[Federal Register Volume 83, Number 166 (Monday, August 27, 2018)]
[Rules and Regulations]
[Pages 43503-43508]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-18209]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026


Truth in Lending (Regulation Z) Annual Threshold Adjustments 
(Credit Cards, HOEPA, and Qualified Mortgages)

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 regulation 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 
revises, as applicable, the dollar amounts for provisions implementing 
TILA and amendments to TILA, including 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). The Bureau is adjusting these amounts, where appropriate, based 
on the annual percentage change reflected in the Consumer Price Index 
(CPI) in effect on June 1, 2018.

DATES: This final rule is effective January 1, 2019.

FOR FURTHER INFORMATION CONTACT: Monique Chenault, Paralegal, and 
Shelley Thompson, Counsel, Office of Regulations, at (202) 435-7700. If 
you require this document in an alternative electronic format, please 
contact [email protected].

SUPPLEMENTARY INFORMATION: The Bureau is amending the regulation 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 CPI as published 
by the Bureau of Labor Statistics (BLS). Specifically, for open-end 
consumer credit plans under TILA, the threshold that triggers 
requirements to disclose minimum interest charges will remain unchanged 
at $1.00 in 2019. For open-end consumer credit plans under the CARD Act 
amendments to TILA, the adjusted dollar amount in 2019 for the safe 
harbor for a first violation penalty fee will increase by $1 to $28 and 
the adjusted dollar amount for the safe harbor for a subsequent 
violation penalty fee will increase by $1 to $39. For HOEPA loans, the 
adjusted total loan amount threshold for high-cost mortgages in 2019 
will be $21,549. The adjusted points-and-fees dollar trigger for high-
cost mortgages in 2019 will be $1,077. For qualified mortgages, which 
receive certain protections from liability under the ability-to-repay 
rule, the maximum thresholds for total points and fees in 2019 will be 
3 percent of the total loan amount for a loan greater than or equal to 
$107,747; $3,232 for a loan amount greater than or equal to $64,648 but 
less than $107,747; 5 percent of the total loan amount for a loan 
greater than or equal to $21,549 but less than $64,648; $1,077 for a 
loan amount greater than or equal to $13,468 but less than $21,549; and 
8 percent of the total loan amount for a loan amount less than $13,468.

I. Background

A. Credit Card Annual Adjustments

Minimum Interest Charge Disclosure Thresholds
    Sections 1026.6(b)(2)(iii) and 1026.60(b)(3) of Regulation Z 
implement sections 127(a)(3) and 127(c)(1)(A)(ii)(II) of TILA. Sections 
1026.6(b)(2)(iii) and 1026.60(b)(3) require the disclosure of any 
minimum interest charge exceeding $1.00 that could be imposed during a 
billing cycle and provide that, for open-end consumer credit plans, the 
minimum interest charge thresholds

[[Page 43504]]

will be re-calculated annually using the CPI that was in effect on the 
preceding June 1; the Bureau uses the Consumer Price Index for Urban 
Wage Earners and Clerical Workers (CPI-W) for this adjustment. 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 analysis is based on the CPI-W 
index in effect on June 1, 2018, which was reported by BLS on May 10, 
2018, and reflects the percentage change from April 2017 to April 2018. 
The CPI-W is a subset of the Consumer Price Index for All Urban 
Consumers (CPI-U) index and represents approximately 29 percent of the 
U.S. population. The adjustment analysis accounts for a 2.6 percent 
increase in the CPI-W from April 2017 to April 2018. 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 the Bureau is 
therefore not amending Sec. Sec.  1026.6(b)(2)(iii) and 1026.60(b)(3).
Safe Harbor Penalty Fees
    Section 1026.52(b)(1)(ii)(A) and (B) of Regulation Z implements 
section 149(e) of TILA, established by the CARD Act.\1\ Section 
1026.52(b)(1)(ii)(D) provides that the safe harbor provision, which 
establishes the permissible penalty fee thresholds in Sec.  
1026.52(b)(1)(ii)(A) and (B), will be re-calculated annually using the 
CPI that was in effect on the preceding June 1; the Bureau uses the 
CPI-W for this adjustment. 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. The 2019 adjustment 
analysis is based on the CPI-W index in effect on June 1, 2018, which 
was reported by BLS on May 10, 2018, and reflects the percentage change 
from April 2017 to April 2018. The adjustment to the permissible fee 
thresholds being adopted here reflects a 2.6 percent increase in the 
CPI-W from April 2017 to April 2018 and is rounded to the nearest $1 
increment.
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    \1\ Credit Card Accountability Responsibility and Disclosure Act 
of 2009, Public Law 111-24, 123 Stat. 1734 (2009).
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B. HOEPA Annual Threshold Adjustments

    Section 1026.32(a)(1)(ii) of Regulation Z implements section 1431 
of the Dodd-Frank Act,\2\ which amended the HOEPA points-and-fees 
coverage test. 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 depends 
on whether the total loan amount is for $20,000 or more, or for less 
than $20,000. Section 1026.32(a)(1)(ii) provides that this threshold 
amount be recalculated annually using the CPI index in effect on June 
1; the Bureau uses the CPI-U for this adjustment. The CPI-U is based on 
all urban consumers and represents approximately 93 percent of the U.S. 
population. The 2019 adjustment is based on the CPI-U index in effect 
on June 1, which was reported by BLS on May 10, 2018, and reflects the 
percentage change from April 2017 to April 2018. The adjustment to the 
$20,000 figure being adopted here reflects a 2.5 percent increase in 
the CPI-U index for this period and is rounded to whole dollars for 
ease of compliance.
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    \2\ Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Public Law 111-203, 124 Stat. 1376 (2010).
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    Under Sec.  1026.32(a)(1)(ii)(B) the HOEPA points-and-fees dollar 
trigger is $1,000. Section 1026.32(a)(1)(ii)(B) provides that this 
threshold amount will be recalculated annually using the CPI index in 
effect on June 1; the Bureau uses the CPI-U for this adjustment. The 
2019 adjustment is based on the CPI-U index in effect on June 1, 2018, 
which was reported by BLS on May 10, 2018, and reflects the percentage 
change from April 2017 to April 2018. The adjustment to the $1,000 
figure being adopted here reflects a 2.5 percent increase in the CPI-U 
index for this period and is rounded to whole dollars for ease of 
compliance.

C. Qualified Mortgages Annual Threshold Adjustments

    The Bureau's Regulation Z implements sections 1411 and 1412 of the 
Dodd-Frank Act, which generally require creditors to make a reasonable, 
good-faith determination of a consumer's ability to repay any consumer 
credit transaction secured by a dwelling and establishes certain 
protections from liability under this requirement for qualified 
mortgages. Under Sec.  1026.43(e)(3)(i), a covered transaction is not a 
qualified mortgage if the transaction's total 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; or 8 percent of the total loan amount for loans less than 
$12,500. Section 1026.43(e)(3)(ii) provides that the limits and loan 
amounts in Sec.  1026.43(e)(3)(i) are recalculated annually for 
inflation using the CPI-U index in effect on June 1. The 2019 
adjustment is based on the CPI-U index in effect on June 1, 2018, which 
was reported by BLS on May 10, 2018, and reflects the percentage change 
from April 2017 to April 2018. The adjustment to the 2018 figures being 
adopted here reflects a 2.5 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. Credit Card 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 at $1.00 for 
the year 2019. Accordingly, the Bureau is not amending these sections 
of Regulation Z.
Safe Harbor Penalty Fees--Sec.  1026.52(b)(1)(ii)(A) and (B)
    Effective January 1, 2019, the permissible fee threshold amounts 
increased by $1 and are $28 for Sec.  1026.52(b)(1)(ii)(A) and $39 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 $28 and $39 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, 2019, for purposes of determining under Sec.  
1026.32(a)(1)(ii)

[[Page 43505]]

the points-and-fees coverage test under HOEPA to which a transaction is 
subject, the total loan amount threshold is $21,549, and the adjusted 
points-and-fees dollar trigger under Sec.  1026.32(a)(1)(ii)(B) is 
$1,077. When the total loan amount for a transaction is $21,549 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 $21,549, and the points-and-
fees amount exceeds the lesser of the adjusted points-and-fees dollar 
trigger of $1,077 or 8 percent of the total loan amount, the 
transaction is a high-cost mortgage. The Bureau is amending comments 
32(a)(1)(ii)-1 and -3, which list the adjustments for each year, to 
reflect for 2019 the new loan amount dollar threshold and the new 
points-and-fees dollar trigger, respectively.

C. Qualified Mortgages Annual Threshold Adjustments

    Effective January 1, 2019, 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 $107,747; $3,232 for a loan amount 
greater than or equal to $64,648 but less than $107,747; 5 percent of 
the total loan amount for loans greater than or equal to $21,549 but 
less than $64,648; $1,077 for a loan amount greater than or equal to 
$13,468 but less than $21,549; or 8 percent of the total loan amount 
for loans less than $13,468. The Bureau is amending comment 
43(e)(3)(ii)-1, which lists the adjustments for each year, to reflect 
the new dollar threshold amounts for 2019.

III. Procedural Requirements

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)(B). Pursuant to this final rule, in 
Regulation Z, Sec.  1026.52(b)(1)(ii)(A) and (B) in subpart G is 
amended and comments 32(a)(1)(ii)-1.v and -3.v, 43(e)(3)(ii)-1.v, and 
52(b)(1)(ii)-2.i.F in Supplement I are added to update the exemption 
thresholds. The amendments in this final rule are technical and non-
discretionary, as 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. The amendments therefore 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 part 1320), the Bureau reviewed this final rule. No 
collections of information pursuant to the Paperwork Reduction Act are 
contained in the final rule.

D. Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Bureau will submit a report containing this rule and other required 
information to the United States Senate, the United States House of 
Representatives, and the Comptroller General of the United States prior 
to the rule taking effect. The Office of Information and Regulatory 
Affairs (OIRA) has designated this rule as not a ``major rule'' as 
defined by 5 U.S.C. 804(2).

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. Amend Sec.  1026.52 by revising paragraphs (b)(1)(ii)(A) and (B) to 
read as follows:


Sec.  1026.52  Limitations on fees.

* * * * *
    (b) * * *
    (1) * * *
    (ii) * * *
    (A) $28
    (B) $39 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:
0
a. Under Section 1026.32--Requirements for High-Cost Mortgages, 
Paragraph 32(a)(1)(ii) is revised.
0
b. Under Section 1026.43--Minimum Standards for Transactions Secured by 
a Dwelling, Paragraph 43(e)(3)(ii) is revised.
0
c. Under Section 1026.52--Limitations on Fees, 52(b)(1)(ii) Safe 
harbors is revised.
    The revisions read as follows:

SUPPLEMENT I TO PART 1026--OFFICIAL INTERPRETATIONS

* * * * *

Section 1026.32--Requirements for High-Cost Mortgages

* * * * *
    Paragraph 32(a)(1)(ii).
    1. Annual adjustment of $1,000 amount. The $1,000 figure in 
Sec.  1026.32(a)(1)(ii)(B) is adjusted annually on January 1 by the 
annual percentage change in the CPI that was in effect on the 
preceding June 1. The Bureau will publish adjustments after the June 
figures become available each year.
    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.
    ii. For 2016, $1,017, reflecting a .2 percent decrease in the 
CPI-U from June 2014 to June 2015, rounded to the nearest whole 
dollar.
    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.
    iv. For 2018, $1,052, reflecting a 2.2 percent increase in the 
CPI-U from June 2016 to June 2017, rounded to the nearest whole 
dollar.
    v. For 2019, $1,077, reflecting a 2.5 percent increase in the 
CPI-U from June 2017 to June 2018, rounded to the nearest whole 
dollar.
    2. Historical adjustment of $400 amount. Prior to January 10, 
2014, a mortgage loan was covered by Sec.  1026.32 if the total 
points and fees payable by the consumer at or before loan 
consummation exceeded the greater of $400 or 8 percent of the total 
loan amount. The $400 figure was adjusted annually on January 1 by 
the annual percentage change in the CPI that was in effect on the 
preceding June 1, as follows:
    i. For 1996, $412, reflecting a 3.00 percent increase in the 
CPI-U from June 1994 to June 1995, rounded to the nearest whole 
dollar.
    ii. For 1997, $424, reflecting a 2.9 percent increase in the 
CPI-U from June 1995 to June 1996, rounded to the nearest whole 
dollar.
    iii. For 1998, $435, reflecting a 2.5 percent increase in the 
CPI-U from June 1996 to June 1997, rounded to the nearest whole 
dollar.

[[Page 43506]]

    iv. For 1999, $441, reflecting a 1.4 percent increase in the 
CPI-U from June 1997 to June 1998, rounded to the nearest whole 
dollar.
    v. For 2000, $451, reflecting a 2.3 percent increase in the CPI-
U from June 1998 to June 1999, rounded to the nearest whole dollar.
    vi. For 2001, $465, reflecting a 3.1 percent increase in the 
CPI-U from June 1999 to June 2000, rounded to the nearest whole 
dollar.
    vii. For 2002, $480, reflecting a 3.27 percent increase in the 
CPI-U from June 2000 to June 2001, rounded to the nearest whole 
dollar.
    viii. For 2003, $488, reflecting a 1.64 percent increase in the 
CPI-U from June 2001 to June 2002, rounded to the nearest whole 
dollar.
    ix. For 2004, $499, reflecting a 2.22 percent increase in the 
CPI-U from June 2002 to June 2003, rounded to the nearest whole 
dollar.
    x. For 2005, $510, reflecting a 2.29 percent increase in the 
CPI-U from June 2003 to June 2004, rounded to the nearest whole 
dollar.
    xi. For 2006, $528, reflecting a 3.51 percent increase in the 
CPI-U from June 2004 to June 2005, rounded to the nearest whole 
dollar.
    xii. For 2007, $547, reflecting a 3.55 percent increase in the 
CPI-U from June 2005 to June 2006, rounded to the nearest whole 
dollar.
    xiii. For 2008, $561, reflecting a 2.56 percent increase in the 
CPI-U from June 2006 to June 2007, rounded to the nearest whole 
dollar.
    xiv. For 2009, $583, reflecting a 3.94 percent increase in the 
CPI-U from June 2007 to June 2008, rounded to the nearest whole 
dollar.
    xv. For 2010, $579, reflecting a 0.74 percent decrease in the 
CPI-U from June 2008 to June 2009, rounded to the nearest whole 
dollar.
    xvi. For 2011, $592, reflecting a 2.2 percent increase in the 
CPI-U from June 2009 to June 2010, rounded to the nearest whole 
dollar.
    xvii. For 2012, $611, reflecting a 3.2 percent increase in the 
CPI-U from June 2010 to June 2011, rounded to the nearest whole 
dollar.
    xviii. For 2013, $625, reflecting a 2.3 percent increase in the 
CPI-U from June 2011 to June 2012, rounded to the nearest whole 
dollar.
    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.
    3. Applicable threshold. For purposes of Sec.  
1026.32(a)(1)(ii), a creditor must determine the applicable points 
and fees threshold based on the face amount of the note (or, in the 
case of an open-end credit plan, the credit limit for the plan when 
the account is opened). However, the creditor must apply the 
allowable points and fees percentage to the ``total loan amount,'' 
as defined in Sec.  1026.32(b)(4). For closed-end credit 
transactions, the total loan amount may be different than the face 
amount of the note. The $20,000 amount in Sec.  1026.32(a)(1)(ii)(A) 
and (B) is adjusted annually on January 1 by the annual percentage 
change in the CPI that was in effect on the preceding June 1.
    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.
    ii. For 2016, $20,350, reflecting a .2 percent decrease in the 
CPI-U from June 2014 to June 2015, rounded to the nearest whole 
dollar.
    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.
    iv. For 2018, $21,032, reflecting a 2.2 percent increase in the 
CPI-U from June 2016 to June 2017, rounded to the nearest whole 
dollar.
    v. For 2019, $21,549, reflecting a 2.5 percent increase in the 
CPI-U from June 2017 to June 2018, rounded to the nearest whole 
dollar.
* * * * *

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

* * * * *
    Paragraph 43(e)(3)(ii).
    1. Annual adjustment for inflation. The dollar amounts, 
including the loan amounts, in Sec.  1026.43(e)(3)(i) will be 
adjusted annually on January 1 by the annual percentage change in 
the CPI-U that was in effect on the preceding June 1. The Bureau 
will publish adjustments after the June figures become available 
each year.
    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.
    ii. For 2016, reflecting a .2 percent decrease 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 $101,749: 3 
percent of the total loan amount;
    B. For a loan amount greater than or equal to $61,050 but less 
than $101,749: $3,052;
    C. For a loan amount greater than or equal to $20,350 but less 
than $61,050: 5 percent of the total loan amount;
    D. For a loan amount greater than or equal to $12,719 but less 
than $20,350; $1,017;
    E. For a loan amount less than $12,719: 8 percent of the total 
loan amount.
    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;
    E. For a loan amount less than $12,862: 8 percent of the total 
loan amount.
    iv. For 2018, reflecting a 2.2 percent increase in the CPI-U 
that was reported on the preceding June 1, a covered transaction is 
not a qualified mortgage unless the transaction's total points and 
fees do not exceed:
    A. For a loan amount greater than or equal to $105,158: 3 
percent of the total loan amount;
    B. For a loan amount greater than or equal to $63,095 but less 
than $105,158: $3,155;
    C. For a loan amount greater than or equal to $21,032 but less 
than $63,095: 5 percent of the total loan amount;
    D. For a loan amount greater than or equal to $13,145 but less 
than $21,032: $1,052;
    E. For a loan amount less than $13,145: 8 percent of the total 
loan amount.
    v. For 2019, reflecting a 2.5 percent increase in the CPI-U that 
was reported on the preceding June 1, a covered transaction is not a 
qualified mortgage unless the transaction's total points and fees do 
not exceed:
    A. For a loan amount greater than or equal to $107,747: 3 
percent of the total loan amount;
    B. For a loan amount greater than or equal to $64,648 but less 
than $107,747: $3,232;
    C. For a loan amount greater than or equal to $21,549 but less 
than $64,648: 5 percent of the total loan amount;
    D. For a loan amount greater than or equal to $13,468 but less 
than $21,549: $1,077;
    E. For a loan amount less than $13,468: 8 percent of the total 
loan amount.
* * * * *

Section 1026.52--Limitations on Fees

* * * * *
    52(b)(1)(ii) Safe harbors
    1. Multiple violations of same type. i. Same billing cycle or 
next six billing cycles. A card issuer cannot impose a fee for a 
violation pursuant to Sec.  1026.52(b)(1)(ii)(B) unless a fee has 
previously been imposed for the same type of violation pursuant to 
Sec.  1026.52(b)(1)(ii)(A). Once a fee has been imposed for a 
violation pursuant to Sec.  1026.52(b)(1)(ii)(A), the card issuer 
may impose a fee pursuant to Sec.  1026.52(b)(1)(ii)(B) for any 
subsequent violation of the same type until that type of violation 
has not occurred for a period of six consecutive complete billing 
cycles. A fee has been imposed for purposes of Sec.  
1026.52(b)(1)(ii) even if the card issuer waives or rebates all or 
part of the fee.
    A. Late payments. For purposes of Sec.  1026.52(b)(1)(ii), a 
late payment occurs during the billing cycle in which the payment 
may first be treated as late consistent with the requirements of 
this part and the terms or other requirements of the account.
    B. Returned payments. For purposes of Sec.  1026.52(b)(1)(ii), a 
returned payment occurs during the billing cycle in which the 
payment is returned to the card issuer.
    C. Transactions that exceed the credit limit. For purposes of 
Sec.  1026.52(b)(1)(ii), a transaction that exceeds the credit limit 
for

[[Page 43507]]

an account occurs during the billing cycle in which the transaction 
occurs or is authorized by the card issuer.
    D. Declined access checks. For purposes of Sec.  
1026.52(b)(1)(ii), a check that accesses a credit card account is 
declined during the billing cycle in which the card issuer declines 
payment on the check.
    ii. Relationship to Sec. Sec.  1026.52(b)(2)(ii) and 
1026.56(j)(1). If multiple violations are based on the same event or 
transaction such that Sec.  1026.52(b)(2)(ii) prohibits the card 
issuer from imposing more than one fee, the event or transaction 
constitutes a single violation for purposes of Sec.  
1026.52(b)(1)(ii). Furthermore, consistent with Sec.  
1026.56(j)(1)(i), no more than one violation for exceeding an 
account's credit limit can occur during a single billing cycle for 
purposes of Sec.  1026.52(b)(1)(ii). However, Sec.  
1026.52(b)(2)(ii) does not prohibit a card issuer from imposing fees 
for exceeding the credit limit in consecutive billing cycles based 
on the same over-the-limit transaction to the extent permitted by 
Sec.  1026.56(j)(1). In these circumstances, the second and third 
over-the-limit fees permitted by Sec.  1026.56(j)(1) may be imposed 
pursuant to Sec.  1026.52(b)(1)(ii)(B). See comment 52(b)(2)(ii)-1.
    iii. Examples. The following examples illustrate the application 
of Sec.  1026.52(b)(1)(ii)(A) and (b)(1)(ii)(B) with respect to 
credit card accounts under an open-end (not home-secured) consumer 
credit plan that are not charge card accounts. For purposes of these 
examples, assume that the billing cycles for the account begin on 
the first day of the month and end on the last day of the month and 
that the payment due date for the account is the twenty-fifth day of 
the month.
    A. Violations of same type (late payments). A required minimum 
periodic payment of $50 is due on March 25. On March 26, a late 
payment has occurred because no payment has been received. 
Accordingly, consistent with Sec.  1026.52(b)(1)(ii)(A), the card 
issuer imposes a $25 late payment fee on March 26. In order for the 
card issuer to impose a $35 late payment fee pursuant to Sec.  
1026.52(b)(1)(ii)(B), a second late payment must occur during the 
April, May, June, July, August, or September billing cycles.
    1. The card issuer does not receive any payment during the March 
billing cycle. A required minimum periodic payment of $100 is due on 
April 25. On April 20, the card issuer receives a $50 payment. No 
further payment is received during the April billing cycle. 
Accordingly, consistent with Sec.  1026.52(b)(1)(ii)(B), the card 
issuer may impose a $35 late payment fee on April 26. Furthermore, 
the card issuer may impose a $35 late payment fee for any late 
payment that occurs during the May, June, July, August, September, 
or October billing cycles.
    2. Same facts as in paragraph A above. On March 30, the card 
issuer receives a $50 payment and the required minimum periodic 
payments for the April, May, June, July, August, and September 
billing cycles are received on or before the payment due date. A 
required minimum periodic payment of $60 is due on October 25. On 
October 26, a late payment has occurred because the required minimum 
periodic payment due on October 25 has not been received. However, 
because this late payment did not occur during the six billing 
cycles following the March billing cycle, Sec.  1026.52(b)(1)(ii) 
only permits the card issuer to impose a late payment fee of $25.
    B. Violations of different types (late payment and over the 
credit limit). The credit limit for an account is $1,000. Consistent 
with Sec.  1026.56, the consumer has affirmatively consented to the 
payment of transactions that exceed the credit limit. A required 
minimum periodic payment of $30 is due on August 25. On August 26, a 
late payment has occurred because no payment has been received. 
Accordingly, consistent with Sec.  1026.52(b)(1)(ii)(A), the card 
issuer imposes a $25 late payment fee on August 26. On August 30, 
the card issuer receives a $30 payment. On September 10, a 
transaction causes the account balance to increase to $1,150, which 
exceeds the account's $1,000 credit limit. On September 11, a second 
transaction increases the account balance to $1,350. On September 
23, the card issuer receives the $50 required minimum periodic 
payment due on September 25, which reduces the account balance to 
$1,300. On September 30, the card issuer imposes a $25 over-the-
limit fee, consistent with Sec.  1026.52(b)(1)(ii)(A). On October 
26, a late payment has occurred because the $60 required minimum 
periodic payment due on October 25 has not been received. 
Accordingly, consistent with Sec.  1026.52(b)(1)(ii)(B), the card 
issuer imposes a $35 late payment fee on October 26.
    C. Violations of different types (late payment and returned 
payment). A required minimum periodic payment of $50 is due on July 
25. On July 26, a late payment has occurred because no payment has 
been received. Accordingly, consistent with Sec.  
1026.52(b)(1)(ii)(A), the card issuer imposes a $25 late payment fee 
on July 26. On July 30, the card issuer receives a $50 payment. A 
required minimum periodic payment of $50 is due on August 25. On 
August 24, a $50 payment is received. On August 27, the $50 payment 
is returned to the card issuer for insufficient funds. In these 
circumstances, Sec.  1026.52(b)(2)(ii) permits the card issuer to 
impose either a late payment fee or a returned payment fee but not 
both because the late payment and the returned payment result from 
the same event or transaction. Accordingly, for purposes of Sec.  
1026.52(b)(1)(ii), the event or transaction constitutes a single 
violation. However, if the card issuer imposes a late payment fee, 
Sec.  1026.52(b)(1)(ii)(B) permits the issuer to impose a fee of $35 
because the late payment occurred during the six billing cycles 
following the July billing cycle. In contrast, if the card issuer 
imposes a returned payment fee, the amount of the fee may be no more 
than $25 pursuant to Sec.  1026.52(b)(1)(ii)(A).
    2. Adjustments based on Consumer Price Index. For purposes of 
Sec.  1026.52(b)(1)(ii)(A) and (b)(1)(ii)(B), the Bureau shall 
calculate each year price level adjusted amounts using the Consumer 
Price Index in effect on June 1 of that year. When the cumulative 
change in the adjusted minimum value derived from applying the 
annual Consumer Price level to the current amounts in Sec.  
1026.52(b)(1)(ii)(A) and (b)(1)(ii)(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 Consumer Price level to the current amounts in 
Sec.  1026.52(b)(1)(ii)(A) and (b)(1)(ii)(B) has decreased by a 
whole dollar, those amounts will be decreased by $1.00. The Bureau 
will publish adjustments to the amounts in Sec.  
1026.52(b)(1)(ii)(A) and (b)(1)(ii)(B).
    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.
    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.
    C. 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) and $38 under Sec.  1026.52(b)(1)(ii)(B), 
through December 31, 2015.
    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.
    E. 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) and $38 under Sec.  1026.52(b)(1)(ii)(B), 
through December 31, 2017.
    F. 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) and $38 under Sec.  1026.52(b)(1)(ii)(B), 
through December 31, 2018.
    3. Delinquent balance for charge card accounts. Section 
1026.52(b)(1)(ii)(C) provides that, when a charge card issuer that 
requires payment of outstanding balances in full at the end of each 
billing cycle has not received the required payment for two or more 
consecutive billing cycles, the card issuer may impose a late 
payment fee that does not exceed three percent of the delinquent 
balance. For purposes of Sec.  1026.52(b)(1)(ii)(C), the delinquent 
balance is any previously billed amount that remains unpaid at the 
time the late payment fee is imposed pursuant to Sec.  
1026.52(b)(1)(ii)(C). Consistent with Sec.  1026.52(b)(2)(ii), a 
charge card issuer that imposes a fee pursuant to Sec.  
1026.52(b)(1)(ii)(C) with respect to a late payment may not impose a 
fee pursuant to Sec.  1026.52(b)(1)(ii)(B) with respect to the same 
late payment. The following examples illustrate the application of 
Sec.  1026.52(b)(1)(ii)(C):
    i. Assume that a charge card issuer requires payment of 
outstanding balances in full at

[[Page 43508]]

the end of each billing cycle and that the billing cycles for the 
account begin on the first day of the month and end on the last day 
of the month. At the end of the June billing cycle, the account has 
a balance of $1,000. On July 5, the card issuer provides a periodic 
statement disclosing the $1,000 balance consistent with Sec.  
1026.7. During the July billing cycle, the account is used for $300 
in transactions, increasing the balance to $1,300. At the end of the 
July billing cycle, no payment has been received and the card issuer 
imposes a $25 late payment fee consistent with Sec.  
1026.52(b)(1)(ii)(A). On August 5, the card issuer provides a 
periodic statement disclosing the $1,325 balance consistent with 
Sec.  1026.7. During the August billing cycle, the account is used 
for $200 in transactions, increasing the balance to $1,525. At the 
end of the August billing cycle, no payment has been received. 
Consistent with Sec.  1026.52(b)(1)(ii)(C), the card issuer may 
impose a late payment fee of $40, which is 3% of the $1,325 balance 
that was due at the end of the August billing cycle. Section 
1026.52(b)(1)(ii)(C) does not permit the card issuer to include the 
$200 in transactions that occurred during the August billing cycle.
    ii. Same facts as above except that, on August 25, a $100 
payment is received. Consistent with Sec.  1026.52(b)(1)(ii)(C), the 
card issuer may impose a late payment fee of $37, which is 3% of the 
unpaid portion of the $1,325 balance that was due at the end of the 
August billing cycle ($1,225).
    iii. Same facts as in paragraph A above except that, on August 
25, a $200 payment is received. Consistent with Sec.  
1026.52(b)(1)(ii)(C), the card issuer may impose a late payment fee 
of $34, which is 3% of the unpaid portion of the $1,325 balance that 
was due at the end of the August billing cycle ($1,125). In the 
alternative, the card issuer may impose a late payment fee of $35 
consistent with Sec.  1026.52(b)(1)(ii)(B). However, Sec.  
1026.52(b)(2)(ii) prohibits the card issuer from imposing both fees.
* * * * *

    Dated: August 16, 2018.
Mick Mulvaney,
Acting Director, Bureau of Consumer Financial Protection.
[FR Doc. 2018-18209 Filed 8-24-18; 8:45 am]
 BILLING CODE 4810-AM-P