Compliance Blog

Aug 20, 2014

CFPB Adjusts CARD Act, HOEPA, and TILA Thresholds for Inflation

Written by Brandy Bruyere, Regulatory Compliance Counsel

The CFPB is required to annually adjust certain threshold amounts within various rules based on inflation. Last week, the bureau published a final rule implementing a few of these adjustments under the CARD Act, HOEPA and TILA. The rule modifies the credit card penalty fee safe harbor, the HOEPA total loan amount and fee trigger thresholds, and the loan amounts for specific points and fees limits under Regulation Z’s qualified mortgage rule.

CARD Act Penalty Fees Safe Harbor. Under Section 1026.52(b) of Regulation Z, fees on credit card accounts must generally be based on costs, but the rule contains safe harbor amounts that are considered compliant. Effective January 1, 2015, the safe harbor penalty fees will increase by one dollar. The new safe harbor for a member’s first late payment will be $27 and $38 for subsequent late payments within the same six month period.

HOEPA Annual Threshold and Fee Trigger Adjustments. Under Section 1026.32, whether a mortgage is considered high-cost depends on the annual percentage rate, with different thresholds for different loan amounts. Effective January 1, 2015, a loan that is $20,391 or above will be a high-cost mortgage if the loan’s points and fees exceed 5% of the total loan amount. A loan will also be high-cost if its points and fees exceed the lesser of 8% of the loan amount or $1,020 for loans for less than $20,391. Here is an excerpt from the final rule:

 

“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 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.

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 § 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.”

Ability to Repay and Qualified Mortgage (QM) Annual Threshold Adjustments. Finally, the bureau’s rule also changes the loan amounts subject to the various points and fees limits to meet the requirements of a QM. Here is the excerpt from the rule:

“Effective January 1, 2015, for purposes of determining whether a covered transaction is a qualified mortgage, 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 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.” (Emphasis added.)

Remember, none of these changes go into effect until January 1, 2015 but it is good to make a note of it now.

***

NAFCU's 2014 Credit Union Compliance GPS is still available. This comprehensive, electronic resource translates complex regulatory language into plain English. The latest edition includes improved user-friendly search functions, including more hyperlinks and bookmarks and much more. You can purchase a copy for your credit union here!