[Federal Register Volume 79, Number 158 (Friday, August 15, 2014)]
[Rules and Regulations]
[Pages 48015-48017]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-18838]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 79, No. 158 / Friday, August 15, 2014 / Rules
and Regulations
[[Page 48015]]
BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Part 1026
Truth in Lending (Regulation Z) Annual Threshold Adjustments
(CARD ACT, 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 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), the Home Ownership and Equity Protection Act of 1994
(HOEPA), and the Dodd-Frank Wall Street Reform and Consumer Protection
Act (Dodd-Frank Act). These amounts are adjusted, where appropriate,
based on the annual percentage change reflected in the Consumer Price
Index in effect on June 1, 2014. The minimum interest charge disclosure
thresholds will remain unchanged in 2015. The adjusted dollar amount
for the penalty fees safe harbor in 2015 is $27 for a first late
payment and $38 for each subsequent violation within the following six
months. For HOEPA loans, the adjusted total loan amount threshold is
$20,391, effective January 1, 2015. The adjusted statutory fee trigger
for HOPEA loans is $1,020, effective January 1, 2015. Effective January
1, 2015, for the purpose of creditor's determination of a consumer's
ability to repay a transaction secured by a dwelling, a covered
transaction is not a qualified mortgage unless the transaction's total
points and fees do not exceed 3 percent of the total loan amount for a
loan greater than or equal to $101,953; $3,059 for a loan amount
greater than or equal to $61,172 but less than $101,953; 5 percent of
the total loan amount for a loan greater than or equal to $20,391 but
less than $61,172; $1,020 for a loan amount greater than or equal to
$12,744 but less than $20,391; and 8 percent of the total loan amount
for a loan amount less than $12,744.
DATES: This final rule is effective January 1, 2015.
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 CARD Act,
which amended 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 (BLS).\1\
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\1\ The responsibility for promulgating rules under TILA was
generally 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
Act, Public Law 111-203, 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. This adjustment is based on the
CPI-W index in effect on June 1, 2014, which was reported on May 15,
2014. 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 (based on all
urban consumers) and represents approximately 28 percent of the U.S.
population. The adjustment reflects a 2 percent increase in the CPI-W
from April 2013 to April 2014 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 $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. 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 is based on the CPI-W index in effect on June 1, 2014, which
was reported on May 15, 2014. 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
[[Page 48016]]
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 2 percent increase in the CPI-
W from April 2013 to April 2014 and is rounded to the nearest $1
increment.
B. HOEPA Annual Threshold Adjustments
On January 10, 2013, the Bureau issued a final rule pursuant to,
inter alia, section 1431 of the Dodd-Frank Act, which revised the loan
amount threshold for HOEPA loans. 78 FR 6856 (Jan. 31, 2013) (2013
HOEPA Final Rule). The 2013 HOEPA Final Rule adjusted the dollar amount
threshold used in connection with calculating whether a transaction
meets the percentage point thresholds in the points and fees coverage
test to $20,000. Specifically, 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 more or less than
$20,000. The HOEPA 2013 Final Rule provides that this threshold amount
be recalculated annually and the Bureau uses the Consumer Price Index
for All Urban Consumers (CPI-U) index, as published by the BLS, as the
index for adjusting the $20,000 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 15, 2014, was the CPI-U index in effect on June 1, and reflects
the percentage change from April 2013 to April 2014. The adjustment to
the $20,000 figure being adopted here reflects a 2 percent increase in
the CPI-U index for this period and is rounded to whole dollars for
ease of compliance.
Pursuant to section 1431 of the Dodd Frank Act and Sec.
1026.32(a)(1)(ii)(B) as amended by the 2013 HOEPA Final Rule,
implementation of the 2013 HOEPA Final Rule also changed the HOEPA fee
trigger to $1,000. The HOEPA 2013 Final Rule provides that this
threshold amount will be recalculated annually and the Bureau uses the
CPI-U index, as published by the BLS, as the index for adjusting the
$1,000 figure. The adjustment to the CPI-U index reported by BLS on May
15, 2014, was the CPI-U index in effect on June 1, and reflects the
percentage change from April 2013 to April 2014. The adjustment to the
$1,000 figure being adopted here reflects a 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
On January 10, 2013, the Bureau issued a final rule pursuant to,
inter alia, sections 1411 and 1412 of the Dodd-Frank Act, which
implemented laws requiring mortgage lenders to consider a consumer's
ability to repay home loans before extending them credit. 78 FR 6407
(Jan. 31, 2013) (2013 ATR/QM Final Rule). The 2013 ATR/QM Final Rule
established the points and fees limits that a loan must not exceed in
order to satisfy the requirements for a qualified mortgage.
Specifically, a covered transaction is not a qualified mortgage unless
the transactions points and fees do not 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; and 8 percent
of the total loan amount for loans less than $12,500. The 2013 ATR/QM
Final Rule provides that the limits and loan amounts in
1026.43(e)(3)(i) be recalculated annually for inflation and the Bureau
uses the Consumer Price Index for All Urban Consumers (CPI-U) index, as
published by the BLS, as the index for adjusting the figures. 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 15, 2014, was the CPI-U index in effect on June
1, and reflects the percentage change from April 2013 to April 2014.
The adjustment to the figures being adopted here reflects a 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. CARD Act 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 for the year
2015. Accordingly, the Bureau is not amending these sections.
Penalty Fees Safe Harbor--Sec. 1026.52(b)(1)(ii)(A) and (B)
Effective January 1, 2015, the permissible fee threshold amounts
are $27 for Sec. 1026.52(b)(1)(ii)(A) and $38 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 $27 and $38 respectively. The Bureau is also 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, 2015, for purposes of determining the total
loan amount threshold that determines whether a transaction is a high
cost mortgage when the points and fees are either 5 percent or 8
percent \2\ is $20,391. Comment 32(a)(1)(ii)-3, which lists the
adjustments for each year, is amended to reflect the new dollar
threshold amount for 2015.
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\2\ Or $1,020, whichever is lesser. See the adjustment of the
amount below for additional discussion.
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Effective January 1, 2015, 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 $1,020 or 8 percent of
the total loan amount, whichever is lower. Comment 32(a)(1)(ii)-1,
which lists the adjustments for each year, is amended to reflect the
new dollar threshold amount for 2015.
C. Ability To Repay and Qualified Mortgages Annual Threshold
Adjustments
Effective January 1, 2015, for purposes of determining whether a
covered transaction is a qualified mortgage, a
[[Page 48017]]
covered transaction is not a qualified mortgage unless the
transaction's total points and fees do not exceed 3 percent of the
total loan amount for a loan amount greater than or equal to $101,953;
$3,059 for a loan amount greater than or equal to $61,172 but less than
$101,953; 5 percent of the total loan amount for loans greater than or
equal to $20,391 but less than $61,172; $1,020 for a loan amount
greater than or equal to $12,744 but less than $20,391, and 8 percent
of the total loan amount for loans less than $12,744. Comment
43(e)(3)(ii)-1, which lists the adjustments for each year, is amended
to reflect the new dollar threshold amounts for 2015.
III. Procedural Requirements
A. Administrative Procedure Act
Under the Administrative Procedure Act (APA), 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, Sec. 1026.52(b)(1)(ii)(A) and (B) in
subpart E is amended and comments 1026.32(a)(1)(ii)-3.i,
1026.43(e)(3)(ii)-1.i, 1026.52(b)(1)(ii)-2.i.b in supplement I are
added to update the exemption thresholds. The amendments in this final
rule are technical and non-discretionary, and 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. Therefore,
the amendments 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 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, 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. In Sec. 1026.52, paragraphs (b)(1)(ii)(A) and (B) are revised to
read as follows:
Sec. 1026.52 Limitations on fees.
* * * * *
(b) * * *
(1) * * *
(ii) * * *
(A) $27
(B) $38 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 subpart E, Section 1026.32--Requirements for Certain Closed-
End Home Mortgages, 32(a) Coverage, Paragraph 32(a)(1)(ii), paragraphs
1.i and 3.i are added.
0
B. Under subpart E, Section 1026.43--Minimum Standards for Transactions
Secured by a Dwelling, 43(e) Qualified Mortgages, Paragraph
43(e)(3)(ii), paragraph 1.i is added.
0
C. Under subpart G, Section 1026.52--Limitations on Fees, 52(b)
Limitations on Penalty Fees, 52(b)(1)(ii) Safe Harbors, subheading i,
paragraph 2.i.B 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 High-Cost Mortgages
32(a) Coverage.
Paragraph 32(a)(1)(ii).
1. * * *
i. For 2015, $1,020, reflecting a 2 percent increase in the CPI-
U from June 2013 to June 2014, rounded to the nearest whole dollar.
* * * * *
3. * * *
i. For 2015, $20,391, reflecting a 2 percent increase in the
CPI-U from June 2013 to June 2014, rounded to the nearest whole
dollar.
* * * * *
Section 1026.43--Minimum Standards for Transactions Secured by a
Dwelling
* * * * *
43(e)(3) Limits on Points and Fees for Qualified Mortgages
* * * * *
Paragraph 43(e)(3)(ii)
1. * * *
i. For 2015, reflecting a 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 transactions total points and fees do
not exceed;
A. For a loan amount greater than or equal to $101,953: 3
percent of the total loan amount;
B. For a loan amount greater than or equal to $61,172 but less
than $101,953: $3,059;
C. For a loan amount greater than or equal to $20,391 but less
than $61,172: 5 percent of the total loan amount;
D. For a loan amount greater than or equal to $12,744 but less
than $20,391; $1,020;
E. For a loan amount less than $12,744: 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)(1)(ii) Safe harbors
* * * * *
2. * * *
i. * * *
B. Card issuers were permitted to impose a fee for violating the
terms of an agreement if the fee did not exceed $26 under Sec.
1026.52(b)(1)(ii)(A) and $37 under Sec. 1026.52(b)(1)(ii)(B),
through December 31, 2014.
* * * * *
Dated: July 29, 2014.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2014-18838 Filed 8-14-14; 8:45 am]
BILLING CODE 4810-AM-P