82 FR 41158 - Truth in Lending (Regulation Z) Annual Threshold Adjustments (Credit Cards, HOEPA, and ATR/QM)

BUREAU OF CONSUMER FINANCIAL PROTECTION

Federal Register Volume 82, Issue 167 (August 30, 2017)

The Bureau of Consumer Financial Protection (Bureau) is issuing this final rule amending the official interpretations for Regulation Z, which implements the Truth in Lending Act (TILA). The Bureau is required to calculate annually the dollar amounts for several provisions in Regulation Z; this final rule revises, as applicable, the dollar amounts for provisions implementing TILA and amendments to TILA, including under the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), the Home Ownership and Equity Protection Act of 1994 (HOEPA), and the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The Bureau is adjusting these amounts, where appropriate, based on the annual percentage change reflected in the Consumer Price Index (CPI) in effect on June 1, 2017.

[Federal Register Volume 82, Number 167 (Wednesday, August 30, 2017)]
[Rules and Regulations]
[Pages 41158-41160]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-18003]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026


Truth in Lending (Regulation Z) Annual Threshold Adjustments 
(Credit Cards, HOEPA, and ATR/QM)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule; official interpretation.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
issuing this final rule amending the official interpretations for 
Regulation Z, which implements the Truth in Lending Act (TILA). The 
Bureau is required to calculate annually the dollar amounts for several 
provisions in Regulation Z; this final rule revises, as applicable, the 
dollar amounts for provisions implementing TILA and amendments to TILA, 
including under the Credit Card Accountability Responsibility and 
Disclosure Act of 2009 (CARD Act), the Home Ownership and Equity 
Protection Act of 1994 (HOEPA), and the Dodd-Frank Wall Street Reform 
and Consumer Protection Act (Dodd-Frank Act). The Bureau is adjusting 
these amounts, where appropriate, based on the annual percentage change 
reflected in the Consumer Price Index (CPI) in effect on June 1, 2017.

DATES: This final rule is effective January 1, 2018.

FOR FURTHER INFORMATION CONTACT: Jaclyn Maier, Counsel, Office of 
Regulations, Consumer Financial Protection Bureau, 1700 G Street NW., 
Washington, DC 20552 at (202) 435-7700.

SUPPLEMENTARY INFORMATION: The Bureau is amending the official 
interpretations for Regulation Z, which implements TILA, to update the 
dollar amounts of various thresholds that are adjusted annually based 
on the annual percentage change in the CPI as published by the Bureau 
of Labor Statistics (BLS). Specifically, for open-end consumer credit 
plans under TILA, the threshold that triggers requirements to disclose 
minimum interest charges will remain unchanged at $1.00 in 2018. For 
open-end consumer credit plans under the CARD Act amendments to TILA, 
the adjusted dollar amount for the safe harbor for a first violation 
penalty fee will remain unchanged at $27 in 2018 and the adjusted 
dollar amount for the safe harbor for a subsequent violation penalty 
fee will remain unchanged at $38 in 2018. For HOEPA loans, the adjusted 
total loan amount threshold for high-cost mortgages in 2018 will be 
$21,032. The adjusted points and fees dollar trigger for high-cost 
mortgages in 2018 will be $1,052. For the general rule to determine 
consumers' ability to repay mortgage loans, the maximum thresholds for 
total points and fees for qualified mortgages in 2018 will be 3 percent 
of the total loan amount for a loan greater than or equal to $105,158; 
$3,155 for a loan amount greater than or equal to $63,095 but less than 
$105,158; 5 percent of the total loan amount for a loan greater than or 
equal to $21,032 but less than $63,095; $1,052 for a loan amount 
greater than or equal to $13,145 but less than $21,032; and 8 percent 
of the total loan amount for a loan amount less than $13,145.

I. Background

A. Credit Card Annual Adjustments

Minimum Interest Charge Disclosure Thresholds
    Sections 1026.6(b)(2)(iii) and 1026.60(b)(3) of the Bureau's 
Regulation Z implement sections 127(a)(3) and 127(c)(1)(A)(ii)(II) of 
TILA. Sections 1026.6(b)(2)(iii) and 1026.60(b)(3) require the 
disclosure of any minimum interest charge exceeding $1.00 that could be 
imposed during a billing cycle and provide that, for open-end consumer 
credit plans, the minimum interest charge thresholds will be re-
calculated annually using the CPI that was in effect on the preceding 
June 1; the Bureau uses the Consumer Price Index for Urban Wage Earners 
and Clerical Workers (CPI-W) for this adjustment. When the cumulative 
change in the adjusted minimum value derived from applying the annual 
CPI-W level to the current amounts in Sec. Sec.  1026.6(b)(2)(iii) and 
1026.60(b)(3) has risen by a whole dollar, the minimum interest charge 
amounts set forth in the regulation will be increased by $1.00. The BLS 
publishes consumer-based indices monthly but does not report a CPI 
change on June 1; adjustments are reported in the middle of the month. 
This adjustment analysis is based on the CPI-W index in effect on June 
1, 2017, which was reported by BLS on May 12, 2017, and reflects the 
percentage change from April 2016 to April 2017. The CPI-W is a subset 
of the Consumer Price Index for All Urban Consumers (CPI-U) index and 
represents approximately 28 percent of the U.S. population. The 
adjustment analysis accounts for a 2.1 percent increase in the CPI-W 
from April 2016 to April 2017. This increase in the CPI-W when applied 
to the current amounts in Sec. Sec.  1026.6(b)(2)(iii) and 
1026.60(b)(3) did not trigger an increase in the minimum interest 
charge threshold of at least $1.00, and the Bureau is therefore not 
amending Sec. Sec.  1026.6(b)(2)(iii) and 1026.60(b)(3).
Safe Harbor Penalty Fees
    Section 1026.52(b)(1)(ii)(A) and (B) of the Bureau's Regulation Z 
implements section 149(e) of TILA, established by the CARD Act.\1\ 
Section 1026.52(b)(1)(ii)(D) provides that the safe harbor provision, 
which establishes the permissible penalty fee thresholds in Sec.  
1026.52(b)(1)(ii)(A) and (B), will be re-calculated annually using the 
CPI that was in effect on the preceding June 1; the Bureau uses the 
CPI-W for this adjustment. The BLS publishes consumer-based indices 
monthly but does not report a CPI change on June 1; adjustments are 
reported in the middle of the month. The CPI-W is a subset of the CPI-U 
index and represents approximately 28 percent of the U.S. population. 
When the cumulative change in the adjusted value derived

[[Page 41159]]

from applying the annual CPI-W level to the current amounts in Sec.  
1026.52(b)(1)(ii)(A) and (B) has risen by a whole dollar, those amounts 
will be increased by $1.00. Similarly, when the cumulative change in 
the adjusted value derived from applying the annual CPI-W level to the 
current amounts in Sec.  1026.52(b)(1)(ii)(A) and (B) has decreased by 
a whole dollar, those amounts will be decreased by $1.00. See comment 
52(b)(1)(ii)-2. The 2018 adjustment analysis is based on the CPI-W 
index in effect on June 1, 2017, which was reported by BLS on May 12, 
2017, and reflects the percentage change from April 2016 to April 2017. 
The 2.1 percent increase in the CPI-W from April 2016 to April 2017 did 
not trigger an increase in the first violation safe harbor penalty fee 
of $27 or the subsequent violation safe harbor penalty fee of $38, and 
the Bureau is therefore not amending Sec.  1026.52(b)(1)(ii)(A) and (B) 
for the 2018 calendar year.
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    \1\ Credit Card Accountability Responsibility and Disclosure Act 
of 2009, Public Law 111-24, 123 Stat. 1734 (2009).
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B. HOEPA Annual Threshold Adjustments

    Section 1026.32(a)(1)(ii) of the Bureau's Regulation Z implements 
section 1431 of the Dodd-Frank Act,\2\ which amended the HOEPA points 
and fees coverage test. Under Sec.  1026.32(a)(1)(ii)(A) and (B), when 
determining whether a transaction is a high-cost mortgage, the 
determination of the applicable points and fees coverage test is based 
upon whether the total loan amount is for $20,000 or more, or for less 
than $20,000. Section 1026.32(a)(1)(ii) provides that this threshold 
amount be recalculated annually using the CPI index in effect on June 
1; the Bureau uses the CPI-U for this adjustment. The CPI-U is based on 
all urban consumers and represents approximately 88 percent of the U.S. 
population. The BLS publishes consumer-based indices monthly but does 
not report a CPI change on June 1; adjustments are reported in the 
middle of each month. The 2018 adjustment is based on the CPI-U index 
in effect on June 1, which was reported by BLS on May 12, 2017, and 
reflects the percentage change from April 2016 to April 2017. The 
adjustment to the $20,000 figure being adopted here reflects a 2.2 
percent increase in the CPI-U index for this period and is rounded to 
whole dollars for ease of compliance.
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    \2\ Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Public Law 111-203, 124 Stat. 1376 (2010).
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    Under Sec.  1026.32(a)(1)(ii)(B) the HOEPA points and fees dollar 
trigger is $1,000. Section 1026.32(a)(1)(ii)(B) provides that this 
threshold amount will be recalculated annually using the CPI index in 
effect on June 1; the Bureau uses the CPI-U for this adjustment. The 
2018 adjustment is based on the CPI-U index in effect on June 1, which 
was reported by BLS on May 12, 2017, and reflects the percentage change 
from April 2016 to April 2017. The adjustment to the $1,000 figure 
being adopted here reflects a 2.2 percent increase in the CPI-U index 
for this period and is rounded to whole dollars for ease of compliance.

C. Ability To Repay and Qualified Mortgages Annual Threshold 
Adjustments

    The Bureau's Regulation Z implements sections 1411 and 1412 of the 
Dodd-Frank Act, which generally require creditors to make a reasonable, 
good faith determination of a consumer's ability to repay any consumer 
credit transaction secured by a dwelling, and establishes certain 
protections from liability under this requirement for qualified 
mortgages. Under Sec.  1026.43(e)(3)(i), a covered transaction is not a 
qualified mortgage if the transaction's points and fees exceed: 3 
Percent of the total loan amount for a loan amount greater than or 
equal to $100,000; $3,000 for a loan amount greater than or equal to 
$60,000 but less than $100,000; 5 percent of the total loan amount for 
loans greater than or equal to $20,000 but less than $60,000; $1,000 
for a loan amount greater than or equal to $12,500 but less than 
$20,000; or 8 percent of the total loan amount for loans less than 
$12,500. Section 1026.43(e)(3)(ii) provides that the limits and loan 
amounts in Sec.  1026.43(e)(3)(i) are recalculated annually for 
inflation using the CPI-U index in effect on June 1. The CPI-U is based 
on all urban consumers and represents approximately 88 percent of the 
U.S. population. The BLS publishes consumer-based indices monthly but 
does not report a CPI change on June 1; adjustments are reported in the 
middle of each month. The 2018 adjustment is based on the CPI-U index 
in effect on June 1, which was reported by BLS on May 12, 2017, and 
reflects the percentage change from April 2016 to April 2017. The 
adjustment to the 2017 figures being adopted here reflects a 2.2 
percent increase in the CPI-U index for this period and is rounded to 
whole dollars for ease of compliance.

II. Adjustment and Commentary Revision

A. Credit Card Annual Adjustments

Minimum Interest Charge Disclosure Thresholds--Sec. Sec.  
1026.6(b)(2)(iii) and 1026.60(b)(3)
    The minimum interest charge amounts for Sec. Sec.  
1026.6(b)(2)(iii) and 1026.60(b)(3) will remain unchanged at $1.00 for 
the year 2018. Accordingly, the Bureau is not amending these sections 
of Regulation Z.
Safe Harbor Penalty Fees--Sec.  1026.52(b)(1)(ii)(A) and (B)
    The safe harbor penalty fee amounts remain unchanged at $27 for 
Sec.  1026.52(b)(1)(ii)(A) (first violation safe harbor penalty fee) 
and $38 for Sec.  1026.52(b)(1)(ii)(B) (subsequent violation safe 
harbor penalty fee) for the year 2018. Accordingly, the Bureau is not 
amending these sections of Regulation Z. The Bureau is amending comment 
52(b)(1)(ii)-2.i to preserve a list of the historical thresholds for 
this provision.

B. HOEPA Annual Threshold Adjustment--Comments 32(a)(1)(ii)-1 and -3

    Effective January 1, 2018, for purposes of determining under Sec.  
1026.32(a)(1)(ii) the points and fees coverage test under HOEPA to 
which a transaction is subject, the total loan amount threshold is 
$21,032, and the adjusted points and fees dollar trigger under Sec.  
1026.32(a)(1)(ii)(B) is $1,052. When the total loan amount for a 
transaction is $21,032 or more, and the points and fees amount exceeds 
5 percent of the total loan amount, the transaction is a high-cost 
mortgage. When the total loan amount for a transaction is less than 
$21,032, and the points and fees amount exceeds the lesser of the 
adjusted points and fees dollar trigger of $1,052 or 8 percent of the 
total loan amount, the transaction is a high-cost mortgage. The Bureau 
is amending comments 32(a)(1)(ii)-1 and -3, which list the adjustments 
for each year, to reflect for 2018 the new loan amount dollar threshold 
and the new points and fees dollar trigger, respectively.

C. Ability To Repay and Qualified Mortgages Annual Threshold 
Adjustments

    Effective January 1, 2018, for purposes of determining whether a 
covered transaction is a qualified mortgage under Sec.  1026.43(e), a 
covered transaction is not a qualified mortgage if, pursuant to Sec.  
1026.43(e)(3), the transaction's total points and fees exceed 3 percent 
of the total loan

[[Page 41160]]

amount for a loan amount greater than or equal to $105,158; $3,155 for 
a loan amount greater than or equal to $63,095 but less than $105,158; 
5 percent of the total loan amount for loans greater than or equal to 
$21,032 but less than $63,095; $1,052 for a loan amount greater than or 
equal to $13,145 but less than $21,032; or 8 percent of the total loan 
amount for loans less than $13,145. The Bureau is amending comment 
43(e)(3)(ii)-1, which lists the adjustments for each year, to reflect 
the new dollar threshold amounts for 2018.

III. Procedural Requirements

A. Administrative Procedure Act

    Under the Administrative Procedure Act, notice and opportunity for 
public comment are not required if the Bureau finds that notice and 
public comment are impracticable, unnecessary, or contrary to the 
public interest. 5 U.S.C. 553(b)(B). Pursuant to this final rule, in 
Regulation Z, comments 32(a)(1)(ii)-1.iv and -3.iv, 43(e)(3)(ii)-1.iv, 
and 52(b)(1)(ii)-2.i.E in supplement I are added to update the 
exemption thresholds. The amendments in this final rule are technical 
and non-discretionary, as they merely apply the method previously 
established in Regulation Z for determining adjustments to the 
thresholds. For these reasons, the Bureau has determined that 
publishing a notice of proposed rulemaking and providing opportunity 
for public comment are unnecessary. The amendments therefore are 
adopted in final form.

B. Regulatory Flexibility Act

    Because no notice of proposed rulemaking is required, the 
Regulatory Flexibility Act does not require an initial or final 
regulatory flexibility analysis. 5 U.S.C. 603(a), 604(a).

C. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3506; 5 CFR part 1320), the Bureau reviewed this final rule. No 
collections of information pursuant to the Paperwork Reduction Act are 
contained in the final rule.

List of Subjects in 12 CFR Part 1026

    Advertising, Consumer protection, Credit, Credit unions, Mortgages, 
National banks, Reporting and recordkeeping requirements, Savings 
associations, Truth in lending.

Authority and Issuance

    For the reasons set forth in the preamble, the Bureau amends 
Regulation Z, 12 CFR part 1026, as set forth below:

PART 1026--TRUTH IN LENDING (REGULATION Z)

0
1. The authority citation for part 1026 continues to read as follows:

    Authority: 12 U.S.C. 2601, 2603-2605, 2607, 2609, 2617, 3353, 
5511, 5512, 5532, 5581; 15 U.S.C. 1601 et seq.

0
2. In Supplement I to part 1026--Official Interpretations:
0
a. Under Section 1026.32--Requirements for High-Cost Mortgages, under 
32(a) Coverage, under Paragraph 32(a)(1)(ii), paragraphs 1.iv and 3.iv 
are added.
0
b. Under Section 1026.43--Minimum Standards for Transactions Secured by 
a Dwelling, under 43(e) Qualified mortgages, under Paragraph 
43(e)(3)(ii), paragraph 1.iv is added.
0
c. Under Section 1026.52--Limitations on Fees, under 52(b) Limitations 
on Penalty Fees, under 52(b)(1)(ii) Safe harbors, paragraph 2.i.E is 
added.
    The additions read as follows:

Supplement I to Part 1026--Official Interpretations

* * * * *

Subpart E--Special Rules for Certain Home Mortgage Transactions

* * * * *

Section 1026.32--Requirements for Certain Closed-End Home Mortgages

32(a) Coverage
* * * * *
    Paragraph 32(a)(1)(ii).
    1. * * *
    iv. For 2018, $1,052, reflecting a 2.2 percent increase in the CPI-
U from June 2016 to June 2017, rounded to the nearest whole dollar.
* * * * *
    3. * * *
    iv. For 2018, $21,032, reflecting a 2.2 percent increase in the 
CPI-U from June 2016 to June 2017, rounded to the nearest whole dollar.
* * * * *

Section 1026.43--Minimum Standards for Transactions Secured by a 
Dwelling

* * * * *
    43(e) Qualified mortgages.
* * * * *
    Paragraph 43(e)(3)(ii).
    1. * * *
    iv. For 2018, reflecting a 2.2 percent increase in the CPI-U that 
was reported on the preceding June 1, a covered transaction is not a 
qualified mortgage unless the transaction's total points and fees do 
not exceed:
    A. For a loan amount greater than or equal to $105,158: 3 percent 
of the total loan amount;
    B. For a loan amount greater than or equal to $63,095 but less than 
$105,158: $3,155;
    C. For a loan amount greater than or equal to $21,032 but less than 
$63,095: 5 percent of the total loan amount;
    D. For a loan amount greater than or equal to $13,145 but less than 
$21,032: $1,052;
    E. For a loan amount less than $13,145: 8 percent of the total loan 
amount.
* * * * *

Subpart G--Special Rules Applicable to Credit Card Accounts and 
Open-End Credit Offered to College Students

* * * * *

Section 1026.52--Limitations on Fees

* * * * *
52(b) Limitations on Penalty Fees
* * * * *
52(b)(1)(ii) Safe harbors
* * * * *
    2. * * *
    i. * * *
    E. Card issuers were permitted to impose a fee for violating the 
terms of an agreement if the fee did not exceed $27 under Sec.  
1026.52(b)(1)(ii)(A) and $38 under Sec.  1026.52(b)(1)(ii)(B), through 
December 31, 2017.
* * * * *

    Dated: July 25, 2017.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2017-18003 Filed 8-29-17; 8:45 am]
BILLING CODE 4810-AM-P