Compliance Blog

Greetings compliance friends! My name is Reggie Watson, and I recently joined NAFCU as a Regulatory Compliance Counsel. Prior to NAFCU, I spent 3 years investigating financial fraud matters for DOJ's civil division. I am excited to join the Regulatory Compliance family here at NAFCU and look forward to working with all of you soon!

Just recently, the Consumer Financial Protection Bureau (CFPB) issued its annual inflation-based adjustments of certain threshold dollar amounts for transactions covered under Regulation Z (which implements the Truth in Lending Act). The changes include regulations 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 required to adjust a variety of thresholds annually for inflation. These changes are based on the annual percentage change reflected in the Consumer Price Index in effect on June 1, 2017 and will become effective on January 1, 2018.

Credit Cards

Regulation Z prohibits a card issuer from imposing a fee for violating the terms or other requirements of a credit card account under an open-end (not home-secured) plan unless the fee “represents a reasonable proportion of the total costs” incurred for the violation, or is within the safe harbor provision of 12 C.F.R. section 1026.52(b). If a credit card issuer charges anything up to the safe harbor amount for certain violations, it is considered to be in compliance with Regulation Z. The threshold that triggers requirements to disclose minimum interest charges will remain at $1.00 in 2018.

The safe harbor amounts will also remain the same as in 2017:

• $27 for a first late payment; and
• $38 for each subsequent late payment over six months.

Ability-to-Repay/Qualified Mortgage

For dollar amounts related to determining a borrower’s ability to repay a transaction secured by a dwelling, the threshold for qualified mortgages in 2018 will require that total points and fees not to exceed:

• 3 percent of the total loan amount for a loan greater or equal to $105,158;
• $3,155 for a loan amount greater or equal to $63,095 but less than $105,158;
• 5 percent of the total loan amount for a loan greater or equal to $21,032 but less than $63,095;
• $1,052 for a loan amount greater or equal to $13,145 but less than $21,032; and
• 8 percent of the total loan amount for a loan less than $13,145.

Home Ownership and Equity Protection Act (HOEPA) Loans

Regulation Z sets additional requirements for high-cost mortgages. To be considered a high-cost mortgage, the transaction must be secured by the consumer’s principal dwelling and the APR and loan amount have to be over a certain threshold. For 2018, the total loan amount threshold will be increased to $21,032 and the adjusted points and fees must exceed 5% of the total loan amount. See, 12 C.F.R. § 1026.32(a)(ii). Loans below $21,032 will also be considered a high-cost transaction if the points and fees exceed the lesser of 8% of the total loan amount or $1,052.

For more information on Regulation Z's 2018 adjusted thresholds, see the CFPB's proposed rule in the Federal Register or their press release.

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Free Webcast!

Equifax Data Breach: Your Vital Next Steps

Thursday, September 28 | 2:00 p.m. – 3:30 p.m. ET

Join NAFCU staff and Reed & Jolly attorney David Reed for this week's free webcast. You'll receive the essential information you need to prepare your credit union for the data breach aftermath.

Key Takeaways:

• Learn the steps to take to ensure your credit union isn't a victim of fraud
• Discover what programs to put in place to assist your members
• Understand how to do your due diligence when using Equifax in the future
• Know what you’re liable for, and how to ensure you have the appropriate coverage for any fraud claims