILA.

You need to re-disclose within 60 days from discovery of the error and you will need to reimburse at the zero tolerance to avoid civil liability. If this loan was rescindable they have until 9/06 to rescind unless you reimburse and make your material disclosures correct.

The statute of limitation is 1 year.

Your examiner can review loans back to the date of last exam. This error occurring after your last exam offers you no protection.

Sorry, I meant to say the error occurred prior to our last federal exam.

If we decide to not consider limiting the civil liability but want to limit the extension of rescission rights do we still need to reimburse at zero tolerance? I'm not finding that addressed in TILA, Section 130 (which is awful to read by the way).

I want to present management with all the options and consequences - your help is certainly appreciated.

Thanks for your help.

You can close the civil liability window for the error in the disclosure, but your RofR problem is going to run the full three years. You can't cure that one.

OK, I may be confused, but there seems to be 2 different opinions on the RoR.

One person indicated that no matter what, the RoR cannot be cured and runs for 3 years. Another says that the reimbursement and redisclosure will provide closure to the rescision period.

I'm confused, will a correct re-disclosure and reimbursement eliminate the 3 years to rescend?

This is a debatable issue and one that can only be truly answered in a court action, but it is my belief that if you refund at the zero tolerance you have made your original material disclosures accurate thereby negating the 3 year ROR. (Just as a side note, this is the only time I think you can "cure" a ROR problem. Failure to give the ROR or giving an inaccurate ROR is not curable.)

Randy and I normally agree on issues, but in this case we do not and I honestly do not think you will get a consensus on this issue.