Consumer Leasing (Regulation M), 86256-86260 [2016-28710]

Download as PDF 86256 Federal Register / Vol. 81, No. 230 / Wednesday, November 30, 2016 / Rules and Regulations amount in effect at the time of consummation. 5. Qualifying for exemption— subsequent changes. A transaction does not meet the condition for an exemption under § 1026.35(c)(2)(ii) merely because it is used to satisfy and replace an existing exempt loan, unless the amount of the new extension of credit is equal to or less than the applicable threshold amount. For example, assume a closedend loan that qualified for a § 1026.35(c)(2)(ii) exemption at consummation in year one is refinanced in year ten and that the new loan amount is greater than the threshold amount in effect in year ten. In these circumstances, the creditor must comply with all of the applicable requirements of § 1026.35(c) with respect to the year ten transaction if the original loan is satisfied and replaced by the new loan, unless another exemption from the requirements of § 1026.35(c) applies. See § 1026.35(c)(2) and (c)(4)(vii). * * * * * Dated: November 22, 2016. Thomas J. Curry, Comptroller of the Currency. By order of the Board of Governors of the Federal Reserve System, November 21, 2016. Robert deV. Frierson, Secretary of the Board. Dated: November 7, 2016. Richard Cordray, Director, Bureau of Consumer Financial Protection. [FR Doc. 2016–28699 Filed 11–29–16; 8:45 am] BILLING CODE 4810–33–P; 6210–01–P; 4810–AM–P FEDERAL RESERVE SYSTEM 12 CFR Part 213 [Docket No. R–1545] RIN 7100 AE–56 BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Part 1013 [Docket No. CFPB–2016–0036] RIN 3170–AA66 Consumer Leasing (Regulation M) Board of Governors of the Federal Reserve System (Board); and Bureau of Consumer Financial Protection (Bureau). ACTION: Final rules, official interpretations and commentary. sradovich on DSK3GMQ082PROD with RULES AGENCY: The Board and the Bureau are finalizing amendments to the official SUMMARY: VerDate Sep<11>2014 16:13 Nov 29, 2016 Jkt 241001 interpretations and commentary for the agencies’ regulations that implement the Consumer Leasing Act (CLA). The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) amended the CLA by requiring that the dollar threshold for exempt consumer leases 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 Bureau will not adjust this exemption threshold from the prior year. The final rule memorializes this as well as the agencies’ calculation method for determining the adjustment in years following a year in which there is no annual percentage increase in the CPI– W. Based on the CPI–W in effect as of June 1, 2016, the exemption threshold will remain at $54,600 through 2017. The Dodd-Frank Act also requires similar adjustments in the Truth in Lending Act’s threshold for exempt consumer credit transactions. Accordingly, the Board and the Bureau are adopting similar amendments to the commentaries to each of their respective regulations implementing the Truth in Lending Act elsewhere in this issue of the Federal Register. DATES: This final rule is effective January 1, 2017. 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 Consumer Leasing Act (CLA) for exempt consumer leases, and the threshold in the Truth in Lending Act (TILA) for exempt consumer credit transactions,1 from $25,000 to $50,000, effective July 21, 2011.2 In addition, the Dodd-Frank Act requires that, on and 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 (2010). PO 00000 Frm 00008 Fmt 4700 Sfmt 4700 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 M (which implements the CLA) consistent with these provisions of the Dodd-Frank Act, along with a similar final rule amending Regulation Z (which implements TILA) (collectively, the Board Final Threshold Rules).3 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 M implementing the CLA in an interim final rule, 12 CFR part 1013 (Bureau Interim Final Rule).4 The Bureau Interim Final Rule substantially duplicated the Board’s Regulation M, including the revisions to the threshold for exempt transactions made by the Board in April 2011. In April 2016, the Bureau adopted the Bureau Interim Final Rule as final, subject to intervening final rules published by the Bureau.5 Although the Bureau has the authority to issue rules to implement the CLA for most entities, the Board retains authority to issue rules under the CLA for certain motor vehicle dealers covered by section 1029(a) of the Dodd-Frank Act, and the Board’s Regulation M continues to apply to those entities.6 3 76 FR 18349 (Apr. 4, 2011); 76 FR 18354 (Apr. 4, 2011). 4 76 FR 78500 (Dec. 19, 2011). 5 81 FR 25323 (April 28, 2016). 6 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 DoddFrank 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 selffinancing 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). E:\FR\FM\30NOR1.SGM 30NOR1 Federal Register / Vol. 81, No. 230 / Wednesday, November 30, 2016 / Rules and Regulations sradovich on DSK3GMQ082PROD with RULES Section 213.2(e)(1) of the Board’s Regulation M and § 1013.2(e)(1) of the Bureau’s Regulation M, 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 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. Since 2011, the Board and the Bureau have adjusted the Regulation M exemption threshold annually, in accordance with these rules. II. Commentary Revision On August 4, 2016, the Board and the Bureau published a proposed rule in the Federal Register to memorialize the calculation method used by the agencies each year to adjust the exemption threshold. See 81 FR 51400 (Aug. 4, 2016). The proposed commentary stated 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 proposed commentary further set forth the calculation method the agencies would use in years following a year in which the exemption threshold was not adjusted because there was no increase in the CPI–W from the previous year. As the Board and the Bureau discussed in the proposal, the proposed calculation method would 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. The comment period closed on September 6, 2016. In response to the proposal, the Board and the Bureau received one comment from a consumer supporting the proposal. The Board and the Bureau are adopting the commentary revisions as proposed, with some minor clarifying amendments. These changes will be effective on January 1, 2017. Specifically, the Board and the Bureau are adopting comment 2(e)–9 as proposed to move the text regarding the 7 See comments 2(e)–9 in supplements I of 12 CFR parts 213 and 1013. VerDate Sep<11>2014 16:13 Nov 29, 2016 Jkt 241001 threshold amount that is in effect during a particular period to a new comment 2(e)–11. The discussion of how the agencies round the threshold calculation will remain in comment 2(e)–9. Furthermore, the Board and the Bureau are adopting new comment 2(e)– 10 as proposed to provide that if the CPI–W in effect on June 1 does not increase from the CPI–W in effect on June 1 of the previous year (i.e., the CPI– W in effect on June 1 is either equal to or less than the CPI–W in effect on June 1 of the previous year), the threshold amount effective the following January 1 through December 31 will not change from the previous year. As the Board and the Bureau discussed in the proposal, this position is consistent with section 1100E(b) of the Dodd-Frank Act, which states that the threshold must be adjusted by the ‘‘annual percentage increase’’ in the CPI–W (emphasis added), and the position the agencies have previously taken.8 Thus, if the threshold in effect from January 1, 2019, through December 31, 2019, is $55,500 and the CPI–W in effect on June 1 of 2019 indicates a 1.1 percent decrease from the CPI–W in effect on June 1, 2018, the threshold in effect for January 1, 2020, through December 31, 2020, will remain $55,500. Comment 2(e)–10 also provides that, for the years after a year in which the threshold did not change because the CPI–W in effect on June 1 decreased from the CPI–W in effect on June 1 of 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. Comment 2(e)– 10.i further states that, if the resulting amount, after rounding, is greater than the current threshold, then the threshold effective January 1 the following year will increase accordingly. For example, assume that the threshold in effect from January 1, 2019, through December 31, 2019, is $55,500 and that, due to a 1.1 percent decrease from the CPI–W in effect on June 1, 2018, to the CPI–W in effect on June 1, 2019, the threshold in effect from January 1, 2020, through December 31, 2020, remains at $55,500. If, however, the threshold had been adjusted downward to reflect the decrease in the CPI–W over that time period, the 8 See, e.g., 76 FR 18354, 18355 n.1 (Apr. 4, 2011) (‘‘[A]n annual period of deflation or no inflation would not require a change in the threshold amount.’’). PO 00000 Frm 00009 Fmt 4700 Sfmt 4700 86257 threshold in effect from January 1, 2020, through December 31, 2020, would have been $54,900, after rounding. Further assume that the CPI–W in effect on June 1, 2020, increased by 1.6 percent from the CPI–W in effect on June 1, 2019. The calculation for the threshold that will be in effect from January 1, 2021, through December 31, 2021, is based on the impact of a 1.6 percent increase in the CPI–W on $54,900, rather than $55,500, resulting in a 2021 threshold of $55,800. Furthermore, comment 2(e)–10.ii states that, 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. To illustrate, assume in the example above that the CPI–W in effect on June 1, 2020, increased by only 0.6 percent from the CPI–W in effect on June 1, 2019. The calculation for the threshold that will be in effect from January 1, 2021, through December 31, 2021, is based on the impact of a 0.6 percent increase in the CPI–W on $54,900. The resulting amount, after rounding, is $55,200, which is lower than $55,500, the threshold in effect from January 1, 2020, through December 31, 2020. Therefore, the threshold in effect from January 1, 2021, through December 31, 2021, will remain $55,500. However, the calculation for the threshold that will be in effect from January 1, 2022, through December 31, 2022, will apply the percentage change in the CPI–W to $55,200, the amount that would have resulted based on the 0.6 percent change from the CPI–W in effect on June 1, 2019, after rounding, to the CPI–W in effect on June 1, 2020. III. 2017 Threshold Based on the calculation method detailed above, the exemption threshold amount for 2017 remains at $54,600. This is based on the CPI–W in effect on June 1, 2016, which was reported on May 17, 2016. 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 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 17, 2016 reflects a 0.8 percent increase in the CPI–W from April 2015 to April 2016. Because the CPI–W decreased from April 2014 to April 2015, the Board and the Bureau are calculating the threshold based on the amount that would have resulted had this decrease been taken into E:\FR\FM\30NOR1.SGM 30NOR1 86258 Federal Register / Vol. 81, No. 230 / Wednesday, November 30, 2016 / Rules and Regulations account, which is $54,200. A 0.8 percent increase in the CPI–W applied to $54,200 results in $54,600, which is the same threshold amount for 2016. Thus, the exemption threshold amount that will be in effect for 2017 remains at $54,600. The Board and the Bureau are revising the commentaries to their respective regulations to add new comment 2(e)–11.viii to state that, from January 1, 2017, through December 31, 2017, the threshold amount is $54,600. These revisions are effective January 1, 2017. IV. 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 2017 threshold amount for exempt consumer leases announced in this rule, $54,600, is technical and applies the calculation method set forth elsewhere in this final rule, for which notice and public comment were provided.10 For these reasons, the Board and the Bureau have determined that publishing a notice of proposed rulemaking and providing opportunity for public comment for purposes of the 2017 threshold adjustment are unnecessary. Therefore, the amendments regarding the 2017 threshold amount for exempt consumer leases are adopted in final form. Bureau’s Dodd-Frank Act Section 1022(b)(2) Analysis In developing the final rule, the Bureau has considered potential benefits, costs, and impacts.11 In addition, the Bureau has consulted, or offered to consult with, the prudential regulators, the Securities and Exchange Commission, the Department of Housing and Urban Development, the Federal Housing Finance Agency, the Federal Trade Commission, and the Department of the Treasury, including regarding consistency with any prudential, market, or systemic objectives administered by such agencies. The Bureau has chosen to evaluate the benefits, costs and impacts of the final 95 U.S.C. 553(b)(B). 81 FR 51400 (Aug. 4, 2016). 11 Specifically, section 1022(b)(2)(A) calls for the Bureau to consider the potential benefits and costs of a regulation to consumers and covered persons, including the potential reduction of access by consumers to consumer financial products or services; the impact on depository institutions and credit unions with $10 billion or less in total assets as described in section 1026 of the Act; and the impact on consumers in rural areas. sradovich on DSK3GMQ082PROD with RULES 10 See VerDate Sep<11>2014 16:13 Nov 29, 2016 Jkt 241001 rule against the current state of the world, which takes into account the current regulatory regime. The Bureau is not aware of any significant benefits or costs to consumers or covered persons associated with the final rule relative to the baseline. The Board previously stated that if there is no annual percentage increase in the CPI–W, then the Board (and now the Bureau) will not adjust the exemption threshold from the prior year.12 The final rule memorializes this in official commentary. The final rule also clarifies how the threshold is calculated for years after a year in which the threshold did not change. The Bureau believes that this clarification memorializes the method that the Bureau would be expected to use: This method holds the threshold fixed until a notional threshold calculated using the Bureau’s methodology, taking into account both decreases and increases in the CPI–W, exceeds the actual threshold. The Bureau requested, but did not receive, comment on this point. Thus, the Bureau concludes that the final rule will not change the regulatory regime relative to the baseline and will create no significant benefits, costs, or impacts. The final rule will have no unique impact on depository institutions or credit unions with $10 billion or less in assets as described in section 1026(a) of the Dodd-Frank Act or on rural consumers. The Bureau does not expect this final rule to affect consumers’ access to credit. Regulatory Flexibility Act Board: An initial regulatory flexibility analysis (IRFA) was included in the proposal in accordance with section 3(a) of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA). In the IRFA, the Board requested comments on any approaches, other than the proposed alternatives, that would reduce the burden on small entities. The RFA requires an agency to prepare a final regulatory flexibility analysis (FRFA) unless the agency certifies that the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities. In accordance with section 3(a) of the RFA, the Board has reviewed the final regulation. Based on its analysis, and for the reasons stated below, the Board believes that the rule will not have a significant economic impact on a substantial number of small entities. 1. Statement of the need for, and objectives of, the final rule. The final 12 76 FR 18354, 18355 n.1 (Apr. 4, 2011) (‘‘[A]n annual period of deflation or no inflation would not require a change in the threshold amount.’’). PO 00000 Frm 00010 Fmt 4700 Sfmt 4700 rule memorializes the calculation method used by the Board each year to adjust the exemption threshold in accordance with section 1100E of the Dodd-Frank Act. The final rule also adopts the exemption threshold that will apply from January 1, 2017, through December 31, 2017, based on the calculation method memorialized in this final rule. 2. Summary of issues raised by comments in response to the initial regulatory flexibility analysis. The Board did not receive any comments on the initial regulatory flexibility analysis. 3. Small entities affected by the final rule. Motor vehicle dealers that are subject to the Board’s Regulation M and offer consumer leases that may be exempt from Regulation M under 12 CFR 213.2(e) would be affected. While the total number of small entities likely to be affected by the final rule is unknown, the Board does not believe the final rule will have a significant economic impact on the entities that it affects. 4. Recordkeeping, reporting, and compliance requirements. The final rule would not impose any recordkeeping, reporting, or compliance requirements. 5. Significant alternatives to the final revisions. The Board has not identified any significant alternatives that would reduce the regulatory burden on small entities associated with this final rule. Bureau: The RFA generally requires an agency to conduct an initial regulatory flexibility analysis (IRFA) and a final regulatory flexibility analysis (FRFA) of any rule subject to noticeand-comment rulemaking requirements.13 These analyses must describe the impact of the proposed and final rules on small entities.14 An IRFA or FRFA is not required if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities.15 The Bureau also is subject to certain additional procedures under the RFA involving the convening of a panel to 13 5 U.S.C. 601 et seq. at 603(a) and 604(a). For purposes of assessing the impacts of the rule on small entities, ‘‘small entities’’ is defined in the RFA to include small businesses, small not-for-profit organizations, and small government jurisdictions. Id. at 601(6). A ‘‘small business’’ is determined by application of Small Business Administration regulations and reference to the North American Industry Classification System (NAICS) classifications and size standards. Id. at 601(3). A ‘‘small organization’’ is any ‘‘not-for-profit enterprise which is independently owned and operated and is not dominant in its field.’’ Id. at 601(4). A ‘‘small governmental jurisdiction’’ is the government of a city, county, town, township, village, school district, or special district with a population of less than 50,000. Id. at 601(5). 15 Id. at 605(b). 14 Id. E:\FR\FM\30NOR1.SGM 30NOR1 Federal Register / Vol. 81, No. 230 / Wednesday, November 30, 2016 / Rules and Regulations consult with small business representatives prior to proposing a rule for which an IRFA is required.16 A FRFA is not required for this final rule because it will not have a significant economic impact on a substantial number of small entities. As discussed in the Bureau’s Section 1022(b)(2) Analysis above, this final rule does not introduce costs or benefits to covered persons because it seeks only to clarify the method of threshold adjustment which has already been established in previous Agency rules. Therefore this final rule will not have a significant impact on small entities. Certification Accordingly, the Bureau Director, by signing below, certifies that this final rule will not have a significant economic impact on a substantial number of small entities. Paperwork Reduction Act In accordance with the Paperwork Reduction Act of 1995,17 the agencies reviewed this final rule. No collections of information pursuant to the Paperwork Reduction Act are contained in the final rule. List of Subjects 12 CFR Part 213 Advertising, Consumer leasing, Consumer protection, Federal Reserve System, Reporting and recordkeeping requirements. 12 CFR Part 1013 Advertising, Consumer leasing, Reporting and recordkeeping requirements, 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 M, 12 CFR part 213, as set forth below: PART 213—CONSUMER LEASING (REGULATION M) 1. The authority citation for part 213 continues to read as follows: ■ sradovich on DSK3GMQ082PROD with RULES Authority: 15 U.S.C. 1604 and 1667f; Public Law 111–203, section 1100E, 124 Stat. 1376. 2. In supplement I to part 213, under Section 213.2—Definitions, under 2(e) Consumer lease, paragraph 9 is revised, and paragraphs 10 and 11 are added, to read as follows: ■ 16 Id. at 609. 17 44 U.S.C. 3506; 5 CFR 1320. VerDate Sep<11>2014 16:13 Nov 29, 2016 Jkt 241001 Supplement I to Part 213—Official Staff Commentary to Regulation M * * * * * Section 213.2—Definitions * * * * * 2(e) Consumer Lease * * * * * 9. Threshold amount. A consumer lease is exempt from the requirements of this part if the total contractual obligation exceeds the threshold amount in effect at the time of consummation. The threshold amount in effect during a particular time period is the amount stated in comment 2(e)–11 for that period. The threshold amount is adjusted effective January 1 of each year by any annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI–W) that was in effect on the preceding June 1. Comment 2(e)–11 will be amended to provide the threshold amount for the upcoming year after the annual percentage change in the CPI–W that was in effect on June 1 becomes available. 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. If a consumer lease is exempt from the requirements of this Part because the total contractual obligation exceeds the threshold amount in effect at the time of consummation, the lease remains exempt regardless of a subsequent increase in the threshold amount. 10. No increase in the CPI–W. If the CPI–W in effect on June 1 does not increase from the CPI–W in effect on June 1 of the previous year, the threshold amount effective the following January 1 through December 31 will not change from the previous year. When this occurs, for the years that follow, the threshold is calculated based on the annual percentage change in the CPI–W applied to the dollar amount that would have resulted, after rounding, if decreases and any subsequent increases in the CPI–W had been taken into account. i. Net increases. 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. PO 00000 Frm 00011 Fmt 4700 Sfmt 4700 86259 ii. Net decreases. 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. 11. Threshold. For purposes of § 213.2(e)(1), the threshold amount in effect during a particular period is the amount stated below for that period. i. Prior to July 21, 2011, the threshold amount is $25,000. ii. From July 21, 2011 through December 31, 2011, the threshold amount is $50,000. iii. From January 1, 2012 through December 31, 2012, the threshold amount is $51,800. iv. From January 1, 2013 through December 31, 2013, the threshold amount is $53,000. v. From January 1, 2014 through December 31, 2014, the threshold amount is $53,500. vi. From January 1, 2015 through December 31, 2015, the threshold amount is $54,600. vii. From January 1, 2016 through December 31, 2016, the threshold amount is $54,600. viii. From January 1, 2017 through December 31, 2017, the threshold amount is $54,600. Bureau of Consumer Financial Protection Authority and Issuance For the reasons set forth in the preamble, the Bureau amends Regulation M, 12 CFR part 1013, as set forth below: PART 1013—CONSUMER LEASING (REGULATION M) 3. The authority citation for part 1013 continues to read as follows: ■ Authority: 15 U.S.C. 1604 and 1667f; Public Law 111–203, section 1100E, 124 Stat. 1376. 4. In supplement I to part 1013, under Section 1013.2—Definitions, under 2(e)—Consumer Lease, paragraph 9 is revised, and paragraphs 10 and 11 are added, to read as follows: ■ Supplement I to Part 1013—Official Interpretations * * * * * Section 1013.2—Definitions * * * * * 2(e) Consumer Lease * * * * * 9. Threshold amount. A consumer lease is exempt from the requirements of E:\FR\FM\30NOR1.SGM 30NOR1 sradovich on DSK3GMQ082PROD with RULES 86260 Federal Register / Vol. 81, No. 230 / Wednesday, November 30, 2016 / Rules and Regulations this part if the total contractual obligation exceeds the threshold amount in effect at the time of consummation. The threshold amount in effect during a particular time period is the amount stated in comment 2(e)–11 for that period. The threshold amount is adjusted effective January 1 of each year by any annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI–W) that was in effect on the preceding June 1. Comment 2(e)–11 will be amended to provide the threshold amount for the upcoming year after the annual percentage change in the CPI–W that was in effect on June 1 becomes available. 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. If a consumer lease is exempt from the requirements of this part because the total contractual obligation exceeds the threshold amount in effect at the time of consummation, the lease remains exempt regardless of a subsequent increase in the threshold amount. 10. No increase in the CPI–W. If the CPI–W in effect on June 1 does not increase from the CPI–W in effect on June 1 of the previous year, the threshold amount effective the following January 1 through December 31 will not change from the previous year. When this occurs, for the years that follow, the threshold is calculated based on the annual percentage change in the CPI–W applied to the dollar amount that would have resulted, after rounding, if decreases and any subsequent increases in the CPI–W had been taken into account. i. Net increases. 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. ii. Net decreases. 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. 11. Threshold. For purposes of § 1013.2(e)(1), the threshold amount in effect during a particular period is the amount stated below for that period. VerDate Sep<11>2014 16:13 Nov 29, 2016 Jkt 241001 i. Prior to July 21, 2011, the threshold amount is $25,000. ii. From July 21, 2011 through December 31, 2011, the threshold amount is $50,000. iii. From January 1, 2012 through December 31, 2012, the threshold amount is $51,800. iv. From January 1, 2013 through December 31, 2013, the threshold amount is $53,000. v. From January 1, 2014 through December 31, 2014, the threshold amount is $53,500. vi. From January 1, 2015 through December 31, 2015, the threshold amount is $54,600. vii. From January 1, 2016 through December 31, 2016, the threshold amount is $54,600. viii. From January 1, 2017 through December 31, 2017, the threshold amount is $54,600. By order of the Board of Governors of the Federal Reserve System, November 17, 2016. Robert deV. Frierson, Secretary of the Board. Dated: November 7, 2016. Richard Cordray, Director, Bureau of Consumer Financial Protection. [FR Doc. 2016–28710 Filed 11–29–16; 8:45 am] BILLING CODE 6210–01–P; 4810–AM–P FEDERAL RESERVE SYSTEM 12 CFR Part 226 [Docket No. R–1546] RIN 7100 AE–57 BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Part 1026 [Docket No. CFPB–2016–0037] RIN 3170–AA67 Truth in Lending (Regulation Z) Board of Governors of the Federal Reserve System (Board); and Bureau of Consumer Financial Protection (Bureau). ACTION: Final rules, official interpretations and commentary. AGENCY: The Board and the Bureau are finalizing amendments to the official interpretations and commentary for the agencies’ regulations that implement the Truth in Lending Act (TILA). The DoddFrank 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 SUMMARY: PO 00000 Frm 00012 Fmt 4700 Sfmt 4700 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 Bureau will not adjust this exemption threshold from the prior year. The final rule memorializes this as well as the agencies’ calculation method for determining the adjustment in years following a year in which there is no annual percentage increase in the CPI– W. Based on the CPI–W in effect as of June 1, 2016, the exemption threshold will remain at $54,600 through 2017. The Dodd-Frank Act also requires similar adjustments in the Consumer Leasing Act’s threshold for exempt consumer leases. Accordingly, the Board and the Bureau are adopting similar amendments to the commentaries 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, 2017. 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 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 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 (2010). E:\FR\FM\30NOR1.SGM 30NOR1

Agencies

[Federal Register Volume 81, Number 230 (Wednesday, November 30, 2016)]
[Rules and Regulations]
[Pages 86256-86260]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28710]


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FEDERAL RESERVE SYSTEM

12 CFR Part 213

[Docket No. R-1545]
RIN 7100 AE-56

BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1013

[Docket No. CFPB-2016-0036]
RIN 3170-AA66


Consumer Leasing (Regulation M)

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

ACTION: Final rules, official interpretations and commentary.

-----------------------------------------------------------------------

SUMMARY: The Board and the Bureau are finalizing amendments to the 
official interpretations and commentary for the agencies' regulations 
that implement the Consumer Leasing Act (CLA). The Dodd-Frank Wall 
Street Reform and Consumer Protection Act (Dodd-Frank Act) amended the 
CLA by requiring that the dollar threshold for exempt consumer leases 
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 
Bureau will not adjust this exemption threshold from the prior year. 
The final rule memorializes this as well as the agencies' calculation 
method for determining the adjustment in years following a year in 
which there is no annual percentage increase in the CPI-W. Based on the 
CPI-W in effect as of June 1, 2016, the exemption threshold will remain 
at $54,600 through 2017. The Dodd-Frank Act also requires similar 
adjustments in the Truth in Lending Act's threshold for exempt consumer 
credit transactions. Accordingly, the Board and the Bureau are adopting 
similar amendments to the commentaries to each of their respective 
regulations implementing the Truth in Lending Act elsewhere in this 
issue of the Federal Register.

DATES: This final rule is effective January 1, 2017.

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 Consumer Leasing 
Act (CLA) for exempt consumer leases, and the threshold in the Truth in 
Lending Act (TILA) for exempt consumer credit transactions,\1\ 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 M (which implements the CLA) consistent with these 
provisions of the Dodd-Frank Act, along with a similar final rule 
amending Regulation Z (which implements TILA) (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 (2010).
    \3\ 76 FR 18349 (Apr. 4, 2011); 76 FR 18354 (Apr. 4, 2011).
---------------------------------------------------------------------------

    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 M 
implementing the CLA in an interim final rule, 12 CFR part 1013 (Bureau 
Interim Final Rule).\4\ The Bureau Interim Final Rule substantially 
duplicated the Board's Regulation M, including the revisions to the 
threshold for exempt transactions made by the Board in April 2011. In 
April 2016, the Bureau adopted the Bureau Interim Final Rule as final, 
subject to intervening final rules published by the Bureau.\5\ Although 
the Bureau has the authority to issue rules to implement the CLA for 
most entities, the Board retains authority to issue rules under the CLA 
for certain motor vehicle dealers covered by section 1029(a) of the 
Dodd-Frank Act, and the Board's Regulation M continues to apply to 
those entities.\6\
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    \4\ 76 FR 78500 (Dec. 19, 2011).
    \5\ 81 FR 25323 (April 28, 2016).
    \6\ 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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[[Page 86257]]

    Section 213.2(e)(1) of the Board's Regulation M and Sec.  
1013.2(e)(1) of the Bureau's Regulation M, 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\ 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. Since 2011, the Board and the Bureau 
have adjusted the Regulation M exemption threshold annually, in 
accordance with these rules.
---------------------------------------------------------------------------

    \7\ See comments 2(e)-9 in supplements I of 12 CFR parts 213 and 
1013.
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II. Commentary Revision

    On August 4, 2016, the Board and the Bureau published a proposed 
rule in the Federal Register to memorialize the calculation method used 
by the agencies each year to adjust the exemption threshold. See 81 FR 
51400 (Aug. 4, 2016). The proposed commentary stated 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 proposed 
commentary further set forth the calculation method the agencies would 
use in years following a year in which the exemption threshold was not 
adjusted because there was no increase in the CPI-W from the previous 
year. As the Board and the Bureau discussed in the proposal, the 
proposed calculation method would 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.
    The comment period closed on September 6, 2016. In response to the 
proposal, the Board and the Bureau received one comment from a consumer 
supporting the proposal. The Board and the Bureau are adopting the 
commentary revisions as proposed, with some minor clarifying 
amendments. These changes will be effective on January 1, 2017.
    Specifically, the Board and the Bureau are adopting comment 2(e)-9 
as proposed to move the text regarding the threshold amount that is in 
effect during a particular period to a new comment 2(e)-11. The 
discussion of how the agencies round the threshold calculation will 
remain in comment 2(e)-9.
    Furthermore, the Board and the Bureau are adopting new comment 
2(e)-10 as proposed to provide that if the CPI-W in effect on June 1 
does not increase from the CPI-W in effect on June 1 of the previous 
year (i.e., the CPI-W in effect on June 1 is either equal to or less 
than the CPI-W in effect on June 1 of the previous year), the threshold 
amount effective the following January 1 through December 31 will not 
change from the previous year. As the Board and the Bureau discussed in 
the proposal, this position is consistent with section 1100E(b) of the 
Dodd-Frank Act, which states that the threshold must be adjusted by the 
``annual percentage increase'' in the CPI-W (emphasis added), and the 
position the agencies have previously taken.\8\ Thus, if the threshold 
in effect from January 1, 2019, through December 31, 2019, is $55,500 
and the CPI-W in effect on June 1 of 2019 indicates a 1.1 percent 
decrease from the CPI-W in effect on June 1, 2018, the threshold in 
effect for January 1, 2020, through December 31, 2020, will remain 
$55,500.
---------------------------------------------------------------------------

    \8\ See, e.g., 76 FR 18354, 18355 n.1 (Apr. 4, 2011) (``[A]n 
annual period of deflation or no inflation would not require a 
change in the threshold amount.'').
---------------------------------------------------------------------------

    Comment 2(e)-10 also provides that, for the years after a year in 
which the threshold did not change because the CPI-W in effect on June 
1 decreased from the CPI-W in effect on June 1 of 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. Comment 2(e)-10.i further states that, if 
the resulting amount, after rounding, is greater than the current 
threshold, then the threshold effective January 1 the following year 
will increase accordingly.
    For example, assume that the threshold in effect from January 1, 
2019, through December 31, 2019, is $55,500 and that, due to a 1.1 
percent decrease from the CPI-W in effect on June 1, 2018, to the CPI-W 
in effect on June 1, 2019, the threshold in effect from January 1, 
2020, through December 31, 2020, remains at $55,500. If, however, the 
threshold had been adjusted downward to reflect the decrease in the 
CPI-W over that time period, the threshold in effect from January 1, 
2020, through December 31, 2020, would have been $54,900, after 
rounding. Further assume that the CPI-W in effect on June 1, 2020, 
increased by 1.6 percent from the CPI-W in effect on June 1, 2019. The 
calculation for the threshold that will be in effect from January 1, 
2021, through December 31, 2021, is based on the impact of a 1.6 
percent increase in the CPI-W on $54,900, rather than $55,500, 
resulting in a 2021 threshold of $55,800.
    Furthermore, comment 2(e)-10.ii states that, 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. To illustrate, assume 
in the example above that the CPI-W in effect on June 1, 2020, 
increased by only 0.6 percent from the CPI-W in effect on June 1, 2019. 
The calculation for the threshold that will be in effect from January 
1, 2021, through December 31, 2021, is based on the impact of a 0.6 
percent increase in the CPI-W on $54,900. The resulting amount, after 
rounding, is $55,200, which is lower than $55,500, the threshold in 
effect from January 1, 2020, through December 31, 2020. Therefore, the 
threshold in effect from January 1, 2021, through December 31, 2021, 
will remain $55,500. However, the calculation for the threshold that 
will be in effect from January 1, 2022, through December 31, 2022, will 
apply the percentage change in the CPI-W to $55,200, the amount that 
would have resulted based on the 0.6 percent change from the CPI-W in 
effect on June 1, 2019, after rounding, to the CPI-W in effect on June 
1, 2020.

III. 2017 Threshold

    Based on the calculation method detailed above, the exemption 
threshold amount for 2017 remains at $54,600. This is based on the CPI-
W in effect on June 1, 2016, which was reported on May 17, 2016. 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 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 17, 2016 reflects a 
0.8 percent increase in the CPI-W from April 2015 to April 2016. 
Because the CPI-W decreased from April 2014 to April 2015, the Board 
and the Bureau are calculating the threshold based on the amount that 
would have resulted had this decrease been taken into

[[Page 86258]]

account, which is $54,200. A 0.8 percent increase in the CPI-W applied 
to $54,200 results in $54,600, which is the same threshold amount for 
2016. Thus, the exemption threshold amount that will be in effect for 
2017 remains at $54,600. The Board and the Bureau are revising the 
commentaries to their respective regulations to add new comment 2(e)-
11.viii to state that, from January 1, 2017, through December 31, 2017, 
the threshold amount is $54,600. These revisions are effective January 
1, 2017.

IV. 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 2017 threshold amount for exempt 
consumer leases announced in this rule, $54,600, is technical and 
applies the calculation method set forth elsewhere in this final rule, 
for which notice and public comment were provided.\10\ For these 
reasons, the Board and the Bureau have determined that publishing a 
notice of proposed rulemaking and providing opportunity for public 
comment for purposes of the 2017 threshold adjustment are unnecessary. 
Therefore, the amendments regarding the 2017 threshold amount for 
exempt consumer leases are adopted in final form.
---------------------------------------------------------------------------

    \9\ 5 U.S.C. 553(b)(B).
    \10\ See 81 FR 51400 (Aug. 4, 2016).
---------------------------------------------------------------------------

Bureau's Dodd-Frank Act Section 1022(b)(2) Analysis

    In developing the final rule, the Bureau has considered potential 
benefits, costs, and impacts.\11\ In addition, the Bureau has 
consulted, or offered to consult with, the prudential regulators, the 
Securities and Exchange Commission, the Department of Housing and Urban 
Development, the Federal Housing Finance Agency, the Federal Trade 
Commission, and the Department of the Treasury, including regarding 
consistency with any prudential, market, or systemic objectives 
administered by such agencies.
---------------------------------------------------------------------------

    \11\ Specifically, section 1022(b)(2)(A) calls for the Bureau to 
consider the potential benefits and costs of a regulation to 
consumers and covered persons, including the potential reduction of 
access by consumers to consumer financial products or services; the 
impact on depository institutions and credit unions with $10 billion 
or less in total assets as described in section 1026 of the Act; and 
the impact on consumers in rural areas.
---------------------------------------------------------------------------

    The Bureau has chosen to evaluate the benefits, costs and impacts 
of the final rule against the current state of the world, which takes 
into account the current regulatory regime. The Bureau is not aware of 
any significant benefits or costs to consumers or covered persons 
associated with the final rule relative to the baseline. The Board 
previously stated that if there is no annual percentage increase in the 
CPI-W, then the Board (and now the Bureau) will not adjust the 
exemption threshold from the prior year.\12\ The final rule 
memorializes this in official commentary. The final rule also clarifies 
how the threshold is calculated for years after a year in which the 
threshold did not change. The Bureau believes that this clarification 
memorializes the method that the Bureau would be expected to use: This 
method holds the threshold fixed until a notional threshold calculated 
using the Bureau's methodology, taking into account both decreases and 
increases in the CPI-W, exceeds the actual threshold. The Bureau 
requested, but did not receive, comment on this point. Thus, the Bureau 
concludes that the final rule will not change the regulatory regime 
relative to the baseline and will create no significant benefits, 
costs, or impacts.
---------------------------------------------------------------------------

    \12\ 76 FR 18354, 18355 n.1 (Apr. 4, 2011) (``[A]n annual period 
of deflation or no inflation would not require a change in the 
threshold amount.'').
---------------------------------------------------------------------------

    The final rule will have no unique impact on depository 
institutions or credit unions with $10 billion or less in assets as 
described in section 1026(a) of the Dodd-Frank Act or on rural 
consumers. The Bureau does not expect this final rule to affect 
consumers' access to credit.

Regulatory Flexibility Act

    Board: An initial regulatory flexibility analysis (IRFA) was 
included in the proposal in accordance with section 3(a) of the 
Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA). In the IRFA, 
the Board requested comments on any approaches, other than the proposed 
alternatives, that would reduce the burden on small entities. The RFA 
requires an agency to prepare a final regulatory flexibility analysis 
(FRFA) unless the agency certifies that the rule will not, if 
promulgated, have a significant economic impact on a substantial number 
of small entities. In accordance with section 3(a) of the RFA, the 
Board has reviewed the final regulation. Based on its analysis, and for 
the reasons stated below, the Board believes that the rule will not 
have a significant economic impact on a substantial number of small 
entities.
    1. Statement of the need for, and objectives of, the final rule. 
The final rule memorializes the calculation method used by the Board 
each year to adjust the exemption threshold in accordance with section 
1100E of the Dodd-Frank Act. The final rule also adopts the exemption 
threshold that will apply from January 1, 2017, through December 31, 
2017, based on the calculation method memorialized in this final rule.
    2. Summary of issues raised by comments in response to the initial 
regulatory flexibility analysis. The Board did not receive any comments 
on the initial regulatory flexibility analysis.
    3. Small entities affected by the final rule. Motor vehicle dealers 
that are subject to the Board's Regulation M and offer consumer leases 
that may be exempt from Regulation M under 12 CFR 213.2(e) would be 
affected. While the total number of small entities likely to be 
affected by the final rule is unknown, the Board does not believe the 
final rule will have a significant economic impact on the entities that 
it affects.
    4. Recordkeeping, reporting, and compliance requirements. The final 
rule would not impose any recordkeeping, reporting, or compliance 
requirements.
    5. Significant alternatives to the final revisions. The Board has 
not identified any significant alternatives that would reduce the 
regulatory burden on small entities associated with this final rule.
    Bureau: The RFA generally requires an agency to conduct an initial 
regulatory flexibility analysis (IRFA) and a final regulatory 
flexibility analysis (FRFA) of any rule subject to notice-and-comment 
rulemaking requirements.\13\ These analyses must describe the impact of 
the proposed and final rules on small entities.\14\ An IRFA or FRFA is 
not required if the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small 
entities.\15\ The Bureau also is subject to certain additional 
procedures under the RFA involving the convening of a panel to

[[Page 86259]]

consult with small business representatives prior to proposing a rule 
for which an IRFA is required.\16\
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    \13\ 5 U.S.C. 601 et seq.
    \14\ Id. at 603(a) and 604(a). For purposes of assessing the 
impacts of the rule on small entities, ``small entities'' is defined 
in the RFA to include small businesses, small not-for-profit 
organizations, and small government jurisdictions. Id. at 601(6). A 
``small business'' is determined by application of Small Business 
Administration regulations and reference to the North American 
Industry Classification System (NAICS) classifications and size 
standards. Id. at 601(3). A ``small organization'' is any ``not-for-
profit enterprise which is independently owned and operated and is 
not dominant in its field.'' Id. at 601(4). A ``small governmental 
jurisdiction'' is the government of a city, county, town, township, 
village, school district, or special district with a population of 
less than 50,000. Id. at 601(5).
    \15\ Id. at 605(b).
    \16\ Id. at 609.
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    A FRFA is not required for this final rule because it will not have 
a significant economic impact on a substantial number of small 
entities. As discussed in the Bureau's Section 1022(b)(2) Analysis 
above, this final rule does not introduce costs or benefits to covered 
persons because it seeks only to clarify the method of threshold 
adjustment which has already been established in previous Agency rules. 
Therefore this final rule will not have a significant impact on small 
entities.
Certification
    Accordingly, the Bureau Director, by signing below, certifies that 
this final rule will not have a significant economic impact on a 
substantial number of small entities.
Paperwork Reduction Act
    In accordance with the Paperwork Reduction Act of 1995,\17\ the 
agencies reviewed this final rule. No collections of information 
pursuant to the Paperwork Reduction Act are contained in the final 
rule.
---------------------------------------------------------------------------

    \17\ 44 U.S.C. 3506; 5 CFR 1320.
---------------------------------------------------------------------------

List of Subjects

12 CFR Part 213

    Advertising, Consumer leasing, Consumer protection, Federal Reserve 
System, Reporting and recordkeeping requirements.

12 CFR Part 1013

    Advertising, Consumer leasing, Reporting and recordkeeping 
requirements, 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 M, 12 CFR part 213, as set forth below:

PART 213--CONSUMER LEASING (REGULATION M)

0
1. The authority citation for part 213 continues to read as follows:

    Authority:  15 U.S.C. 1604 and 1667f; Public Law 111-203, 
section 1100E, 124 Stat. 1376.


0
2. In supplement I to part 213, under Section 213.2--Definitions, under 
2(e) Consumer lease, paragraph 9 is revised, and paragraphs 10 and 11 
are added, to read as follows:

Supplement I to Part 213--Official Staff Commentary to Regulation M

* * * * *

Section 213.2--Definitions

* * * * *
2(e) Consumer Lease
* * * * *
    9. Threshold amount. A consumer lease is exempt from the 
requirements of this part if the total contractual obligation exceeds 
the threshold amount in effect at the time of consummation. The 
threshold amount in effect during a particular time period is the 
amount stated in comment 2(e)-11 for that period. The threshold amount 
is adjusted effective January 1 of each year by any annual percentage 
increase in the Consumer Price Index for Urban Wage Earners and 
Clerical Workers (CPI-W) that was in effect on the preceding June 1. 
Comment 2(e)-11 will be amended to provide the threshold amount for the 
upcoming year after the annual percentage change in the CPI-W that was 
in effect on June 1 becomes available. 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. If a consumer lease is 
exempt from the requirements of this Part because the total contractual 
obligation exceeds the threshold amount in effect at the time of 
consummation, the lease remains exempt regardless of a subsequent 
increase in the threshold amount.
    10. No increase in the CPI-W. If the CPI-W in effect on June 1 does 
not increase from the CPI-W in effect on June 1 of the previous year, 
the threshold amount effective the following January 1 through December 
31 will not change from the previous year. When this occurs, for the 
years that follow, the threshold is calculated based on the annual 
percentage change in the CPI-W applied to the dollar amount that would 
have resulted, after rounding, if decreases and any subsequent 
increases in the CPI-W had been taken into account.
    i. Net increases. 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.
    ii. Net decreases. 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.
    11. Threshold. For purposes of Sec.  213.2(e)(1), the threshold 
amount in effect during a particular period is the amount stated below 
for that period.
    i. Prior to July 21, 2011, the threshold amount is $25,000.
    ii. From July 21, 2011 through December 31, 2011, the threshold 
amount is $50,000.
    iii. From January 1, 2012 through December 31, 2012, the threshold 
amount is $51,800.
    iv. From January 1, 2013 through December 31, 2013, the threshold 
amount is $53,000.
    v. From January 1, 2014 through December 31, 2014, the threshold 
amount is $53,500.
    vi. From January 1, 2015 through December 31, 2015, the threshold 
amount is $54,600.
    vii. From January 1, 2016 through December 31, 2016, the threshold 
amount is $54,600.
    viii. From January 1, 2017 through December 31, 2017, the threshold 
amount is $54,600.

Bureau of Consumer Financial Protection

Authority and Issuance

    For the reasons set forth in the preamble, the Bureau amends 
Regulation M, 12 CFR part 1013, as set forth below:

PART 1013--CONSUMER LEASING (REGULATION M)

0
3. The authority citation for part 1013 continues to read as follows:

    Authority:  15 U.S.C. 1604 and 1667f; Public Law 111-203, 
section 1100E, 124 Stat. 1376.


0
4. In supplement I to part 1013, under Section 1013.2--Definitions, 
under 2(e)--Consumer Lease, paragraph 9 is revised, and paragraphs 10 
and 11 are added, to read as follows:

Supplement I to Part 1013--Official Interpretations

* * * * *

Section 1013.2--Definitions

* * * * *
2(e) Consumer Lease
* * * * *
    9. Threshold amount. A consumer lease is exempt from the 
requirements of

[[Page 86260]]

this part if the total contractual obligation exceeds the threshold 
amount in effect at the time of consummation. The threshold amount in 
effect during a particular time period is the amount stated in comment 
2(e)-11 for that period. The threshold amount is adjusted effective 
January 1 of each year by any annual percentage increase in the 
Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-
W) that was in effect on the preceding June 1. Comment 2(e)-11 will be 
amended to provide the threshold amount for the upcoming year after the 
annual percentage change in the CPI-W that was in effect on June 1 
becomes available. 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. If a consumer lease is exempt from the requirements 
of this part because the total contractual obligation exceeds the 
threshold amount in effect at the time of consummation, the lease 
remains exempt regardless of a subsequent increase in the threshold 
amount.
    10. No increase in the CPI-W. If the CPI-W in effect on June 1 does 
not increase from the CPI-W in effect on June 1 of the previous year, 
the threshold amount effective the following January 1 through December 
31 will not change from the previous year. When this occurs, for the 
years that follow, the threshold is calculated based on the annual 
percentage change in the CPI-W applied to the dollar amount that would 
have resulted, after rounding, if decreases and any subsequent 
increases in the CPI-W had been taken into account.
    i. Net increases. 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.
    ii. Net decreases. 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.
    11. Threshold. For purposes of Sec.  1013.2(e)(1), the threshold 
amount in effect during a particular period is the amount stated below 
for that period.
    i. Prior to July 21, 2011, the threshold amount is $25,000.
    ii. From July 21, 2011 through December 31, 2011, the threshold 
amount is $50,000.
    iii. From January 1, 2012 through December 31, 2012, the threshold 
amount is $51,800.
    iv. From January 1, 2013 through December 31, 2013, the threshold 
amount is $53,000.
    v. From January 1, 2014 through December 31, 2014, the threshold 
amount is $53,500.
    vi. From January 1, 2015 through December 31, 2015, the threshold 
amount is $54,600.
    vii. From January 1, 2016 through December 31, 2016, the threshold 
amount is $54,600.
    viii. From January 1, 2017 through December 31, 2017, the threshold 
amount is $54,600.

    By order of the Board of Governors of the Federal Reserve 
System, November 17, 2016.
Robert deV. Frierson,
Secretary of the Board.
    Dated: November 7, 2016.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2016-28710 Filed 11-29-16; 8:45 am]
 BILLING CODE 6210-01-P; 4810-AM-P