I. INTRODUCTION
The Consumer Financial Protection Bureau (CFPB) has issued an interpretive rule to provide guidance on certain Regulation Z timing requirements related to rescission of closed–end mortgages in the TILA–RESPA integrated disclosures (TRID). These timing requirements are based on definition of “business day” that excludes days that are designated as legal public holidays under Federal law. The interpretive rule explains these timing requirements in light of recent legislation that designated “Juneteenth National Independence Day, June 19” (Juneteenth) as a Federal legal public holiday. Since June 19 fell on a Saturday, it was observed on June 18. The interpretive rule clarifies that, if the relevant closed–end rescission or TRID time period began on or before June 17, 2021, then June 19, 2021, was considered a business day, but nothing prohibits creditors from providing longer time periods. Therefore, it would also be compliant for creditors to have considered June 19, 2021, a federal holiday for purposes of these provisions.
II. APPLICATION TO SPECIFIC RESCISSION PROVISIONS
Section 1026.23(a)(3)(i) provides that, for closed–end transactions covered by the right of rescission, the consumer may exercise the right to rescind until midnight of the third business day following the last of (1) delivery of all material disclosures; (2) consummation of the loan; and (3) delivery of the notice of the right to rescind to each consumer entitled to rescind. The notice must include the date the rescission period expires.
For purposes of Section 1026.23(a)(3)(i), the rescission period is determined based on the version of the specific business day definition in effect when the rescission period begins. For purposes of Section 1026.23(b)(1)(v), the rescission period expiration date disclosed on the notice of the right to rescind is determined based on the version of the specific business day definition in effect when the rescission period begins. Therefore, if the rescission period began on or before June 17, 2021, for purposes of determining the rescission period and the disclosed rescission period expiration date, Saturday, June 19, 2021, is a business day notwithstanding the addition of Juneteenth as a Federal holiday.
As an example of the application of the interpretation, assume the rescission period began on Wednesday, June 16, 2021. Consistent with the version of the specific business day definition in effect when the rescission period began, the creditor disclosed June 19, 2021, as the rescission period expiration date on the notice of the right to rescind. Because the rescission period began on or before June 17, 2021, Saturday, June 19, 2021, is a business day for purposes of determining the rescission period and the disclosed rescission period expiration date. In this example, the rescission period expired on Saturday, June 19, 2021; the original rescission period expiration date did not change as a result of the addition of Juneteenth as a Federal holiday. The CFPB notes, however, that for purposes of compliance with Section 1026.23(a)(3)(i) and (b)(1)(v), a creditor may provide a longer rescission period.
III. APPLICATION TO SPECIFIC TRID PROVISIONS
A. Delivery of Loan Estimate Prior to Consummation
1. Waiting Period.
Section 1026.19(e)(1)(iii)(B) provides that creditors generally must deliver or place in the mail the Lone Estimate to consumers no later than seven business days before consummation of the transaction. For purposes of TRID’s seven–business–day waiting period under Section 1026.19(e)(1)(iii)(B) the waiting period is determined based on the version of the specific business day definition in effect on the date the creditor delivers the Lone Estimate or places it in the mail. For example, if a creditor delivered or placed the Loan Estimate in the mail on Monday, June 14, 2021, the creditor complied with Section 1026.19(e)(1)(iii)(B) if consummation occurred on or after Tuesday, June 22, 2021, because the Loan Estimate was delivered or mailed seven business days (including June 19, 2021) before consummation. The CFPB notes, however, that it would also be compliant for creditors to have considered June 19, 2021, a federal holiday for purposes of Section 1026.19(e)(1)(iii)(B) because creditors may provide the Loan Estimate earlier than seven business days before consummation.
2. Mailbox Rules
Section 1026.19(e)(1)(iv), (e)(4)(ii), and (f)(1)(iii) provide that if the Loan Estimate or Closing Disclosure, as applicable, is not provided to the consumer in person, the consumer is considered to have received the Loan Estimate or Closing Disclosure three business days after it is delivered or placed in the mail when determining compliance with disclosure timing requirements in these sections. For purposes of these sections, the three–business–day period is determined based on the version of the specific business day definition in effect on the date the creditor delivers the disclosures or places them in the mail. For example, if a creditor did not provide the Loan Estimate or Closing Disclosure to the consumer in person but delivered or placed it in the mail on Thursday, June 17, 2021, the consumer is considered to have received the Loan Estimate or Closing Disclosure on Monday, June 21, 2021. It would also be compliant for creditors to have considered June 19, 2021, a federal holiday for purposes of the mailbox rules.
3. Receipt of Revised Loan Estimate and Closing Disclosure Prior to Consummation
Section 1026.19(e)(4)(ii) provides, in part, that the consumer must receive any revised Loan Estimate no later than four business days prior to consummation. Section 1026.19(f)(1)(ii)(A) provides that the creditor must ensure that the consumer receive the Closing Disclosure no later than three business days before consummation. The four– and three–business–day timing requirements are determined based on the version of the specific business day definition in effect on the date the creditor either provides the required disclosures to the consumer in person, or if not provided in person, the date creditor delivers or places the required disclosures in the mail.
For example, if a creditor provided the Closing Disclosure to the consumer in person on Thursday, June 17, 2021, the creditor complied with Section 1026.19(f)(1)(ii)(A) if consummation occurred on or after Monday, June 21, 2021, because the Closing Disclosure was delivered in person no later than three business days (including June 19, 2021) before consummation. The CFPB notes, however, that it would also be compliant for creditors to have considered June 19, 2021, a federal holiday for purposes of Section 1026.19(e)(4)(ii) and (f)(1)(ii)(A), because creditors may provide the revised Loan Estimate or Closing Disclosure earlier than required.
IV. POTENTIAL GAPS IN THE INTERPRETIVE RULE
In instances where the rescission period began after June 17, 2021, June 19, 2021, is not deemed a business day and would not be counted towards the three days rescission period. Specifically, in instances where loan consummation occurred on June 18, 2021, the rescission period would be deemed to expire on June 23, 2021 (since June 19, 2021, and Sunday, June 20, 2021, would not be counted). Banks could incur technical problems for such loans because rescission notices pursuant to Section 1026.23(b)(1)(v) would likely have listed the rescission expiration date as June 22, 2021.
V. EFFECTIVE DATE
The interpretive rule became effective immediately upon publication in the Federal Register. Importantly, the CFPB has explained that the interpretive rule has retroactive application, offering that the interpretation applies to “the legal requirements that were applicable around the time of the Juneteenth holiday in June 2021.” The CFPB also clarifies that by operation of Section 130(f) of TILA, no provision of TILA imposing any liability applies to any act done or omitted in good faith in conformity with the interpretive rule.