[Federal Register Volume 78, Number 241 (Monday, December 16, 2013)]
[Rules and Regulations]
[Pages 76033-76035]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-29844]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026


Truth in Lending (Regulation Z)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule; official interpretation.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
publishing this final rule amending the regulatory text and 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 reviews 
the dollar amounts for provisions implementing amendments to TILA under 
the Credit Card Accountability Responsibility and Disclosure Act of 
2009 (CARD Act) and the Home Ownership and Equity Protection Act of 
1994 (HOEPA). These amounts are adjusted, where appropriate, based on 
the annual percentage change reflected in the Consumer Price Index in 
effect on June 1, 2013. The minimum interest charge disclosure 
thresholds will remain unchanged in 2014. The adjusted dollar amount 
for the penalty fees safe harbor in 2014 is $26 for a first late 
payment and $37 for each subsequent violation within the following six 
months. The adjusted statutory fee trigger for HOPEA loans is $632, 
effective January 1, 2014.

DATES: This final rule is effective January 1, 2014.

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

SUPPLEMENTARY INFORMATION: 

I. Background

A. CARD Act Annual Adjustments

    In 2010, the Board of Governors of the Federal Reserve System 
(Board) published amendments to Regulation Z implementing the Credit 
Card Accountability Responsibility and Disclosure Act of 2009 (CARD 
Act), which amended the Truth in Lending Act (TILA). Public Law 111-24, 
123 Stat. 1734 (2009). Pursuant to the CARD Act, the Board's Regulation 
Z amendments established new requirements with respect to open-end 
consumer credit plans, including requirements for the disclosure of 
minimum interest charge amounts and the establishment of a safe harbor 
provision allowing card issuers to impose penalty fees for violating 
account terms without violating the restrictions on penalty fees 
established by the CARD Act. See 75 FR 7658, 7799 (Feb. 22, 2010) and 
75 FR 37526, 37527 (June 29, 2010). The final rule issued by the Board 
required that these thresholds be calculated annually using the 
Consumer Price Index as published by the Bureau of Labor Statistics.\1\
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    \1\ The responsibility for promulgating rules under TILA was 
transferred from the Board to the Bureau effective July 21, 2011. 
The Bureau restated Regulation Z on December 22, 2011, and the 
Bureau's Regulation Z is located at 12 CFR part 1026. 76 FR 79768 
(Dec. 22, 2011). See sections 1061 and 1100A of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (Dodd-Frank Act), Public 
Law 11-203, 124 Stat. 1376 (2010). Section 1029 of the Dodd-Frank 
Act excludes from this transfer of authority, subject to certain 
exceptions, any rulemaking authority over a motor vehicle dealer 
that is predominantly engaged in the sale and servicing of motor 
vehicles, the leasing and servicing of motor vehicles, or both.
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Minimum Interest Charge Disclosure Thresholds
    Sections 1026.6(b)(2)(iii) and 1026.60(b)(3) of the Bureau's 
Regulation Z provide that the minimum interest charge thresholds will 
be re-calculated annually using the Consumer Price Index for Urban Wage 
Earners and Clerical Workers (CPI-W) that was in effect on the 
preceding June 1. 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 Bureau of Labor Statistics 
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 (based on all urban consumers) 
and represents approximately 28 percent of the U.S. population. The 
adjustment reflects a 0.9 percent increase in the CPI-W from April 2012 
to April 2013 and is rounded to the nearest $1 increment. 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

[[Page 76034]]

$1.00, and therefore the Bureau is not amending Sec. Sec.  
1026.6(b)(2)(iii) and 1026.60(b)(3).
Penalty Fees Safe Harbor
    The Bureau's Regulation Z provides that the safe harbor provision 
which establishes the permissible fee thresholds in Sec.  
1026.52(b)(1)(ii)(A) and (B) will be re-calculated annually using the 
CPI-W that was in effect on the preceding June 1. This adjustment is 
based on the CPI-W index in effect on June 1, 2013, which was reported 
on May 16, 2013. The Bureau of Labor Statistics 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 (based on all urban consumers) and represents 
approximately 28 percent of the U.S. population. When the cumulative 
change in the adjusted minimum value derived 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 minimum 
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 adjustment to the permissible fee thresholds being 
adopted here reflects a 0.9 percent increase in the CPI-W from April 
2012 to April 2013 and is rounded to the nearest $1 increment.

B. HOEPA Annual Threshold Adjustment

    In 1995, the Board of Governors of the Federal Reserve System 
(Board) published amendments to Regulation Z implementing the Home 
Ownership and Equity Protection Act of 1994 (HOEPA), which amended TILA 
and was contained in the Riegle Community Development and Regulatory 
Improvement Act of 1994, Public Law 103-325, 108 Stat. 2160. These 
amendments impose substantive limitations and additional disclosure 
requirements on certain closed-end home mortgage loans bearing annual 
percentage rates or points and fees above a certain percentage or 
amount. As enacted, the statute requires creditors to comply with the 
HOEPA requirements if the total points and fees payable by the consumer 
at consummation exceed the greater of $400 or 8 percent of the total 
loan amount. TILA and Regulation Z provide that the $400 figure shall 
be adjusted annually on January 1 by the annual percentage change in 
the Consumer Price Index (CPI) that was reported on the preceding June 
1. 15 U.S.C. 1602(bb)(3); 12 CFR 1026.32(a)(1)(ii).
    The Bureau uses the Consumer Price Index for All Urban Consumers 
(CPI-U) index, as published by the Bureau of Labor Statistics (BLS), as 
the index for adjusting the $400 figure. 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 adjustment to the CPI-U index reported by BLS 
on May 16, 2013, was the CPI-U index in effect on June 1, and reflects 
the percentage change from April 2012 to April 2013. The adjustment to 
the $400 figure being adopted here reflects a 1.1 percent increase in 
the CPI-U index for this period and is rounded to whole dollars for 
ease of compliance.
    The fee trigger being adjusted in this Federal Register notice 
pursuant to TILA section 103(bb) is used in determining whether a loan 
is covered by Sec.  1026.32. Such loans have generally been known as 
``HOEPA loans.'' On January 10, 2013, the Bureau issued a final rule 
pursuant to, inter alia, section 1431 of the Dodd-Frank Act, which 
revised the statutory fee trigger for HOEPA loans. 78 FR 6856 (Jan. 31, 
2013) (2013 HOEPA Final Rule). The amendments adopted in the 2013 HOEPA 
Final Rule, including the revised fee trigger, apply to loans for which 
the creditor received an application on or after January 10, 2014. Id. 
at 6939. The Bureau is mindful of the need to coordinate implementation 
of this final rule with the effective date of the January 10th final 
rule adopting revisions to the HOEPA fee trigger. Accordingly, the 
adjustment to the fee trigger that is being published today will become 
effective on January 1, 2014, will apply to loans consummated on or 
after January 1, 2014, and will apply until the revised HOEPA fee 
trigger takes effect. Pursuant to section 1431 of the Dodd Frank Act 
and Sec.  1026.32(a)(1)(ii) as amended by the 2013 HOEPA Final Rule, 
implementation of the 2013 HOEPA Final Rule will change the HOEPA fee 
trigger to $1,000, which will be adjusted annually thereafter in 
accordance with Sec.  1026.32(a)(1)(ii) as amended by the 2013 HOEPA 
Final Rule. Id. at 6968.

II. Adjustment and Commentary Revision

A. CARD Act Annual Adjustments

Minimum Interest Charge Disclosure Thresholds--Sec. Sec.  
1026.6(b)(1)(ii) 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 for the year 
2014. Accordingly, the Bureau is not amending these sections.
Penalty Fees Safe Harbor--Sec.  1026.52(b)(1)(ii)(A) and (B)
    Effective January 1, 2014, the permissible fee threshold amounts 
are $26 for Sec.  1026.52(b)(1)(ii)(A) and $37 for Sec.  
1026.52(b)(1)(ii)(B). Accordingly, the Bureau is revising Sec.  
1026.52(b)(1)(ii)(A) and (B) to state that the fee imposed for 
violating the terms or other requirements of an account shall not 
exceed $26 and $37 respectively. The Bureau is also adopting new 
comment 52(b)(1)(ii)-2.i to preserve a list of the historical 
thresholds for this provision.

B. HOEPA Annual Threshold Adjustment--Comment 32(a)(1)(ii)-2

    Effective January 1, 2014, for purposes of determining whether a 
consumer credit transaction that is secured by a consumer's principal 
dwelling and is not otherwise exempt is covered by Sec.  1026.32 (based 
on the total points and fees payable by the consumer at consummation), 
a loan is covered if the points and fees exceed $632 or 8 percent of 
the total loan amount, whichever is greater. Comment 32(a)(1)(ii)-2, 
which lists the adjustments for each year, is amended to reflect the 
new dollar threshold amount for 2014.

III. Administrative Law Matters

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). The amendments in this notice are 
technical and non-discretionary, and they apply the method previously 
established in the agency's regulations 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. Therefore, the amendments are 
adopted in final form.
    Section 553(d) of the Administrative Procedure Act generally 
requires publication of a final rule not less than

[[Page 76035]]

30 days before its effective date, except for (1) a substantive rule 
which grants or recognizes an exemption or relieves a restriction; (2) 
interpretive rules and statements of policy; or (3) as otherwise 
provided by the agency for good cause found and published with the 
rule. 5 U.S.C. 553(d). At a minimum, the Bureau believes the amendments 
fall under the third exception to section 553(d). The Bureau finds that 
there is good cause to make the amendments effective on January 1, 
2014. The amendments in this notice are technical and non-
discretionary, and they apply the method previously established in the 
agency's regulations for determining adjustments to the thresholds.

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 1320), the agency 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, 5511, 
5512, 5532, 5581; 15 U.S.C. 1601 et seq.

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

0
2. Section 1026.52(b)(1)(ii)(A) and (B) is revised to read as follows:


Sec.  1026.52  Limitations on fees.

* * * * *
    (b * * *
    (1) * * *
    (ii) * * *
    (A) $26;
    (B) $37 if the card issuer previously imposed a fee pursuant to 
paragraph (b)(1)(ii)(A) of this section for a violation of the same 
type that occurred during the same billing cycle or one of the next six 
billing cycles; or
* * * * *

0
3. In Supplement I to part 1026--Official Interpretations:
0
A. Under Section 1026.32--Requirements for Certain Closed-End Home 
Mortgages, 32(a) Coverage, Paragraph 32(a)(1)(ii), paragraph 2.xix is 
added.
0
B. Under Section 1026.52--Limitations on Fees, 52(b) Limitations on 
Penalty Fees, 52(b)(1)(ii) Safe Harbors, subheading i and paragraph 
2.i.A are 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).
* * * * *
    2. Annual adjustment of $400 amount. * * *
    xix. For 2014, $632, reflecting a 1.1 percent increase in the CPI-U 
from June 2012 to June 2013, rounded to the nearest whole dollar.
* * * * *

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)(1)(ii)   Safe harbors

* * * * *
    2. Adjustments based on Consumer Price Index. * * *
    i. Historical thresholds.
    A. Card issuers were permitted to impose a fee for violating the 
terms of an agreement if the fee did not exceed $25 under Sec.  
1026.52(b)(1)(ii)(A) and $35 under Sec.  1026.52(b)(1)(ii)(B), through 
December 31, 2013.

Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2013-29844 Filed 12-13-13; 8:45 am]
BILLING CODE 4810-AM-P