United States: Truth In Tuition Lending: Understanding Compliance With TILA (NBOA's Net Assets, November 2017)

The federal Truth in Lending Act and its sci-fi-sounding Regulation Z (which implements the statute) require that borrowers of consumer credit receive written information about the terms of a loan prior to being legally bound to repay it. Most people probably associate the concept of "truth in lending" with securing a mortgage or obtaining car financing. Independent schools often do not realize that TILA may apply to tuition payments, too. Under certain circumstances, tuition can meet the definition of "consumer credit," as it covers the cost of education, which the law considers a "personal, family or household" expense. Your school is likely subject to TILA if the following apply:

  • A written agreement covers tuition payments (i.e., the enrollment contract) and
  • Tuition is under $54,600 (the 2017 threshold amount, adjusted annually) and

    • Families have the option of paying tuition in more than four installments or
    • The school assesses a finance charge.

A few of the law's key concepts:

  1. TILA applies to independent schools that "regularly extend consumer credit," defined as establishing tuition payment plans for more than 25 students in the preceding year.
  2. Payment plans that permit families to distribute tuition payments in four or more instalments throughout the school year generally fall under Regulation Z. However, plans that require tuition payments in advance generally do not, as families are paying before receiving the educational service and the school therefore is not extending credit.
  3. Broadly speaking, a "finance charge" is any additional amount families must pay if they do not make one lump-sum tuition payment before the start of the school year. For example, if your school offers a discount (however small) to families who pay tuition in one payment, you are in effect levying a finance charge against families who pay in as few as two installments. Therefore, TILA applies.

Once you determine that TILA applies to your school, focus on the contents of your TILA disclosure (usually a one-page form, in a grid format) and your timing for issuing it to families.

CONTENTS

The purpose of TILA is to provide consumers with a meaningful way to compare different credit offerings. By the time families review their payment options, they may no longer be comparison-shopping between schools. Nonetheless, Regulation Z requires TILA disclosures to present several terms in a specific and uniform way, with certain terms printed in bold type (the easiest way to satisfy the requirement that certain terms be more conspicuous than others). Your school's TILA disclosure must define the following terms in order to help families understand the true cost of enrollment:

  • Annual percentage rate (cost of credit expressed as a yearly percentage amount)
  • Finance charge (cost of credit expressed in a dollar amount)
  • Amount financed (dollar amount a family must pay to the school)
  • Total payment amount (sum of all payments due to the school, including the basic tuition amount, plus any finance charges)
  • Payment schedule (when installment payments are due)

The disclosure must include other details as well, such as identifying your school as the "creditor," and an indication as to whether the school can demand payment on an accelerated schedule. In other words, many of the required terms on the disclosure may not feel like a good fit for an independent school; nonetheless, it is important to attend to the technical details to comply with TILA.

TIMING

TILA compliance is really a two-step process: Learn who will be participating in an applicable plan, and then provide the disclosure.

Families are entitled to understand the cost of enrolling in a tuition payment plan before they sign the enrollment contract. However, since your school may not know which payment plan a family will select, nor their financial aid arrangements, you will need to tailor TILA disclosures individually.

There is some good news: If your school uses a third-party vendor to process tuition payments online, that company may have built the TILA disclosure process into its system architecture.

ENFORCEMENT

The Federal Trade Commission is responsible for enforcing TILA, and it has recently assessed fines in the thousands and in some cases millions of dollars against payday, automobile and consumer electronics lenders that ran afoul of Regulation Z. Independent schools could be responsible for several thousand dollars of penalties per family, and potentially much more, if they intentionally fail to comply with TILA. Focusing on the perceived or actual administrative burdens of compliance, some schools have decided to forego finance charges and installment plans to avoid the law altogether.

On the other hand, many independent schools will decide that complying with TILA is worth the effort to provide families with flexible payment options (thus helping to ensure a reliable flow of tuition dollars). Business officers are urged to consult with a qualified independent school attorney, accountant and/or other professional with relevant experience to ensure that their school's TILA disclosure includes required terms and is executed at the appropriate time during the enrollment process.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions