TILA Annual Threshold Adjustments
Written by Eliott C. Ponte, Regulatory Compliance Counsel
The CFPB is required to annually adjust certain threshold amounts within various rules based on the percentage change in Consumer Price Index. Last week, the CFPB published a final rule revising dollar amounts for certain regulations falling under Regulation Z that implement the CARD Act, HOEPA, and the ability to repay/qualified mortgage provisions of the Dodd-Frank Act. With the exception of the adjustment to the CARD Act's Penalty Fees Safe Harbor, all adjustments will be effective January 1, 2017. The CARD Act adjustment is, however, effective immediately due to a decline in the 2015 Consumer Price Index that was not fully accounted for when the CFPB last updated these thresholds in September of 2015. As a result, the Card Act penalty fee amount will be adjusted immediately upon being published in the federal register. As of the date of this blog, the adjustment has not been published in the federal register.
CARD Act Penalty Fees Safe Harbor
The CFPB issued a final rule amending the safe harbor threshold amounts for credit card penalty fees in Regulation Z, section 1026.52(b)(1)(ii)(A) and (B). Under the final rule, the new safe harbor will be $27 and $38 for subsequent late payments within the same six month period. Credit unions should note that while the first penalty fee remains unchanged, subsequent penalty fee payments within the six month period increased by $1 to $38. This change will be effective on the date the final rule is published in the federal register.
HOEPA Annual Threshold Adjustment
Regulation Z provides additional protections and disclosure requirements for High-Cost Mortgages. Effective January 1, 2017, for purposes of determining the points and fees coverage test, the total loan amount is $20,579. This is an increase from the current $20,350 figure. The adjusted points and fees dollar trigger is also increasing from the current $1,017 to $1,029. Below is an excerpt from the final rule:
Effective January 1, 2017, for purposes of determining under 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 $20,579, and the adjusted points and fees dollar trigger under 1026.32(a)(1)(ii)(B) is $1,029. When the total loan amount for a transaction is $20,579 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 $20,579, and the points and fees amount exceeds the lesser of the adjusted points and fees dollar trigger of $1,029 or 8 percent of the total loan amount, the transaction is a high-cost mortgage. Comments 32(a)(1)(ii)-1 and -3, which list the adjustments for each year, are amended to reflect for 2017 the new dollar threshold amount and the new points and fees dollar trigger, respectively.
Ability to Repay and Qualified Mortgages Annual Threshold Adjustments
Effective January 1, 2017, for purposes of determining whether a covered transaction is a qualified mortgage under section 1026.43(e), the total points and fees charged may not exceed the threshold set for the size of the loan under the rule:
- For a loan amount of $102,894 or more, 3 percent of the total loan amount.
- For a loan amount of greater than or equal to $61,737 but less than $102,894, $3,087.
- For a loan amount of greater than or equal to $20,579 but less than $61,737, 5 percent of the total loan amount.
- For a loan amount of greater than or equal to $12,862 but less than $20,579, $1,029.
- For a loan amount of less than $12,862, 8 percent of the total loan amount.