Truth In Lending Act
Lopez v. Bank of Orrick
Date: July 1, 2024
Issue: Whether Bank of Orrick’s open-end “Vault” brand of credit lines are exempt from repayment disclosures required in Section 127(b)(11) of the Truth in Lending Act (TILA) and Regulation Z.
Case Summary: In a rare occurrence, the Consumer Financial Protection Bureau (CFPB) filed an amicus brief supporting a bank (Bank of Orrick) in a lawsuit alleging the bank violated TILA by failing to provide repayment disclosures to a borrower.
Under TILA, lenders must send disclosures to borrowers. These disclosures include information in a borrower’s monthly statements on how long it would take to repay an outstanding balance by making minimum payments and how much it would cost to clear the debt within three years. This regulation applies to all open-end accounts. However, in 2010, the Federal Reserve (the Fed) exempted overdraft and general-purpose credit lines from the requirement when it promulgated its final rule. This information can be found in a “Schumer Box” —a legally required credit card cheat sheet that breaks down interest rates and fees.
Jose Lopez obtained a Vault line of credit through Kendall Bank and from Bank of Orrick in June 2022. Vault was a brand name for short-term lines of credit issued by Bank of Orrick. The credit line had a 379% annual interest rate. While Lopez received monthly statements, he alleged he did not receive the required disclosures because his statements allegedly lacked a Schumer Box. Lopez sued Bank of Orrick on behalf of all persons in Illinois who received similar statements with their Vault credit lines.
U.S. District Judge Manish Shah of the Northern District of Illinois requested the CFPB to comment on whether the Bank of Orrick violated federal requirements to provide borrower Lopez with the required disclosures. CFPB filed an amicus brief arguing the type of line of credit Lopez received from Bank of Orrick was exempt from such requirements. According to CFPB, when the Fed promulgated its final rule in 2010, it exercised the statutory authority granted to it under Sections 105(a) and (f) of the TILA. The final rule also exempted open-end credit plans, which are not credit card accounts, from these statutory repayment disclosure obligations. Put differently, since 2010, the disclosure obligations have only applied to credit card accounts under an open-end (not home-secured) consumer credit plan.
Bottom Line: Lopez filed a response to the CFPB, arguing that neither the CFPB nor Bank of Orrick identified a regulation stating that non-credit card open-end credit plans are exempt from federal law’s repayment disclosures.
Documents: Order
