[Federal Register Volume 82, Number 216 (Thursday, November 9, 2017)]
[Rules and Regulations]
[Pages 51977-51979]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-24445]


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FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Docket No. R-1581]
RIN 7100 AE-88

BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026

[Docket No. CFPB-2017-0027]


Truth in Lending (Regulation Z)

AGENCY: Board of Governors of the Federal Reserve System (Board); and 
Bureau of Consumer Financial Protection (Bureau).

ACTION: Final rules, official interpretations and commentary.

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SUMMARY: The Board and the Bureau are publishing final rules amending 
the official interpretations and commentary for the agencies' 
regulations that implement the Truth in Lending Act (TILA). The Dodd-
Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) 
amended TILA by requiring that the dollar threshold for exempt consumer 
credit transactions be adjusted annually by the annual percentage 
increase in the Consumer Price Index for Urban Wage Earners and 
Clerical Workers (CPI-W). If there is no annual percentage increase in 
the CPI-W, the Board and the Bureau will not adjust this exemption 
threshold from the prior year. However, in years following a year in 
which the exemption threshold was not adjusted, the threshold is 
calculated by applying the annual percentage change in the CPI-W to the 
dollar amount that would have resulted, after rounding, if the 
decreases and any subsequent increases in the CPI-W had been taken into 
account. Based on the annual percentage increase in the CPI-W as of 
June 1, 2017, the exemption threshold will increase from $54,600 to 
$55,800 effective January 1, 2018. Because the Dodd-Frank Act also 
requires similar adjustments in the Consumer Leasing Act's threshold 
for exempt consumer leases, the Board and the Bureau are making similar 
amendments to each of their respective regulations implementing the 
Consumer Leasing Act elsewhere in this issue of the Federal Register.

DATES: This final rule is effective January 1, 2018.

FOR FURTHER INFORMATION CONTACT:
    Board: Vivian W. Wong, Senior Counsel, Division of Consumer and 
Community Affairs, Board of Governors of the Federal Reserve System, at 
(202) 452-3667; for users of Telecommunications Device for the Deaf 
(TDD) only, contact (202) 263-4869.
    Bureau: Jaclyn Maier, Counsel, Office of Regulations, Consumer 
Financial Protection Bureau, at (202) 435-7700.

SUPPLEMENTARY INFORMATION:

I. Background

    The Dodd-Frank Wall Street Reform and Consumer Protection Act of 
2010 (Dodd-Frank Act) increased the threshold in the Truth in Lending 
Act (TILA) for exempt consumer credit transactions,\1\ and the 
threshold in the

[[Page 51978]]

Consumer Leasing Act (CLA) for exempt consumer leases, from $25,000 to 
$50,000, effective July 21, 2011.\2\ In addition, the Dodd-Frank Act 
requires that, on and after December 31, 2011, these thresholds be 
adjusted annually for inflation by the annual percentage increase in 
the Consumer Price Index for Urban Wage Earners and Clerical Workers 
(CPI-W), as published by the Bureau of Labor Statistics. In April 2011, 
the Board issued a final rule amending Regulation Z (which implements 
TILA) consistent with these provisions of the Dodd-Frank Act, along 
with a similar final rule amending Regulation M (which implements the 
CLA) (collectively, the Board Final Threshold Rules).\3\
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    \1\ Although consumer credit transactions above the threshold 
are generally exempt, loans secured by real property or by personal 
property used or expected to be used as the principal dwelling of a 
consumer and private education loans are covered by TILA regardless 
of the loan amount. See 12 CFR 226.3(b)(1)(i) (Board) and 12 CFR 
1026.3(b)(1)(i) (Bureau).
    \2\ Public Law 111-203, section 1100E, 124 Stat. 1376, 2111 
(2010).
    \3\ 76 FR 18354 (Apr. 4, 2011); 76 FR 18349 (Apr. 4, 2011).
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    Title X of the Dodd-Frank Act transferred rulemaking authority for 
a number of consumer financial protection laws from the Board to the 
Bureau, effective July 21, 2011. In connection with this transfer of 
rulemaking authority, the Bureau issued its own Regulation Z 
implementing TILA, 12 CFR part 1026, substantially duplicating the 
Board's Regulation Z.\4\ Although the Bureau has the authority to issue 
rules to implement TILA for most entities, the Board retains authority 
to issue rules under TILA for certain motor vehicle dealers covered by 
section 1029(a) of the Dodd-Frank Act, and the Board's Regulation Z 
continues to apply to those entities.\5\
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    \4\ See 76 FR 79768 (Dec. 22, 2011); 81 FR 25323 (Apr. 28, 
2016).
    \5\ Section 1029(a) of the Dodd-Frank Act states: ``Except as 
permitted in subsection (b), the Bureau may not exercise any 
rulemaking, supervisory, enforcement, or any other 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.'' 12 U.S.C. 5519(a). Section 1029(b) of the 
Dodd-Frank Act states: ``Subsection (a) shall not apply to any 
person, to the extent that such person (1) provides consumers with 
any services related to residential or commercial mortgages or self-
financing transactions involving real property; (2) operates a line 
of business (A) that involves the extension of retail credit or 
retail leases involving motor vehicles; and (B) in which (i) the 
extension of retail credit or retail leases are provided directly to 
consumers; and (ii) the contract governing such extension of retail 
credit or retail leases is not routinely assigned to an unaffiliated 
third party finance or leasing source; or (3) offers or provides a 
consumer financial product or service not involving or related to 
the sale, financing, leasing, rental, repair, refurbishment, 
maintenance, or other servicing of motor vehicles, motor vehicle 
parts, or any related or ancillary product or service.'' 12 U.S.C. 
5519(b).
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    The Board's and the Bureau's regulations,\6\ and their accompanying 
commentaries, provide that the exemption threshold will be adjusted 
annually effective January 1 of each year based on any annual 
percentage increase in the CPI-W that was in effect on the preceding 
June 1. They further provide that any increase in the threshold amount 
will be rounded to the nearest $100 increment. For example, if the 
annual percentage increase in the CPI-W would result in a $950 increase 
in the threshold amount, the threshold amount will be increased by 
$1,000. However, if the annual percentage increase in the CPI-W would 
result in a $949 increase in the threshold amount, the threshold amount 
will be increased by $900.\7\ Since 2011, the Board and the Bureau have 
adjusted the Regulation Z exemption threshold annually, in accordance 
with these rules.
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    \6\ 12 CFR 226.3(b)(1)(ii) (Board) and 12 CFR 1026.3(b)(1)(ii) 
(Bureau).
    \7\ See comments 3(b)-1 in supplements I of 12 CFR parts 226 and 
1026.
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    On November 30, 2016, the Board and the Bureau published a final 
rule in the Federal Register to memorialize the calculation method used 
by the agencies each year to adjust the exemption threshold to ensure 
that the values for the exemption threshold keep pace with the CPI-W as 
contemplated by section 1100E(b) of the Dodd-Frank Act (Regulation Z 
Adjustment Calculation Rule).\8\ The Regulation Z Adjustment 
Calculation Rule memorialized the policy that if there is no annual 
percentage increase in the CPI-W, the Board and Bureau will not adjust 
the exemption threshold from the prior year. The Regulation Z 
Adjustment Calculation Rule also provided that in years following a 
year in which the exemption threshold was not adjusted because there 
was a decrease in the CPI-W from the previous year, the threshold is 
calculated by applying the annual percentage change in the CPI-W to the 
dollar amount that would have resulted, after rounding, if the 
decreases and any subsequent increases in the CPI-W had been taken into 
account. If the resulting amount calculated, after rounding, is greater 
than the current threshold, then the threshold effective January 1 the 
following year will increase accordingly; if the resulting amount 
calculated, after rounding, is equal to or less than the current 
threshold, then the threshold effective January 1 the following year 
will not change, but future increases will be calculated based on the 
amount that would have resulted, after rounding.
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    \8\ See 81 FR 86260 (Nov. 30, 2016).
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II. 2018 Adjustment and Commentary Revision

    Effective January 1, 2018, the exemption threshold amount is 
increased from $54,600 to $55,800. This is based on the CPI-W in effect 
on June 1, 2017, which was reported on May 12, 2017. 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 prior 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 CPI-W reported on May 12, 2017 reflects a 2.1 
percent increase in the CPI-W from April 2016 to April 2017. 
Accordingly, the 2.1 percent increase in the CPI-W from April 2016 to 
April 2017 results in an exemption threshold amount of $55,800. The 
Board and the Bureau are revising the commentaries to their respective 
regulations to add new comment 3(b)-3.ix to state that, from January 1, 
2018 through December 31, 2018, the threshold amount is $55,800. These 
revisions are effective January 1, 2018.

III. Regulatory Analysis

Administrative Procedure Act

    Under the Administrative Procedure Act, notice and opportunity for 
public comment are not required if the Board and the Bureau find that 
notice and public comment are impracticable, unnecessary, or contrary 
to the public interest.\9\ The amendments in this rule are technical 
and apply the method previously set forth in the Board Final Threshold 
Rules and the Regulation Z Adjustment Calculation Rule. For these 
reasons, the Board and the Bureau have determined that publishing a 
notice of proposed rulemaking and providing opportunity for public 
comment are unnecessary. Therefore, the amendments are adopted in final 
form.
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    \9\ 5 U.S.C. 553(b)(B).
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Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) does not apply to a rulemaking 
where a general notice of proposed rulemaking is not required.\10\ As 
noted previously, the agencies have determined that it is unnecessary 
to publish a general notice of proposed rulemaking for this joint final 
rule. Accordingly, the RFA's requirements relating to an initial and

[[Page 51979]]

final regulatory flexibility analysis do not apply.
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    \10\ 5 U.S.C. 603 and 604.
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Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995,\11\ the 
agencies reviewed this final rule. No collections of information 
pursuant to the Paperwork Reduction Act are contained in the final 
rule.
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    \11\ 44 U.S.C. 3506; 5 CFR part 1320.
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List of Subjects

12 CFR Part 226

    Advertising, Consumer protection, Federal Reserve System, Reporting 
and recordkeeping requirements, Truth in lending.

12 CFR Part 1026

    Advertising, Appraisal, Appraiser, Banking, Banks, Consumer 
protection, Credit, Credit unions, Mortgages, National banks, Reporting 
and recordkeeping requirements, Savings associations, Truth in lending.

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

Authority and Issuance

    For the reasons set forth in the preamble, the Board amends 
Regulation Z, 12 CFR part 226, as set forth below:

PART 226--TRUTH IN LENDING (REGULATION Z)

0
1. The authority citation for part 226 continues to read as follows:

    Authority: 12 U.S.C. 3806; 15 U.S.C. 1604, 1637(c)(5), 1639(l) 
and 1639h; Pub. L. 111-24, section 2, 123 Stat. 1734; Pub. L. 111-
203, 124 Stat. 1376.

Subpart A--General

0
2. In supplement I to part 226, under Section 226.3--Exempt 
Transactions, under 3(b) Credit over applicable threshold amount, 
paragraph 3.ix is added to read as follows:

Supplement I to Part 226--Official Staff Interpretations

* * * * *

Subpart A--General

* * * * *

Section 226.3--Exempt Transactions

* * * * *

3(b) Credit Over Applicable Threshold Amount

* * * * *
    3. * * *
    ix. From January 1, 2018 through December 31, 2018, the 
threshold amount is $55,800.
* * * * *

BUREAU OF CONSUMER FINANCIAL PROTECTION

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
3. 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.


0
4. In supplement I to part 1026, under Section 1026.3--Exempt 
Transactions, under 3(b) Credit Over Applicable Threshold Amount, 
paragraph 3.ix is added to read as follows:

Supplement I to Part 1026--Official Interpretations

* * * * *

Subpart A--General

* * * * *

Section 1026.3--Exempt Transactions

* * * * *

3(b) Credit Over Applicable Threshold Amount

* * * * *
    3. * * *
    ix. From January 1, 2018 through December 31, 2018, the 
threshold amount is $55,800.
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, acting through the Secretary of the Board under delegated 
authority, November 2, 2017.
Ann E. Misback,
Secretary of the Board.
     Dated: September 7, 2017.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2017-24445 Filed 11-8-17; 8:45 am]
BILLING CODE 4810-AM-P 6210-01-P