WASHINGTON (6/6/13)--If the effective date of prohibitions on financing credit insurance premiums in connection with certain mortgage loans has been delayed by the Consumer Financial Protection Bureau, have mandatory arbitration clauses also been pushed back? No, Credit Union National Association Senior Director of Compliance Analysis Valerie Moss explained in a recent Comp Blog post.
The compliance date for the premium financing prohibitions has been pushed back until Jan. 10, 2014, Moss said. However, portions of Regulation Z that prohibit the inclusion of mandatory arbitration provisions in any agreement for a closed-end loan secured by a dwelling or an open-end loan secured by the consumer's principal dwelling apply to loans for which an application is received on or after June 1, 2013.
Reg Z also prohibits interpreting any provisions in these agreements as barring consumers from bringing a claim in court for any alleged violation of Federal law, Moss added. However, she said, the rule doesn't prohibit a consumer and creditor from agreeing to use arbitration after a dispute arises.
"Credit unions now using mortgage loan documentation containing such provisions should take steps to ensure that these clauses are removed from documentation for covered loans," Moss recommended.
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