Compliance Blog

Before I get into today’s blog topic, I want to take this opportunity to wish all of our members and blog readers a happy and healthy new year!  I always get a little sappy during this time of year, so I wanted to say that our team is grateful to everyone who takes the time to read our blogs and publications, write or call in with questions, attend our trainings and events, and keep our day-to-day jobs interesting!  I hope you all get (or got) some well-deserved time off to spend with loved ones, and come back feeling refreshed and ready to tackle whatever 2023 brings.  I’ve decided on the following for my new year’s resolution:

It might be difficult to out-awesome myself, but I think I’m up to the task.  Now on to the good stuff.

Each year, the Consumer Financial Protection Bureau (CFPB) provides annual adjustments to certain dollar amount thresholds covered in Regulation Z.  This year has been speeding by, but we didn’t want to say “Happy New Year” without providing an update!  The adjustments were issued on December 21, and can be found in the final rule and at the CFPB’s webpage for Truth in Lending (Regulation Z) Annual Threshold Adjustments (Credit Cards, HOEPA, and Qualified Mortgages).  The adjustments are effective as of January 1, 2023.

CARD Act

Section 1026.52(b)(1)(ii) provides that a credit union “may impose a fee for violating the terms or other requirements of an account if the dollar amount does not exceed” the safe harbor amounts.  For 2023, the final rule does not address the penalty fee safe harbor amounts, so it appears they will both remain unchanged:

• $30 for a first late payment; and
• $41 for each subsequent late payment over six months.

The bureau also did not increase the threshold that triggers requirements to disclose minimum interest charges.  This threshold remains at $1.00.

HOEPA

The 2021 Compliance Blog post on the annual adjustments is a great resource which provides a helpful summary of HOEPA’s high-cost coverage tests.  Here’s refresher:

"HOEPA enacted a high-cost coverage test, that subjects specific loans to special disclosure requirements and restrictions on loan terms. As explained in the CFPB HOEPA Small Entity Compliance Guide, there are three separate HOEPA coverage tests:

1. The transaction’s annual percentage rate (APR);
2. The amount of points and fees paid in connection with the transaction; or
3. The prepayment penalties you may charge under the loan or credit agreement.

Only one needs to apply for the loan to be considered a high-cost mortgage subject to the HOEPA requirements."

Section 1026.32(a)(1)(ii) outlines the points-and-fees test.  The annual adjustment will increase the threshold for 2023 so a loan will be considered high cost if points and fees exceed 5% of the total loan amount for loans $24,866 or more; or if the loan amount is less than $24,866, the points and fees exceed the lesser of 8% or $1,243.

Qualified Mortgages

Section 1026.43(e)(2) provides the definition of General QM loans.  The thresholds for the spread between the APR and the APOR for 2023 will be:

• 2.25 or more percentage points for a first-lien covered transaction with a loan amount greater than or equal to $124,331;
• 3.5 or more percentage points for a first-lien covered transaction with a loan amount greater than or equal to $74,599 but less than $124,331;
• 6.5 or more percentage points for a first-lien covered transaction with a loan amount less than $74,599;
• 6.5 or more percentage points for a first-lien covered transaction secured by a manufactured home with a loan amount less than $124,331;
• 3.5 or more percentage points for a subordinate-lien covered transaction with a loan amount greater than or equal to $74,599; or
• 6.5 or more percentage points for a subordinate-lien covered transaction with a loan amount less than $74,599.

Additionally, the thresholds for total points and fees in 2023 for all categories of QMs will be:

• 3 percent of the total loan amount of $124,331 or more;
• $3,730 for loan amounts from $74,599 and up, but less than $124,331;
• 5 percent of the total loan amount for loans of $24,866 and up, but less than $74,599;
• $1,243 for loans of $15,541 and up, but less than $24,866; and
• 8 percent of the total loan amount for loans less than $15,541.

PROGRAMMING NOTE

NAFCU’s office will be closed at noon on Friday, December 30, 2022, and will reopen on Tuesday, January 3, 2023 in observation of the New Year’s Day holiday.

NAFCU’S HOLIDAY SALE IS ON! Save $300.00 on ALL 2023 NAFCU conferences with code HOLIDAY through January 6, 2023.

-        Regulatory Compliance School: Understand credit union compliance from A to Z and earn your NAFCU Certified Compliance Officer (NCCO) credential when you pass the exams.

-        BSA School: Discover new ways to identify and stop money laundering and earn your NAFCU Certified Bank Secrecy Officer (NCBSO) credential.

-        Risk Management Seminar: Earn your NAFCU Certified Risk Manager credential (NCRM) when you pass the exams.

-        Regulatory Compliance & BSA Seminar: Renew your NCCO credential and sharpen your compliance and BSA knowledge.