CFPB TRID Sec. 7 - When is a consumer permitted to shop for a service?

Compliance > Regulation Z - TILA / TRID Specific > Loan Estimates
Q:  When is a consumer permitted to shop for a service?
 
A:  A consumer is permitted to shop for a service if the creditor permits the consumer to select the third-party service provider. (§ 1026.19(e)(1)(vi)(A)) Permission to shop is based on all the relevant facts and circumstances. (Comment 19(e)(1)(vi)-1)
 
The creditor may impose reasonable requirements on the third-party service provider’s qualifications, such as that the settlement provider is appropriately licensed. However, a consumer is not considered able to shop if the creditor limits the third-party service provider choices to a list selected by the creditor. (Comment 19(e)(1)(vi)-1)
 
In addition to the Loan Estimate, if the consumer is permitted to shop for a settlement service, the creditor must provide the consumer with a written list of services for which the consumer can shop. See also section 7.6 below for additional information on providing the written list of service providers. This written list of service providers is separate from the Loan Estimate, but must be provided within the same time frame—that is, it must be provided to the consumer no later than three business days after the creditor receives the consumer’s application—and the list must:
 
  • Identify at least one available settlement service provider for each service; and
  • State that the consumer may choose a different provider of that service. (§ 1026.19(e)(1)(vi)(C))
 
The settlement service providers identified on the written list must correspond to the required settlement services for which the consumer can shop as disclosed on the Loan Estimate. (Comment 19(e)(1)(vi)-3). There must be sufficient information in the written list for the consumer to contact a settlement service provider for each required settlement service for which the consumer can shop as disclosed on the Loan Estimate. This information can include the provider’s business name, business address, and telephone number. (Comment 19(e)(1)(vi)-4). The settlement service providers listed must be available to the consumer. For example, they must be in business at the time the Loan Estimate is provided to the consumer, and they must provide the services in the geographic area where the consumer or property is located. (Comment 19(e)(1)(vi)-4)
 
See form H-27(A) of appendix H to Regulation Z for a model list. A creditor complies with the requirement to provide the written list if it properly uses this model list. (Comment 19(e)(1)(vi)-3). The creditor complies with the requirement even if it makes changes to the model list, so long as the changes do not affect the substance, clarity, or meaningful sequence of the form. For example, the creditor may delete the estimated fees column on the written list because the TILA-RESPA Rule does not require the disclosure of such estimated fees on the written list. (Comment 19(e)(1)(vi)-3)
 
A creditor is permitted to add language to the written list indicating that the inclusion of a third-party service provider on the written list is not an endorsement. (Comment 19(e)(1)(vi)-6). However, there is no specific language required to be provided when the creditor wishes to do so. The general requirement that the creditor must provide the information clearly and conspicuously on the disclosures under § 1026.17(a) would apply to any language the creditor adds to the written list.
 
The creditor may also identify on the written list of service providers those services for which the consumer is not permitted to shop, as long as those services are clearly and conspicuously distinguished from those services for which the consumer is permitted to shop. (Comment 19(e)(1)(vi)-6). See form H-27(C) of appendix H to Regulation Z for a sample of the inclusion of this information.
 
NOTE:  While the written list must correspond to the required services for which the consumer can shop as disclosed on the Loan Estimate, the creditor is not required to provide a detailed breakdown of all related fees that are not themselves required by the creditor but that may be charged to the consumer by the settlement service provider. These fees could include notary fees, title search fees, or other services the settlement service provider needs to perform the service that the creditor requires.
 
 
This Loan Estimate / LE information can be found in the CFPB's TILA-RESPA Integrated Disclosure rule compliance guide - http://www.consumerfinance.gov/regulatory-implementation/tila-respa/
 

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