On July 12, 2023, the CFPB joined the State of Maine to help ensure that consumers receive critical consumer protections when taking out loans by filing an amicus brief in the Maine Supreme Judicial Court in a case involving a married couple’s loan. Maine law incorporates the federal Truth in Lending Act that provides crucial consumer protections, including requiring lenders to provide precise information about the amount of a loan, its interest rate and other costs, and when it must be repaid.
In 2008, a couple took out a mortgage to purchase land and build a home, which they sold in 2014. However, the sale proceeds weren’t enough to pay off the loan because it had lost value due to the 2008 financial crisis. Thus, the couple took out a new loan, on which they made regular monthly payments for about four years. However, the couple was unable to pay the balloon payment, which led to the bank suing the couple. The couple tried to present evidence that the bank had not provided them with disclosures required by the Truth in Lending Act or determined that they could repay the loan. The bank argued that the law does not apply because the loan documents stated that the loan had a commercial purpose.
The CFPB’s amicus brief argues that lenders can’t escape coverage under the Truth in Lending Act by labeling their loans as “commercial.” According to the CFPB, determining whether a loan is covered by TILA requires assessing the borrower’s primary purpose in entering into the transaction. This inquiry looks to substance over form and is not controlled by language in the loan documents. The CFPB asserts that the statutory text, judicial precedent, and agency guidance all support this approach.
Read the CFPB’s article here.
The amicus brief can be found here.