CFPB TRID Sec. 11.14 - Are creditors ever allowed to impose average charges on consumers instead of the actual amount received?

Compliance > Regulation Z - TILA / TRID Specific > Closing Disclosures
Q:  Are creditors ever allowed to impose average charges on consumers instead of the actual amount received?
 
A:  In general, the amount imposed on the consumer for any settlement service must not exceed the amount the settlement service provider actually received for that service. However, an average charge may be imposed instead of the actual amount received for a particular service, as long as the average charge satisfies certain conditions. (§ 1026.19(f)(3)(i)-(ii); Comment 19(f)(3)(i)-1)
 
An average charge may be used if the following conditions are satisfied (§ 1026.19(f)(3)(ii)):
  • The average charge is no more than the average amount paid for that service by or on behalf of all consumers and sellers for a class of transactions;
  • The creditor or settlement service provider defines the class of transactions based on an appropriate period of time, geographic area, and type of loan;
  • The creditor or settlement service provider uses the same average charge for every transaction within the defined class; and
  • The creditor or settlement service provider does not use an average charge:
    • For any type of insurance;
    • For any charge based on the loan amount or property value; or
    • If doing so is otherwise prohibited by law.
If the creditor develops representative samples of specific settlement costs for a particular class of transactions, the creditor may charge the average cost for that settlement service instead of the actual cost for such transactions. An average-charge program may not be used in a way that inflates the cost for settlement services overall. (Comment 19(f)(3)(ii)-1)
 
Creditors should consult the commentary to § 1026.19(f)(3)(ii) for additional guidance on using average-charge pricing. (Comments 19(f)(3)(ii)-1 through -9)
 
 
This Closing Disclosure / CD 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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