[Federal Register Volume 81, Number 123 (Monday, June 27, 2016)]
[Rules and Regulations]
[Pages 41418-41422]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-14782]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Parts 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

[[Page 41419]]

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 revises, as applicable, 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). In addition to adjusting these amounts, where 
appropriate, based on the annual percentage change reflected in the 
Consumer Price Index in effect on June 1, 2016, the Bureau is 
correcting a calculation error pertaining to the 2016 subsequent 
violation penalty safe harbor fee.

DATES: This final rule is effective January 1, 2017, except for the 
amendment to Sec.  1026.52(b)(1)(ii)(B) which is effective on June 27, 
2016.

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

SUPPLEMENTARY INFORMATION: The Bureau is amending the regulatory text 
and official interpretations for Regulation Z, which implements TILA, 
to update the dollar amounts of various thresholds that are adjusted 
annually based on the annual percentage change in the Consumer Price 
Index. Specifically, for open-end consumer credit plans under the CARD 
Act, the threshold that triggers requirements to disclose minimum 
interest charges will remain unchanged in 2017. The adjusted dollar 
amount for the safe harbor for a first violation penalty fee will 
remain unchanged at $27 in 2017; the adjusted dollar amount for the 
safe harbor for a subsequent violation penalty fee will remain 
unchanged in 2017 from the corrected amount of $38 applicable in 2016, 
as discussed in this notice. For HOEPA loans, the adjusted total loan 
amount threshold for high-cost mortgages in 2017 will be $20,579. The 
adjusted points and fees dollar trigger for high-cost mortgages will be 
$1,029. For the general rule to determine consumers' ability to repay 
mortgage loans, the maximum threshold for total points and fees for 
qualified mortgages in 2017 will be 3 percent of the total loan amount 
for a loan greater than or equal to $102,894; $3,087 for a loan amount 
greater than or equal to $61,737 but less than $102,894; 5 percent of 
the total loan amount for a loan greater than or equal to $20,579 but 
less than $61,737; $1,029 for a loan amount greater than or equal to 
$12,862 but less than $20,579; and 8 percent of the total loan amount 
for a loan amount less than $12,862.

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 
on April 28, 2016, adopted as final the December 22, 2011, notice as 
subsequently amended. See 76 FR 79768 (Dec. 22, 2011) and 81 FR 
25323 (April 28, 2016), respectively. The Bureau's Regulation Z is 
located at 12 CFR part 1026. 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. 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, 2016, which was reported 
on May 17, 2016, and reflects the percentage change from April 2015 to 
April 2016. 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 accounts for a 0.8 percent increase in the 
CPI-W from April 2015 to April 2016. 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. On 
September 21, 2015, the Bureau published an adjustment, effective 
January 1, 2016, based on the CPI-W index in effect on June 1, 2015, 
which was reported on May 22, 2015. 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 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 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.
    In the September 21, 2015, notice, 80 FR 56895, the subsequent 
violation penalty safe harbor fee amount in Sec.  1026.52(b)(1)(ii)(B) 
was miscalculated, as it did not fully account for situations in which 
the CPI-W decreased, as occurred in 2015. The published subsequent 
violation penalty safe harbor fee amount was $37. Effective 
immediately, the Bureau is amending Sec.  1026.52(b)(1)(ii)(B) to 
reflect the correct subsequent violation penalty safe harbor fee amount 
of $38.

[[Page 41420]]

    The 2017 adjustment is based on the CPI-W index in effect on June 
1, 2016, which was reported on May 17, 2016, and reflects the 
percentage change from April 2015 to April 2016. The 0.8 percent 
increase in the CPI-W from April 2015 to April 2016 did not trigger an 
increase in the first violation penalty safe harbor fee of $27 or the 
corrected subsequent violation penalty safe harbor fee of $38, and 
therefore, the Bureau is not further amending Sec.  
1026.52(b)(1)(ii)(A) and (B) for the 2017 calendar year.

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 to $20,000. 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 $20,000 or 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 17, 2016, was the CPI-U index in effect on June 1, and reflects 
the percentage change from April 2015 to April 2016. The adjustment to 
the $20,000 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.
    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 
points and fees dollar 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 17, 2016, was the CPI-U index in effect on June 
1, and reflects the percentage change from April 2015 to April 2016. 
The adjustment to the $1,000 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.

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 determine consumers' 
ability to repay mortgage 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 if the 
transaction's points and fees 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 Sec.  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 17, 2016, was the CPI-U index in effect on June 1, and reflects 
the percentage change from April 2015 to April 2016. The adjustment to 
the 2016 figures 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.

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 
2017. Accordingly, the Bureau is not amending these sections.
Penalty Fees Safe Harbor--Sec.  1026.52(b)(1)(ii)(A) and (B)
    As discussed above, effective immediately, the permissible safe 
harbor fee amount in Sec.  1026.52(b)(1)(ii)(B) is $38. Accordingly, 
the Bureau is revising Sec.  1026.52(b)(1)(ii)(B) to reflect the 
corrected subsequent violation penalty safe harbor fee amount of $38.
    Effective January 1, 2017, the permissible safe harbor fee amounts 
are $27 for Sec.  1026.52(b)(1)(ii)(A) and $38 for Sec.  
1026.52(b)(1)(ii)(B). These amounts did not change based on the 
increase in CPI-W from April 2015 to April 2016. Thus, they remain the 
same as the 2016 amount for Sec.  1026.52(b)(1)(ii)(A) and the 2016 
amount corrected in this notice for Sec.  1026.52(b)(1)(ii)(B). The 
Bureau is 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, 2017, for purposes of determining under Sec.  
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 Sec.  
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.

[[Page 41421]]

C. 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 Sec.  1026.43(e), a 
covered transaction is not a qualified mortgage if, pursuant to Sec.  
1026.43(e)(3), the transaction's total points and fees exceed 3 percent 
of the total loan amount for a loan amount greater than or equal to 
$102,894; $3,087 for a loan amount greater than or equal to $61,737 but 
less than $102,894; 5 percent of the total loan amount for loans 
greater than or equal to $20,579 but less than $61,737; $1,029 for a 
loan amount greater than or equal to $12,862 but less than $20,579; and 
8 percent of the total loan amount for loans less than $12,862. Comment 
43(e)(3)(ii)-1, which lists the adjustments for each year, is amended 
to reflect the new dollar threshold amounts for 2017.

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)(B) in subpart E is 
amended and comments 32(a)(1)(ii)-1.iii and -3.iii, 43(e)(3)(ii)-1.iii, 
and 52(b)(1)(ii)-2.i.D in supplement I are added to update the 
exemption thresholds. Comments 32(a)(1)(ii)-1.iii and -3.iii, 
43(e)(3)(ii)-1.iii, and 52(b)(1)(ii)-2.1.D added by 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. The amendment to Sec.  1026.52(b)(1)(ii)(B) merely 
applies a necessary correction to address an inadvertent calculation 
error for the 2016 safe harbor fee. 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. The Bureau also finds that 
there is good cause for making the technical calculation correction to 
the safe harbor fee amount in Sec.  1026.52(b)(1)(ii)(B) in this final 
rule effective immediately upon publication in the Federal Register. 5 
U.S.C. 553(d). This portion of the final rule does not establish any 
new requirements; instead, it corrects an inadvertent error in the 
September 21, 2015, notice, 80 FR 56895, regarding the subsequent 
violation penalty safe harbor fee. Making the rule effective 
immediately will allow the correct amount to be used upon publication.

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, 3353, 
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. Effective on June 27, 2016, Sec.  1026.52(b)(1)(ii)(B) is revised to 
read as follows:


Sec.  1026.52  Limitation on fees.

* * * * *
    (b) * * *
    (1) * * *
    (ii) * * *
    (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. Effective on January 1, 2017, in Supplement I to Part 1026--Official 
Interpretations:
0
a. Under Section 1026.32--Requirements for High-Cost Mortgages, under 
32(a)--Coverage, under Paragraph 32(a)(1)(ii), paragraphs 1.iii and 
3.iii are added.
0
b. Under Section 1026.43--Minimum Standards for Transactions Secured by 
a Dwelling, under 43(e)--Qualified mortgages, under Paragraph 
43(e)(3)(ii), paragraph 1.iii is added.
0
c. Under Section 1026.52--Limitations on Fees, under 52(b)--Limitations 
on penalty fees, under 52(b)(1)(ii)--Safe harbors, paragraph 2.i.D 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 Certain Closed-End Home Mortgages

    32(a) Coverage.
    Paragraph (a)(1).
* * * * *
    Paragraph 32(a)(1)(ii).
    1. * * *
    iii. For 2017, $1,029, reflecting a 1.1 percent increase in the 
CPI-U from June 2015 to June 2016, rounded to the nearest whole dollar.
* * * * *
    3. * * *
    iii. For 2017, $20,579, reflecting a 1.1 percent increase in the 
CPI-U from June 2015 to June 2016, rounded to the nearest whole dollar.
* * * * *

Section 1026.43--Minimum Standards for Transactions Secured by a 
Dwelling

* * * * *
    43(e) Qualified mortgages.
* * * * *
    43(e)(3) Limits on points and fees for qualified mortgages.
* * * * *
    Paragraph 43(e)(3)(ii).
    1. * * *
    iii. For 2017, reflecting a 1.1 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 $102,894: 3 percent 
of the total loan amount;
    B. For a loan amount greater than or equal to $61,737 but less than 
$102,894: $3,087;
    C. For a loan amount greater than or equal to $20,579 but less than 
$61,737: 5 percent of the total loan amount;
    D. For a loan amount greater than or equal to $12,862 but less than 
$20,579: $1,029;

[[Page 41422]]

    E. For a loan amount less than $12,862: 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) Limitations on penalty fees.
* * * * *
    52(b)(1) General rule.
* * * * *
    52(b)(1)(ii) Safe harbors.
* * * * *
    2. * * *
    i. * * *
    D. Card issuers were permitted to impose a fee for violating the 
terms of an agreement if the fee did not exceed $27 under Sec.  
1026.52(b)(1)(ii)(A), through December 31, 2016. Card issuers were 
permitted to impose a fee for violating the terms of an agreement if 
the fee did not exceed $37 under Sec.  1026.52(b)(1)(ii)(B), through 
June 26, 2016, and $38 under Sec.  1026.52(b)(1)(ii)(B) from June 27, 
2016 through December 31, 2016.
* * * * *

    Dated: June 14, 2016.
Richard Cordray
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2016-14782 Filed 6-24-16; 8:45 am]
 BILLING CODE 4810-AM-P