I hope I am in the right place. I am looking for a place to exchange and debate ideas, caselaw and theories related to Federal Preemption of State Usury Laws as defined in §1735f–7a.
I am not debating whether the federal government has authority. I stipulate to the supremacy clause.
What I wish to debate is the diverse definitions of what constitutes "interest" between the many states and how that applies to the preemption.
For example, some state usury laws prohibit cetain fees, such as late fees. Other states allow them. Other states allow and define them to be interest and included in the calculation of the annual percentage rate (APR).
However, I find substantial inconsistency and conflict with this.
TOPIC TO BE NARROW: I would like to limit this topic to be specific to Residential Mortgages and Home loans of primary dwelling or homestead. Otherwise, it is far too broad.
APPARENT CONFLICTS THAT EXIST:
1. definition of interest between states
2. "congressional intent" of the federal statute
3. co-existance and conflicts between multiple federal laws that apply to home loans, including DIDMCA, Truth In Lending Act (TILA) a title of the Consumer Credit Protection Act.
PREFACE OF EVIDENCE OF CONFLICTS:
If we assume that late fees are to be included in the definition of "interest," as has been ruled in certain caselaw decisions, then the following conflict exists:
CONFLICT #1. PART 590—PREEMPTION OF STATE USURY LAWS AUTHORITY: 12 U.S.C.1735f-7a
§ 590.3 Operation.
(c) Nothing in this section preempts limitations in state laws on prepayment charges, attorneys' fees, late charges or other provisions designed to protect borrowers.
[Codified to 12 C.F.R. § 590.3]
CONFLICT #2. PART 226—TRUTH IN LENDING (REGULATION Z)
AUTHORITY: 15 U.S.C. 1601 et se.
§ 226.4 Finance charge.
(a) Definition. The finance charge is the cost of consumer credit as a dollar amount. (b) Examples of finance charges. The finance charge includes the following types of charges, except for charges specifically excluded by paragraphs (c) through (e) of this section:
(1) Interest, time price differential, and any amount payable under an add-on or discount system of additional charges.
(c) Charges excluded from the finance charge. The following charges are not finance charges:
(2) Charges for actual unanticipated late payment, for exceeding a credit limit, or for delinquency, default, or a similar occurrence.
TILA Regulation Z §226.4 requires that interest be included in the "Finance Charge" disclosure, but Late Fees must be excluded. If late fees have been preempted under the premise of "interest" this is an irreconcilable conflict, because interest must be calculated into the Finance Charge, but the late fee must not.
Secondly, Regulation § 590.3(c) specifically excludes late fees/charges from preemption.
THEORY:Caselaw rulings which have allowed or recognized late fees to be preempted as interest have not addressed or accounted for these significant factors which should have been given deference.
In re Hollis, Case No. 07-22759 (KCF) (Bankr.N.J. 9/17/2009)"In implementing the Truth In Lending Act, Congress authorized the Federal Reserve Board to promulgate regulations concerning the implementation of the statute including the particulars of the disclosures. 12 C.F.R. 226.4. The implementing regulations are commonly known as Regulation Z. Jeffries v. Ameriquest Mtg. Co., 543 F. Supp. 2d 368, 379 (E.D. Pa. 2008)."
"12 C.F.R. Pt. 226, Supp. I at 580 (rev. Jan. 1, 2009). The Supreme Court has instructed that "unless demonstrably irrational, Federal Reserve Board staff opinions construing the Act or Regulation should be dispositive...." Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 565 (1980)."