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[Federal Register Volume 79, Number 158 (Friday, August 15, 2014)]
[Rules and Regulations]
[Pages 48015-48017]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-18838]

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Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 
Prices of new books are listed in the first FEDERAL REGISTER issue of each 
week.

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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
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