II SUBSTANTIVE ISSUES
The issues identified below do not constitute an exhaustive list of all the issues arising out of the CMC's Consultation Paper or CCDA 4.1 that might be worthy of discussion. The issues mentioned below are those that seem particularly important for the Uniform Law Section to consider, with a view to making recommendations to the CMC or confirming or changing CCDA 4.1's approach to certain issues. In identifying issues for discussion, I have been mindful of the limited amount of time that will be available for discussion of ccdl at the Conference. Of course, delegates are encouraged to review the CMC Consultation Paper and CCDA 4.1 and raise for discussion any additional issues they believe should be considered during the Conference.
The following discussion does not raise issues that are incidental to the working group's proposal to require disclosure of the APR for fixed credit. For example, there is no discussion of how the APR should be calculated or what sorts of charges ought to be included in the APR. These are crucial issues if you are going to require APR disclosure. They are also complex. Given that for the past few years the ULS has been advocating an approach that does not involve APR disclosure, and that it continues to advocate such an approach, I do not think it is necessary or appropriate at this stage of the project for the ULS to immerse itself in the mechanics of APR disclosure.
A. The APR Approach Versus the AIR Approach
As mentioned earlier in this memorandum, the CMC working group proposes that harmonized ccdl should continue to require lenders to calculate and disclose the APR for fixed loans. In contrast, the ULCC has proposed the AIR approach, which would require lenders to disclose the AIR and dollar amount of non-interest charges, and would place express limits on the types of non-interest charges that can be imposed by lenders.
It is worth emphasizing that the ULCC's approach is not based on the premise that the APR is a useless piece of information in consumer credit transactions. In many cases, knowing the respective APRs for two alternative loan arrangements could help a consumer decide which loan is really less expensive. However, it is one thing to acknowledge that the APR may be a useful piece of information and another to argue that lenders should be required to disclose the APR for their loans. One of the arguments in the APR Paper is that there may be more efficient means of conveying the APR for loans to consumers than by requiring lenders to calculate and disclose the APR.
I am convinced that the AIR approach is a better approach than the APR approach. The reasons for that conclusion are set out in the APR Paper. Since the APR Paper is a 60-page document, it would be rather difficult to describe its arguments in this memorandum, and I will not attempt to do so. The APR Paper is available and speaks for itself. In any event, I do not think that it would be especially productive for the ULS to engage in another discussion of the relative merits of the contending approaches. The ULS decided a couple of years ago (at least) to reject the APR approach in favour of the AIR approach, and the reasons that were advanced for doing so are as valid now as they were then. I would suggest that the ULS simply confirm that it continues to be of the view that the AIR approach is a superior alternative to the APR approach.
Taken on their own, I doubt that any further arguments the ULCC might make regarding therelative merits of the AIR approach and the APR approach would persuade the CMC working group to change its position on this fundamental issue. However, based on the responses we have received to our own consultation, I would not be surprised if the working group's consultation process reveals substantial support for the AIR approach. I would assume that such support, combined with whatever arguments are advanced by the ULCC, would influence the final decision on this issue. Thus, I think it is important to affirm that the ULCC is unrepentant on this issue.
The ULS should confirm its support for an approach to cost of credit disclosure that does not require lenders to disclose an APR for fixed loans, but which contains the following elements:
(a) disclosure of the annual interest rate;
(b) disclosure of the dollar amount of non-interest charges;
(c) express restrictions on the types and number of non-interest charges that may be imposed in connection with consumer loans.
B. Restrictions on Non-Interest Charges Under AIR Approach
The issues discussed in this section arise out of the AIR Approach, rather than out of anything proposed in the Consultation Paper.
As you know, express restrictions on non-interest charges are a key element of the AIR approach. The restrictions serve two broad purposes. The first is to ensure the usefulness of the annual interest rate as a measure of the cost of credit. It does so by making it difficult for lenders to state misleading interest rates by loading a large chunk of the cost of borrowing into non-interest charges. The second purpose of the restrictions relates to prepayment of loans. Here the CCDA's restrictions on non-interest charges are designed to make it difficult to for lenders to load an unduly large portion of the total cost of borrowing for a loan into "front-end" charges, which would largely negate the advantage to consumers of prepaying such loans.
We have received many comments on the proposed restrictions on non-interest charges. As mentioned earlier, a few commentators have objected to the whole concept of placing restrictions on non-interest charges. However, most commentators have focused on the issue of how, rather than whether, ccdl should restrict non-interest charges. Most of the discussion has focused on the concept of the permitted flat charge for fixed loans.
Flat ChargesIn the CCDA's terminology, a flat charge is a charge that is the same for all loans within a certain category. Lenders would be allowed to impose flat charges in connection with fixed loans. Although neither CCDA 3.2 nor CCDA 4.1 expressly ties flat charges to any particular expense incurred by the lender, the rationale for allowing lenders to impose a flat charge is that imposing such a charge is the most efficient and accurate way for a lender to recover internal costs that do not vary with the size and duration of a loan.
Under CCDA 3.2, for the purpose of setting the amount of their flat charges for loan categories, each lender would have been free to categorize its loans according to any criteria the lender considered relevant. But there was one constraint: a lender coulduse the amount of the loan as a criterion for categorizing loans only if this reflected a material difference in the procedure (and, hence, the cost) for setting up loans in the different categories. In other words, a lender would have to charge the same flat charge for loans which differed only in their amount, unless this difference was reflected in a different procedure for setting up the loans or administering them.
The comments on CCDA 3.2's approach to flat charges fall into four rough categories. First, there were commentators who thought that lenders should not be allowed to impose a flat charge at all. Second, there were commentators who thought that if flat charges were permitted, they should be subject to explicit monetary caps to ensure that the charges are "nominal" and do not significantly affect the cost of borrowing.(10) Thirdly, some commentators thought that the restrictions on flat charges, or the permitted methods of categorizing loans, were too restrictive. Finally, there were even some commentators who thought that CCDA 3.2's restrictions on flat charges were quite reasonable.
When I was writing the APR paper, it was apparent that the main concern of some CMC working group members was that CCDA 3.2's approach would give some lenders too much scope for inflating the flat charge, thereby making the annual interest rate unreliable as a measure of the relative cost of credit. To address this concern, the APR paper suggested that permitted flat charges might be explicitly tied to lenders' cost of setting up and administering loans. The suggested provision read as follows:
(X) The flat charge for any category of fixed loan must not exceed the lender's reasonable estimate of the approximate cost of setting up and administering, or renewing and administering, a typical loan within the relevant category.
(Y) For the purpose of subsection (X), the cost of setting up, renewing or administering a loan does not include
(a) any cost that depends on the amount and duration of the loan;
(b) any cost that is recovered otherwise than through a flat charge.
I was concerned that this restriction on flat charges might be viewed as too restrictive, but I anticipated that it would meet the objection that the definition of permitted flat charge in CCDA 3.2 would allow lenders to inflate flat charges. However, some members of the working group were concerned that this formulation would still allow lenders to impose non-interest charges that woulddistort the cost of borrowing.
CCDA 4.1 does not incorporate provisions "X" and Y" set out above. In fact, section 8 of CCDA 4.1 is much closer to the corresponding provision in CCDA 3.2 than it is to provisions X and Y. Strictly speaking, section 8 of CCDA 4.1 is less restrictive than section 8 of CCDA 3.2, because the former removes any constraints on how lenders may categorize loans for the purpose of setting flat charges. The only official constraints on the creation of loan categories are the disclosure and record-keeping requirements of section 8. The lender must keep a record of its loan categories and the flat charge imposed within each category, and must disclose to any person who requests such information how the lender categorizes its loans and the flat charge for each category of loan. In other words, CCDA 4.1 imposes no explicit or implicit restrictions on the amount of flat charges for any given category of loans but attempts to ensure that those charges will be as transparent as possible. Like CCDA 3.2, CCDA 4.1 would authorize regulations placing explicit monetary limits on flat charges for specific types of loan, but such regulations are viewed as a backstop.
The ULS should confirm its support for the approach to flat charges embodied by CCDA 4.1 section 8, which contains the following elements:
(a) every lender should be free to categorize loans for the purpose of setting flat charge according to whatever criteria the lender considers relevant;
(b) lenders should be required to keep a record of their loan categories and the flat charges for each category;
(c) lenders should be required to disclose to any person who requests such information their loan categories and the flat charges for each category;
(d) the CCDA should not impose monetary limits on flat charges, but should authorize regulations to that end.
Required Payments to Third PartiesSection 6(3)-(4) of CCDA 4.1 is based on a provision that was proposed and explained in the 1994 Memorandum. Essentially, the purpose of this provision is to prevent lenders from getting around the restrictions on non-interest charges(11) by requiring the borrower to make a payment to a third party. Time constraints during the 1994 Conference did not allow for a discussion of this provision, so I mention it here todraw delegates' attention to its inclusion in CCDA 4.1.
The ULS should confirm its support for the restrictions on mandatory payments to third parties set out in section 6(3)-(4) of CCDA 4.1.
Refund of Certain Non-Interest Charges on Prepayment of Loan under CMC Approach
Although CCDA 3.2 placed express restrictions on non-interest charges, there was only one circumstance in which CCDA 3.2 would have required a lender to refund a permitted non-interest charge that had been properly imposed. This was where the borrower withdrew a loan application or paid off a loan within two business days after receiving the initial disclosure statement. The borrower would then be entitled to a refund of any flat charge paid prior to the withdrawal or prepayment.(12) The purpose of this cooling-off period was to give the borrower a chance to evaluate the information in the disclosure statement before being irrevocably committed to paying a flat charge. Once the cooling-off period had expired, however, a borrower who prepaid a loan would not be entitled to a rebate of any portion of a flat charge paid at the beginning of a loan. If the borrower paid a $50 administration fee at the outset of a one-year loan but repaid the loan after six months, the $50 would be gone.
For prepayment purposes, the CMC Consultation Paper divides non-interest charges into two broad classes: non-refundable charges and refundable charges. The former class includes disbursement charges, brokerage fees and the "rebate-not-taken" under a rebate or low-rate financing ("RLRF") program.(13) The latter class includes all other non-interest charges. Thus, any lump-sum charge, such as application fee or administration fee, imposed at the beginning of a fixed loan is partially refundable upon a prepayment, unless the charge relates to a specific external expense incurred by the lender and passed on to the borrower. If the lender imposes a $50 fee to cover its internal costs of setting up a loan, half of that fee would be refundable if the borrower prepays the loan half-way through the term.
During the CMC working group meetings I argued that if a charge imposed at the beginning of a loan relates to an expense incurred by the lender at the outset of the loan, it is reasonable for the lender to retain the relevant payment even when the loan is prepaid. It should not matter whether the expense is incurredinternally or externally. Whether internal or external, it is incurred by the lender even if the loan is prepaid, so it is difficult to discern the principle upon which the charge should be refunded upon a prepayment. Moreover, if forced to refund a portion of such charges to borrowers who prepay, lenders will have to recover the relevant expenses from other borrowers. Thus, the policy of requiring lenders to refund charges that may relate to expenses already incurred by the lender at the time of a prepayment amounts to a cross-subsidization of borrowers who prepay by borrowers who pay their loans according to the agreed schedule.
I do not think that the CMC working group raise any objection, in principle, to lenders retaining charges that relate to expenses they have already incurred at the time a loan is prepaid. However, it was concerned that, for prepayment purposes, it would be too difficult to distinguish between the portion of an "administrative charge" that genuinely relates to expenses already incurred by the lender and the portion that is more accurately characterized as unearned cost of borrowing. Therefore, to avoid having to make this distinction, the Consultation Paper proposes to require a proportionate refund of all non-interest charges other than disbursement charges and brokerage fees. However, I am not convinced that a policy of allowing lenders to retain non-interest charges that cover internal expenses incurred before a loan is prepaid will undermine the policy that borrowers who prepay loans should not have to pay the portion of the cost of borrowing that has not been earned at the time of the prepayment. The two policies can co-exist if a mechanism is provided that ensures that front-end charges bear a reasonable relationship to front-end expenses. CCDA's flat charge mechanism is intended to fulfil this function.
The ULS should recommend that, except for privileges under a "cooling-off" period following the delivery of a disclosure statement, when a borrower prepays a loan a lender should not be required to refund any charges that cover internal or external expenses incurred by the lender before the loan is prepaid.
D. RLRF Programs
You will recall that there has been an ongoing debate as to the most appropriate method of dealing with RLRF programs in harmonized ccdl. Sections 14 and 14.1 of CCDA 3.2 represent alternative approaches to such programs. Section 14 would essentially have required that anyone who gives a rebate to cash customers give the same rebate to credit customers.
Section 14.1 would have drawn a distinction between rebates offered by the seller of merchandise and rebates offered by third persons (i.e. a manufacturer who does not sell the goods directly to consumers). Section 14.1 would have taken the same approach as section 14 to rebates offered by sellers; any rebate given to cash customers would also have to be given to credit customers. Otherwise, sellers could easily use the device of rebates tocompletely undermine restrictions on non-interest charges and the usefulness of the AIR as a measure of the relative cost of credit. For example, the proprietor of Joe's Used Furniture could make offers like this:
Cash customers: Buy this sofa for $500 and get a $100 rebate. Credit customers: buy this sofa for $500 and get 0% financing for 1 full year.
Of course, Joe would really be selling the chair for $400 and disguising the cost of borrowing as a rebate given to cash customers. Section 14.1 would require Joe to give the rebate to credit customers as well as to cash customers, so the initial outstanding balance on the supplier loan would be $400. If Joe wants to collect interest, he would have to reveal the interest rate as an interest rate.
Section 14.1's approach is different where a third party offers the rebate. A rebate offered to cash customers must also be offered to credit customers, but it can be offered as an alternative to low-rate financing. In other words, a manufacturer could offer credit customers a choice between (1) a rebate and financing at the going market rate and (2) no rebate (or a smaller rebate) and low-rate financing. A print advertisement that offered credit customers such a choice would have to include a table setting out comparative payment information for each of the alternatives, based on a representative transaction.
Most commentators who commented on the alternative provisions in CCDA 3.2 expressed a preference for the approach of section 14.1. Most commentators thought that the comparative payment table contemplated by section 14.1 would allow consumers to make a reasonably informed choice between the two alternatives. Given the strong support for section 14.1, section 15 of CCDA 4.1 is based on section 14.1 rather than section 14 of CCDA 3.2. As compared to section 14.1 of CCDA 3.2, section 15 contains several cosmetic modifications and two substantive modifications. The first substantive modification is in section 15(5)(i), which requires an additional item of information in the comparative table. This is a statement of how much the borrower would have to pay to prepay the loan half-way through its term under each alternative. This is intended to give prospective customers some idea of the negative implications for prepayment of choosing the low-rate alternative over the rebate alternative (assuming the rebate would be applied to reduce the initial loan balance).
The second substantive modification is found in section 15(2). It provides that the requirement for a comparative table does not apply to a radio or television advertisement if the ad refers to a contemporaneous newspaper advertisement where the relevant information can be found.
It should be noted that the special disclosure requirements in section 15 of CCDA 4.1 only deal with advertisements. There is noprovision in CCDA 4.1 that would impose special disclosure requirements at the time a consumer enters into a low-rate financing arrangement and foregoes a rebate. Arguably, the disclosure statement for such a transaction should contain the same type of comparative table that would have to be provided in an advertisement. One possible drawback of such a requirement is that it might be more challenging for a seller (e.g. a car dealer) to provide a comparative table for a specific transaction than for an advertiser to provide a comparative table for a representative transaction. Presumably, the necessary calculations would be done by a computer, but the seller would have to be careful to enter the correct data not only for the actual transaction (with low-rate financing), but also for other option (a rebate and regular-rate financing).
Since the CMC working group is proposing to require lenders to disclose the APR for fixed credit, it must address an issue that does not arise under the AIR approach. Should the rebate foregone by a credit customer in order to get low-rate financing be counted as part of the cost of borrowing and be taken into account in calculating the APR for the relevant credit arrangement? The working group has proposed that it should. This approach will almost certainly be controversial, because it is the approach that has already proved to be controversial under some provinces' existing legislation. It must be said, however, that if you are going to require disclosure of the APR for fixed credit, it seems logical to require the amount of the rebate-not-taken to be included in the APR for the low-rate loan.
6.1The ULS should confirm CCDA 4.1's approach to RLRF programs, which consists of the following major elements:
(a) Sellers should be required to give the same rebate to credit customers that they give to cash customers.
(b) A person other than the seller (such as a manufacturer or its "captive" finance company) should be able to offer credit customers a choice between a rebate and low-rate financing.
(c) Any print advertisement relating to a RLRF program should contain a table setting out comparative payment information for the two options.
(d) The comparative payment information should include the amount that would be outstanding under each alternative if the loan were to be prepaid at some point during the term of the loan.
(e) A radio or television advertisement regarding a RLRF program need not contain the comparative tableof payment information if it refers to a concurrently published newspaper advertisement.
6.2 The ULS should consider whether the same comparative payment information that must be provided for advertisements should also be provided in the disclosure statement for a specific transaction in which the customer foregoes a rebate in favour of low-rate financing.
E. Timing of Disclosure
Non-Mortgage LoansCCDA 3.2 sections 24 and 27 provided a two day "cooling-off period" following a consumer's receipt of the disclosure statement for a supplier loan or non-mortgage cash loan. If the consumer withdrew the loan application or prepaid the loan (presumably with funds provided by another lender at a better rate), the borrower would have been entitled to a refund of any flat charge paid by the borrower in connection with the loan. As mentioned earlier, the purpose of this provision was to give the borrower a reasonable opportunity to evaluate the information in the disclosure statement and possibly obtain equivalent (but cheaper) financing elsewhere.
Commentators' comments on these sections ranged from very negative to mildly positive. One commentator thought that in the context of supplier credit transactions (e.g. conditional sales contracts) it would be more useful to provide consumers with a real cooling-off period, during which they could cancel the entire transaction without liability.(14) On the other hand, some commentators thought this provision was too generous. They thought lenders should be compensated for thrown-away expenses, whether internal or external, when a borrower withdraws from a credit arrangement after receiving the disclosure statement.
The CMC working group concluded that, in the context of non-mortgage credit, it is unnecessary to give consumers the sort of cooling-off period contemplated by CCDA 3.2. In the context of their proposals regarding prepayment of non-mortgage loans, the working group's conclusion on this point seem correct. As discussed earlier, the working group has proposed that a borrower who prepays a non-mortgage loan should be entitled to a proportionate refund of all non-interest charges other than disbursement charges or brokerage fees. Under this general proposal, a borrower who prepaid a loan a few days after it was advanced would be entitled to a refund of virtually the whole of any administration charge imposed at the outset of the loan. A cooling-off period along the lines of the one provided by CCDA 3.2 would be redundant where consumers have the generous prepayment right proposed by the CMC working group.
In accordance with the working group's proposals, CCDA 4.1 has eliminated the cooling-off periods for non-mortgage loans. However,CCDA 4.1's general prepayment right for non-mortgage loans is not as generous as that proposed by the working group, in that CCDA 4.1 would not provide for a proportionate refund of a properly imposed flat charge.(15) It is certainly arguable that given the difference in the general prepayment rights afforded by CCDA 4.1 and the CMC Consultation Paper, CCDA 4.1 should have retained the same sort of cooling-off period for non-mortgage loans that was contemplated by CCDA 3.2.
The ULS should consider whether borrowers should have a "cooling-off" period after receiving a disclosure statement for a non-mortgage loan, as contemplated in CCDA 3.2. If during the cooling-off period a consumer either withdrew the credit application (if the loan had not already been advanced) or prepaid the loan in full, the consumer would not be liable for any non-interest charges other than disbursement charges for expenses already incurred by the lender.
Brokered LoansCCDA 3.2 section 12 required a loan broker to provide the borrower with a brokerage fee disclosure statement on or before the day the borrower received the lender's disclosure statement. The brokerage fee disclosure statement would disclose the dollar amount of the brokerage fee as well as the APR for the loan.(16) A borrower who withdrew the loan application or paid off the loan within the cooling-off period would not be liable for the brokerage fee.
The working group proposes more onerous disclosure requirements for brokers than were proposed in CCDA 3.2. The Consultation Paper proposes that a broker be required to provide a preliminary disclosure statement ("PDS") and a final disclosure statement ("FDS"). The PDS would have to be given to the borrower when the borrower applies for the loan and before the borrower incurs any obligations or makes any payments in connection with the prospective loan. The PDS would have to contain information such as the amount and term of the loan, the maximum interest rate, the brokerage fee, the APR and the target date for obtaining a written commitment from a lender to provide a loan on terms at least as favourable as those set out in the PDS. If the broker does not obtain such a commitment by the target date, the borrower would not be liable for any portion of the brokerage fee.
The timing and consequences of the FDS would depend on whether the loan is a mortgage loan or non-mortgage loan. For a mortgage loan, the Consultation Paper proposes that the broker be requiredto provide a FDS at least 14 days before the loan is advanced, although the borrower could waive this right "on the advice of an independent professional stipulated by regulation". This would tie in with the working group's proposal regarding the timing of delivery of disclosure statements for mortgage loans generally. The Consultation Paper does not expressly discuss what happens if the borrower declines the mortgage loan after receiving the disclosure statement. Presumably, the working group intends that the borrower would not be liable for the brokerage fee if the borrower declines the mortgage within a certain period (a day or two) after receiving the disclosure statement. Otherwise, it would be difficult to see any point in requiring the broker to provide the FDS 14 days before the loan is advanced.
For a non-mortgage loan, the FDS must be given before the borrower incurs any obligations under the loan. The Consultation Paper says that "a borrower who prepays a non-mortgage loan within 24 hours of receiving the [final] disclosure statement from the broker should not be liable for the brokerage fee." Presumably, this is intended to apply not only where the borrower prepays the loan, but also where the borrower declines to accept the loan after seeing the disclosure statement.
I am not sure that the working group has a firm idea of exactly how its proposed approach would work in practice. I certainly do not. In particular, I am unclear as to the exact relationship between the PDS and the CDS. My questions about the proposed approach include but are not limited to the following:
1. Suppose that a broker provides a PDS, but does not provide a written commitment from a lender until a few days after the target date set out in the PDS. Despite the broker's tardiness, the borrower is prepared to accept the loan, and in fact does so. The Consultation Paper says that if the broker does not provide a written commitment by the target date, the borrower should not be liable for any portion of the brokerage fee. Does the broker's failure to deliver a commitment by the target date mean the broker cannot receive a brokerage fee from the borrower even if the latter accepts and receives the loan? Or can the broker still receive a brokerage fee so long as the borrower receives the FDS and accepts the loan. The latter approach seems reasonable, but it would then appear that the broker's failure to deliver a signed commitment by the target date would have no discernible legal consequences.
2. On a similar note, suppose the broker is unable to arrange a loan on terms as favourable as those set out in the PDS (perhaps because a credit check reveals that the borrower does not have a stellar credit record) but is able to arrange a loan on less favourable terms. If the borrower is prepared to accept a loan on the less favourable terms, is the broker nevertheless prohibited from receiving a brokerage fee for arranging that loan, because its terms are less favourable than those set out in the PDS?
3. How is it determined whether the terms of the loan arranged by the broker are as favourable as the terms set out in the PDS? For example, if the PDS refers to a 3-year loan at an APR of 12% and the broker ultimately arranges a 2-year loan at an APR of 10%, are the terms of the actual loan more or less favourable than those set out in the PDS?
The ULS should recommend that the CMC working group consider whether the proposed disclosure requirements for loans arranged by brokers, especially the requirements regarding a "preliminary disclosure statement" are clear and practical.
RenewalsCCDA 3.2 section 33 provided that a lender who was willing to enter into a renewal agreement [for a balloon payment loan] had to provide the borrower with a disclosure statement at least 15 days before the end of the term of the existing agreement. The renewal statement would have to provide information such as the interest rate and the amount of the periodic payments, and could provide this information for several different renewal options. A couple of commentators thought that the requirement to provide advance disclosure of the renewal terms was onerous or impractical. One of these commentators argued that the lender could be locked in to a below-market rate if rates rose between the time the disclosure statement was delivered and the actual renewal date. But if silence can be interpreted as agreement, most commentators seemed to agree with the approach taken by CCDA 3.2.
The Consultation Paper's approach to renewal statements is similar to CCDA 3.2's with a few important differences:
*The lender would be required to provide the disclosure statement sixty days before the renewal date.
*The interest rate quoted in the renewal statement would be the current interest rate as of the date of the disclosure statement, and the statement could indicate that the rate is subject to change.
*The renewal statement would have to contain "the same categories of cost information as the disclosure statement for the loan."
*A lender who did not intend to renew a loan would be required to so advise the borrower at least sixty days before the end of the term.
*If the lender did not provide the renewal statement at least 60 days in advance of the renewal date, the loan would be prepayable without penalty at any time within 60 days of when the disclosure statement is delivered to the borrower.
My main concern with the working group's proposals relates to the timing of the disclosure statement. I do not think it would bereasonable to require lenders to offer a firm interest rate at least 60 days before the renewal date. The general level of interest rates could change quite considerably over a 60 day period. Therefore, if the lender is required to deliver the disclosure statement 60 days before the renewal date, then I believe it is necessary _ as the working group proposes _ to allow the lender to quote a rate that is subject to change. In my view, however, consumers would be better off getting a firm rate two weeks before the renewal date than getting a rate that is subject to change sixty days before the renewal date.
The ULS should recommend that the CMC working group reconsider whether the proposal to require lenders to provide a disclosure statement 60 days before the renewal date will actually be more beneficial to consumers than a requirement to provide a disclosure statement with firmer information a shorter period (such as 15 days) before the renewal date.