Truth in Lending (Regulation Z) Annual Threshold Adjustments (Credit Cards, HOEPA, and Qualified Mortgages), 37565-37570 [2019-16300]

Agencies

• BUREAU OF CONSUMER FINANCIAL PROTECTION

[Federal Register Volume 84, Number 148 (Thursday, August 1, 2019)]
[Rules and Regulations]
[Pages 37565-37570]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-16300]



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                                                Federal Register
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Federal Register / Vol. 84, No. 148 / Thursday, August 1, 2019 / 
Rules and Regulations

[[Page 37565]]



BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026


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

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule; official interpretation.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
issuing this final rule amending the regulation text and official 
interpretations for Regulation Z, which implements the Truth in Lending 
Act (TILA). The Bureau is required to calculate annually the dollar 
amounts for several provisions in Regulation Z; this final rule 
revises, as applicable, the dollar amounts for provisions implementing 
TILA and amendments to TILA, including under the Credit Card 
Accountability Responsibility and Disclosure Act of 2009 (CARD Act), 
the Home Ownership and Equity Protection Act of 1994 (HOEPA), and the 
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank 
Act). The Bureau is adjusting these amounts, where appropriate, based 
on the annual percentage change reflected in the Consumer Price Index 
(CPI) in effect on June 1, 2019.

DATES: This final rule is effective January 1, 2020.

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

SUPPLEMENTARY INFORMATION: The Bureau is amending the regulation text 
and official interpretations for Regulation Z, which implements TILA, 
to update the dollar amounts of various thresholds that are adjusted 
annually based on the annual percentage change in the CPI as published 
by the Bureau of Labor Statistics (BLS). Specifically, for open-end 
consumer credit plans under TILA, the threshold that triggers 
requirements to disclose minimum interest charges will remain unchanged 
at $1.00 in 2020. For open-end consumer credit plans under the CARD Act 
amendments to TILA, the adjusted dollar amount in 2020 for the safe 
harbor for a first violation penalty fee will increase by $1 to $29 and 
the adjusted dollar amount for the safe harbor for a subsequent 
violation penalty fee will increase by $1 to $40. For HOEPA loans, the 
adjusted total loan amount threshold for high-cost mortgages in 2020 
will be $21,980. The adjusted points-and-fees dollar trigger for high-
cost mortgages in 2020 will be $1,099. For qualified mortgages, which 
provide creditors with certain protections from liability under the 
Ability-to-Repay Rule, the maximum thresholds for total points and fees 
in 2020 will be 3 percent of the total loan amount for a loan greater 
than or equal to $109,898; $3,297 for a loan amount greater than or 
equal to $65,939 but less than $109,898; 5 percent of the total loan 
amount for a loan greater than or equal to $21,980 but less than 
$65,939; $1,099 for a loan amount greater than or equal to $13,737 but 
less than $21,980; and 8 percent of the total loan amount for a loan 
amount less than $13,737.

I. Background

A. Credit Card Annual Adjustments

Minimum Interest Charge Disclosure Thresholds
    Sections 1026.6(b)(2)(iii) and 1026.60(b)(3) of Regulation Z 
implement sections 127(a)(3) and 127(c)(1)(A)(ii)(II) of TILA. Sections 
1026.6(b)(2)(iii) and 1026.60(b)(3) require creditors to disclose any 
minimum interest charge exceeding $1.00 that could be imposed during a 
billing cycle. These provisions also state that, for open-end consumer 
credit plans, the minimum interest charge thresholds will be re-
calculated annually using the CPI that was in effect on the preceding 
June 1; the Bureau uses the Consumer Price Index for Urban Wage Earners 
and Clerical Workers (CPI-W) for this adjustment.\1\ If 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 analysis is based on the CPI-W index in effect on June 1, 
2019, which was reported by BLS on May 10, 2019,\2\ and reflects the 
percentage change from April 2018 to April 2019. The adjustment 
analysis accounts for a 1.9 percent increase in the CPI-W from April 
2018 to April 2019. 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) does 
not trigger an increase in the minimum interest charge threshold of at 
least $1.00, and the Bureau is therefore not amending Sec. Sec.  
1026.6(b)(2)(iii) and 1026.60(b)(3).
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    \1\ The CPI-W is a subset of the Consumer Price Index for All 
Urban Consumers (CPI-U) index and represents approximately 29 
percent of the U.S. population.
    \2\ BLS publishes Consumer Price Indices monthly, usually in the 
middle of each calendar month. Thus, the CPI-W reported on May 10, 
2019 was the most current as of June 1, 2019.
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Safe Harbor Penalty Fees
    Section 1026.52(b)(1)(ii)(A) and (B) of Regulation Z implements 
section 149(e) of TILA, which was added to TILA by the CARD Act.\3\ 
Section 1026.52(b)(1)(ii)(D) provides that the safe harbor provision, 
which establishes the permissible penalty fee thresholds in Sec.  
1026.52(b)(1)(ii)(A) and (B), will be re-calculated annually using the 
CPI that was in effect on the preceding June 1; the Bureau uses the 
CPI-W for this adjustment. If the cumulative change in the adjusted 
value derived from applying the annual CPI-W level to the current 
amounts in Sec.  1026.52(b)(1)(ii)(A) and (B) has risen by a whole 
dollar, those amounts will be increased by $1.00. Similarly, if the 
cumulative change in the adjusted value derived from applying the 
annual CPI-W level to the current amounts in Sec.  1026.52(b)(1)(ii)(A) 
and (B) has decreased by a whole dollar, those amounts will be 
decreased by $1.00. See comment 52(b)(1)(ii)-2. The 2020 adjustment 
analysis is based on the CPI-W index in effect on June 1, 2019, which 
was reported by BLS on May 10, 2019, and reflects the percentage change 
from April 2018 to April 2019. The adjustment to the permissible fee

[[Page 37566]]

thresholds of $29 for a first violation penalty fee and $40 for a 
subsequent violation being adopted here reflects a 1.9 percent increase 
in the CPI-W from April 2018 to April 2019 and is rounded to the 
nearest $1 increment.
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    \3\ Credit Card Accountability Responsibility and Disclosure Act 
of 2009, Public Law 111-24, 123 Stat. 1734 (2009).
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B. HOEPA Annual Threshold Adjustments

    Section 1026.32(a)(1)(ii) of Regulation Z implements section 1431 
of the Dodd-Frank Act,\4\ which amended the HOEPA points-and-fees 
coverage test. Under Sec.  1026.32(a)(1)(ii)(A) and (B), in assessing 
whether a transaction is a high-cost mortgage due to points and fees 
the creditor is charging, the applicable points-and-fees coverage test 
depends on whether the total loan amount is for $20,000 or more, or for 
less than $20,000. Section 1026.32(a)(1)(ii) provides that this 
threshold amount be recalculated annually using the CPI index in effect 
on June 1; the Bureau uses the CPI-U for this adjustment.\5\ The 2020 
adjustment is based on the CPI-U index in effect on June 1, which was 
reported by BLS on May 10, 2019, and reflects the percentage change 
from April 2018 to April 2019. The adjustment to $21,980 here reflects 
a 2 percent increase in the CPI-U index from April 2018 to April 2019 
and is rounded to the nearest whole dollar amount for ease of 
compliance.
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    \4\ Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Public Law 111-203, 124 Stat. 1376 (2010).
    \5\ The CPI-U is based on all urban consumers and represents 
approximately 93 percent of the U.S. population.
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    Under Sec.  1026.32(a)(1)(ii)(B) the HOEPA points-and-fees 
threshold is $1,000. Section 1026.32(a)(1)(ii)(B) provides that this 
threshold amount will be recalculated annually using the CPI index in 
effect on June 1; the Bureau uses the CPI-U for this adjustment. The 
2020 adjustment is based on the CPI-U index in effect on June 1, 2019, 
which was reported by BLS on May 10, 2019, and reflects the percentage 
change from April 2018 to April 2019. The adjustment to $1,099 here 
reflects a 2 percent increase in the CPI-U index from April 2018 to 
April 2019 and is rounded to the nearest whole dollar amount for ease 
of compliance.

C. Qualified Mortgages Annual Threshold Adjustments

    The Bureau's Regulation Z implements sections 1411 and 1412 of the 
Dodd-Frank Act, which generally require creditors to make a reasonable, 
good-faith determination of a consumer's ability to repay any consumer 
credit transaction secured by a dwelling and establishes certain 
protections from liability under this requirement for qualified 
mortgages. Under Sec.  1026.43(e)(3)(i), a covered transaction is not a 
qualified mortgage if the transaction's total points and fees exceed: 3 
Percent of the total loan amount for a loan amount greater than or 
equal to $100,000; $3,000 for a loan amount greater than or equal to 
$60,000 but less than $100,000; 5 percent of the total loan amount for 
loans greater than or equal to $20,000 but less than $60,000; $1,000 
for a loan amount greater than or equal to $12,500 but less than 
$20,000; or 8 percent of the total loan amount for loans less than 
$12,500. Section 1026.43(e)(3)(ii) provides that the limits and loan 
amounts in Sec.  1026.43(e)(3)(i) are recalculated annually for 
inflation using the CPI-U index in effect on June 1. The 2020 
adjustment is based on the CPI-U index in effect on June 1, 2019, which 
was reported by BLS on May 10, 2019, and reflects the percentage change 
from April 2018 to April 2019. The adjustment to the 2019 figures \6\ 
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.
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    \6\ For 2020, a covered transaction is not a qualified mortgage 
if the transaction's total points and fees exceed 3 percent of the 
total loan amount for a loan amount greater than or equal to 
$109,898; $3,297 for a loan amount greater than or equal to $65,939 
but less than $109,898; 5 percent of the total loan amount for loans 
greater than or equal to $21,980 but less than $65,939; $1,099 for a 
loan amount greater than or equal to $13,737 but less than $21,980; 
or 8 percent of the total loan amount for loans less than $13,737.
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II. Adjustment and Commentary Revision

A. Credit Card Annual Adjustments

Minimum Interest Charge Disclosure Thresholds--Sec. Sec.  
1026.6(b)(2)(iii) and 1026.60(b)(3)
    The minimum interest charge amounts for Sec. Sec.  
1026.6(b)(2)(iii) and 1026.60(b)(3) will remain unchanged at $1.00 for 
the year 2020. Accordingly, the Bureau is not amending these sections 
of Regulation Z.
Safe Harbor Penalty Fees--Sec.  1026.52(b)(1)(ii)(A) and (B)
    Effective January 1, 2020, the permissible fee threshold amounts 
increased by $1 and are $29 for Sec.  1026.52(b)(1)(ii)(A) and $40 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 $29 and $40, 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, 2020, for purposes of determining under Sec.  
1026.32(a)(1)(ii) the points-and-fees coverage test under HOEPA to 
which a transaction is subject, the total loan amount threshold is 
$21,980, and the adjusted points-and-fees dollar trigger under Sec.  
1026.32(a)(1)(ii)(B) is $1,099. If the total loan amount for a 
transaction is $21,980 or more, and the points-and-fees amount exceeds 
5 percent of the total loan amount, the transaction is a high-cost 
mortgage. If the total loan amount for a transaction is less than 
$21,980, and the points-and-fees amount exceeds the lesser of the 
adjusted points-and-fees dollar trigger of $1,099 or 8 percent of the 
total loan amount, the transaction is a high-cost mortgage. The Bureau 
is amending comments 32(a)(1)(ii)-1 and -3, which list the adjustments 
for each year, to reflect for 2020 the new loan amount dollar threshold 
and the new points-and-fees dollar trigger, respectively.

C. Qualified Mortgages Annual Threshold Adjustments

    Effective January 1, 2020, a covered transaction is not a qualified 
mortgage if, pursuant to Sec.  1026.43(e)(3), the transaction's total 
points and fees exceed 3 percent of the total loan amount for a loan 
amount greater than or equal to $109,898; $3,297 for a loan amount 
greater than or equal to $65,939 but less than $109,898; 5 percent of 
the total loan amount for loans greater than or equal to $21,980 but 
less than $65,939; $1,099 for a loan amount greater than or equal to 
$13,737 but less than $21,980; or 8 percent of the total loan amount 
for loans less than $13,737. The Bureau is amending comment 
43(e)(3)(ii)-1, which lists the adjustments for each year, to reflect 
the new dollar threshold amounts for 2020.

III. Procedural Requirements

A. Administrative Procedure Act

    Under the Administrative Procedure Act, notice and opportunity for 
public comment are not required if the Bureau finds that notice and 
public comment are impracticable, unnecessary, or contrary to the 
public interest.\7\ Pursuant to this final rule, in Regulation Z, Sec.  
1026.52(b)(1)(ii)(A) and (B) in subpart G is amended and comments 
32(a)(1)(ii)-1.vi and -3.vi, 43(e)(3)(ii)-

[[Page 37567]]

1.vi, and 52(b)(1)(ii)-2.i.G in Supplement I are added to update the 
exemption thresholds. The amendments in this final rule are technical 
and non-discretionary, as they merely apply the method previously 
established in Regulation Z for determining adjustments to the 
thresholds. For these reasons, the Bureau has determined that 
publishing a notice of proposed rulemaking and providing opportunity 
for public comment are unnecessary. The amendments therefore are 
adopted in final form.
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    \7\ 5 U.S.C. 553(b)(B).
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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.\8\
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    \8\ 5 U.S.C. 603(a), 604(a).
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C. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995,\9\ the 
Bureau reviewed this final rule. No collections of information pursuant 
to the Paperwork Reduction Act are contained in the final rule.
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    \9\ 44 U.S.C. 3506; 5 CFR part 1320.
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D. Congressional Review Act

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

List of Subjects in 12 CFR Part 1026

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

Authority and Issuance

    For the reasons set forth in the preamble, the Bureau amends 
Regulation Z, 12 CFR part 1026, as set forth below:

PART 1026--TRUTH IN LENDING (REGULATION Z)

0
1. The authority citation for part 1026 continues to read as follows:

    Authority: 12 U.S.C. 2601, 2603-2605, 2607, 2609, 2617, 3353, 
5511, 5512, 5532, 5581; 15 U.S.C. 1601 et seq.

SUBPART G--SPECIAL RULES APPLICABLE TO CREDIT CARD ACCOUNTS AND 
OPEN END CREDIT OFFERED TO COLLEGE STUDENTS

0
2. Amend Sec.  1026.52 by revising paragraphs (b)(1)(ii)(A) and (B) to 
read as follows:


Sec.  1026.52  Limitations on fees.

* * * * *
    (b) * * *
    (1) * * *
    (ii) * * *
    (A) $29
    (B) $40 if the card issuer previously imposed a fee pursuant to 
paragraph (b)(1)(ii)(A) of this section for a violation of the same 
type that occurred during the same billing cycle or one of the next six 
billing cycles; or
* * * * *

0
3. In Supplement I to Part 1026:
0
a. Under Section 1026.32--Requirements for High-Cost Mortgages, 
paragraph 32(a)(1)(ii) is revised.
0
b. Under Section 1026.43--Minimum Standards for Transactions Secured by 
a Dwelling, paragraph 43(e)(3)(ii) is revised.
0
c. Under Section 1026.52--Limitations on Fees, section 52(b)(1)(ii) 
Safe harbors is revised.
    The revisions read as follows:

Supplement I to Part 1026--Official Interpretations

* * * * *

Section 1026.32--Requirements for High-Cost Mortgages

* * * * *
    Paragraph 32(a)(1)(ii).
    1. Annual adjustment of $1,000 amount. The $1,000 figure in Sec.  
1026.32(a)(1)(ii)(B) is adjusted annually on January 1 by the annual 
percentage change in the CPI that was in effect on the preceding June 
1. The Bureau will publish adjustments after the June figures become 
available each year.
    i. For 2015, $1,020, reflecting a 2 percent increase in the CPI-U 
from June 2013 to June 2014, rounded to the nearest whole dollar.
    ii. For 2016, $1,017, reflecting a .2 percent decrease in the CPI-U 
from June 2014 to June 2015, rounded to the nearest whole dollar.
    iii. For 2017, $1,029, reflecting a 1.1 percent increase in the 
CPI-U from June 2015 to June 2016, rounded to the nearest whole dollar.
    iv. For 2018, $1,052, reflecting a 2.2 percent increase in the CPI-
U from June 2016 to June 2017, rounded to the nearest whole dollar.
    v. For 2019, $1,077, reflecting a 2.5 percent increase in the CPI-U 
from June 2017 to June 2018, rounded to the nearest whole dollar.
    vi. For 2020, $21,980, reflecting a 2 percent increase in the CPI-U 
from June 2018 to June 2019, rounded to the nearest whole dollar.
    2. Historical adjustment of $400 amount. Prior to January 10, 2014, 
a mortgage loan was covered by Sec.  1026.32 if the total points and 
fees payable by the consumer at or before loan consummation exceeded 
the greater of $400 or 8 percent of the total loan amount. The $400 
figure was adjusted annually on January 1 by the annual percentage 
change in the CPI that was in effect on the preceding June 1, as 
follows:
    i. For 1996, $412, reflecting a 3.00 percent increase in the CPI-U 
from June 1994 to June 1995, rounded to the nearest whole dollar.
    ii. For 1997, $424, reflecting a 2.9 percent increase in the CPI-U 
from June 1995 to June 1996, rounded to the nearest whole dollar.
    iii. For 1998, $435, reflecting a 2.5 percent increase in the CPI-U 
from June 1996 to June 1997, rounded to the nearest whole dollar.
    iv. For 1999, $441, reflecting a 1.4 percent increase in the CPI-U 
from June 1997 to June 1998, rounded to the nearest whole dollar.
    v. For 2000, $451, reflecting a 2.3 percent increase in the CPI-U 
from June 1998 to June 1999, rounded to the nearest whole dollar.
    vi. For 2001, $465, reflecting a 3.1 percent increase in the CPI-U 
from June 1999 to June 2000, rounded to the nearest whole dollar.
    vii. For 2002, $480, reflecting a 3.27 percent increase in the CPI-
U from June 2000 to June 2001, rounded to the nearest whole dollar.
    viii. For 2003, $488, reflecting a 1.64 percent increase in the 
CPI-U from June 2001 to June 2002, rounded to the nearest whole dollar.
    ix. For 2004, $499, reflecting a 2.22 percent increase in the CPI-U 
from June 2002 to June 2003, rounded to the nearest whole dollar.
    x. For 2005, $510, reflecting a 2.29 percent increase in the CPI-U 
from June 2003 to June 2004, rounded to the nearest whole dollar.
    xi. For 2006, $528, reflecting a 3.51 percent increase in the CPI-U 
from June 2004 to June 2005, rounded to the nearest whole dollar.
    xii. For 2007, $547, reflecting a 3.55 percent increase in the CPI-
U from June 2005 to June 2006, rounded to the nearest whole dollar.
    xiii. For 2008, $561, reflecting a 2.56 percent increase in the 
CPI-U from June

[[Page 37568]]

2006 to June 2007, rounded to the nearest whole dollar.
    xiv. For 2009, $583, reflecting a 3.94 percent increase in the CPI-
U from June 2007 to June 2008, rounded to the nearest whole dollar.
    xv. For 2010, $579, reflecting a 0.74 percent decrease in the CPI-U 
from June 2008 to June 2009, rounded to the nearest whole dollar.
    xvi. For 2011, $592, reflecting a 2.2 percent increase in the CPI-U 
from June 2009 to June 2010, rounded to the nearest whole dollar.
    xvii. For 2012, $611, reflecting a 3.2 percent increase in the CPI-
U from June 2010 to June 2011, rounded to the nearest whole dollar.
    xviii. For 2013, $625, reflecting a 2.3 percent increase in the 
CPI-U from June 2011 to June 2012, rounded to the nearest whole dollar.
    xix. For 2014, $632, reflecting a 1.1 percent increase in the CPI-U 
from June 2012 to June 2013, rounded to the nearest whole dollar.
    3. Applicable threshold. For purposes of Sec.  1026.32(a)(1)(ii), a 
creditor must determine the applicable points and fees threshold based 
on the face amount of the note (or, in the case of an open-end credit 
plan, the credit limit for the plan when the account is opened). 
However, the creditor must apply the allowable points and fees 
percentage to the ``total loan amount,'' as defined in Sec.  
1026.32(b)(4). For closed-end credit transactions, the total loan 
amount may be different than the face amount of the note. The $20,000 
amount in Sec.  1026.32(a)(1)(ii)(A) and (B) is adjusted annually on 
January 1 by the annual percentage change in the CPI that was in effect 
on the preceding June 1.
    i. For 2015, $20,391, reflecting a 2 percent increase in the CPI-U 
from June 2013 to June 2014, rounded to the nearest whole dollar.
    ii. For 2016, $20,350, reflecting a .2 percent decrease in the CPI-
U from June 2014 to June 2015, rounded to the nearest whole dollar.
    iii. For 2017, $20,579, reflecting a 1.1 percent increase in the 
CPI-U from June 2015 to June 2016, rounded to the nearest whole dollar.
    iv. For 2018, $21,032, reflecting a 2.2 percent increase in the 
CPI-U from June 2016 to June 2017, rounded to the nearest whole dollar.
    v. For 2019, $21,549, reflecting a 2.5 percent increase in the CPI-
U from June 2017 to June 2018, rounded to the nearest whole dollar.
    vi. For 2020, $21,980, reflecting a 2 percent increase in the CPI-U 
from June 2018 to June 2019, rounded to the nearest whole dollar.
* * * * *

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

* * * * *
    Paragraph 43(e)(3)(ii).
    1. Annual adjustment for inflation. The dollar amounts, including 
the loan amounts, in Sec.  1026.43(e)(3)(i) will be adjusted annually 
on January 1 by the annual percentage change in the CPI-U that was in 
effect on the preceding June 1. The Bureau will publish adjustments 
after the June figures become available each year.
    i. For 2015, reflecting a 2 percent increase in the CPI-U that was 
reported on the preceding June 1, a covered transaction is not a 
qualified mortgage unless the transactions total points and fees do not 
exceed;
    A. For a loan amount greater than or equal to $101,953: 3 percent 
of the total loan amount;
    B. For a loan amount greater than or equal to $61,172 but less than 
$101,953: $3,059;
    C. For a loan amount greater than or equal to $20,391 but less than 
$61,172: 5 percent of the total loan amount;
    D. For a loan amount greater than or equal to $12,744 but less than 
$20,391; $1,020;
    E. For a loan amount less than $12,744: 8 percent of the total loan 
amount.
    ii. For 2016, reflecting a .2 percent decrease in the CPI-U that 
was reported on the preceding June 1, a covered transaction is not a 
qualified mortgage unless the transactions total points and fees do not 
exceed;
    A. For a loan amount greater than or equal to $101,749: 3 percent 
of the total loan amount;
    B. For a loan amount greater than or equal to $61,050 but less than 
$101,749: $3,052;
    C. For a loan amount greater than or equal to $20,350 but less than 
$61,050: 5 percent of the total loan amount;
    D. For a loan amount greater than or equal to $12,719 but less than 
$20,350; $1,017;
    E. For a loan amount less than $12,719: 8 percent of the total loan 
amount.
    iii. For 2017, reflecting a 1.1 percent increase in the CPI-U that 
was reported on the preceding June 1, a covered transaction is not a 
qualified mortgage unless the transactions total points and fees do not 
exceed:
    A. For a loan amount greater than or equal to $102,894: 3 percent 
of the total loan amount;
    B. For a loan amount greater than or equal to $61,737 but less than 
$102,894: $3,087;
    C. For a loan amount greater than or equal to $20,579 but less than 
$61,737: 5 percent of the total loan amount;
    D. For a loan amount greater than or equal to $12,862 but less than 
$20,579: $1,029;
    E. For a loan amount less than $12,862: 8 percent of the total loan 
amount.
    iv. For 2018, reflecting a 2.2 percent increase in the CPI-U that 
was reported on the preceding June 1, a covered transaction is not a 
qualified mortgage unless the transaction's total points and fees do 
not exceed:
    A. For a loan amount greater than or equal to $105,158: 3 percent 
of the total loan amount;
    B. For a loan amount greater than or equal to $63,095 but less than 
$105,158: $3,155;
    C. For a loan amount greater than or equal to $21,032 but less than 
$63,095: 5 percent of the total loan amount;
    D. For a loan amount greater than or equal to $13,145 but less than 
$21,032: $1,052;
    E. For a loan amount less than $13,145: 8 percent of the total loan 
amount.
    v. For 2019, reflecting a 2.5 percent increase in the CPI-U that 
was reported on the preceding June 1, a covered transaction is not a 
qualified mortgage unless the transaction's total points and fees do 
not exceed:
    A. For a loan amount greater than or equal to $107,747: 3 percent 
of the total loan amount;
    B. For a loan amount greater than or equal to $64,648 but less than 
$107,747: $3,232;
    C. For a loan amount greater than or equal to $21,549 but less than 
$64,648: 5 percent of the total loan amount;
    D. For a loan amount greater than or equal to $13,468 but less than 
$21,549: $1,077;
    E. For a loan amount less than $13,468: 8 percent of the total loan 
amount.
    vi. For 2020, 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 transaction's total points and fees do 
not exceed:
    A. For a loan amount greater than or equal to $109,898: 3 percent 
of the total loan amount;
    B. For a loan amount greater than or equal to $65,939 but less than 
$109,898: $3,297;
    C. For a loan amount greater than or equal to $21,980 but less than 
$65,939: 5 percent of the total loan amount;
    D. For a loan amount greater than or equal to $13,737 but less than 
$21,980: $1,099;

[[Page 37569]]

    E. For a loan amount less than $13,737: 8 percent of the total loan 
amount.
* * * * *

Section 1026.52--Limitations on Fees

* * * * *
    52(b)(1)(ii) Safe harbors
    1. Multiple violations of same type. i. Same billing cycle or next 
six billing cycles. A card issuer cannot impose a fee for a violation 
pursuant to Sec.  1026.52(b)(1)(ii)(B) unless a fee has previously been 
imposed for the same type of violation pursuant to Sec.  
1026.52(b)(1)(ii)(A). Once a fee has been imposed for a violation 
pursuant to Sec.  1026.52(b)(1)(ii)(A), the card issuer may impose a 
fee pursuant to Sec.  1026.52(b)(1)(ii)(B) for any subsequent violation 
of the same type until that type of violation has not occurred for a 
period of six consecutive complete billing cycles. A fee has been 
imposed for purposes of Sec.  1026.52(b)(1)(ii) even if the card issuer 
waives or rebates all or part of the fee.
    A. Late payments. For purposes of Sec.  1026.52(b)(1)(ii), a late 
payment occurs during the billing cycle in which the payment may first 
be treated as late consistent with the requirements of this part and 
the terms or other requirements of the account.
    B. Returned payments. For purposes of Sec.  1026.52(b)(1)(ii), a 
returned payment occurs during the billing cycle in which the payment 
is returned to the card issuer.
    C. Transactions that exceed the credit limit. For purposes of Sec.  
1026.52(b)(1)(ii), a transaction that exceeds the credit limit for an 
account occurs during the billing cycle in which the transaction occurs 
or is authorized by the card issuer.
    D. Declined access checks. For purposes of Sec.  1026.52(b)(1)(ii), 
a check that accesses a credit card account is declined during the 
billing cycle in which the card issuer declines payment on the check.
    ii. Relationship to Sec. Sec.  1026.52(b)(2)(ii) and 1026.56(j)(1). 
If multiple violations are based on the same event or transaction such 
that Sec.  1026.52(b)(2)(ii) prohibits the card issuer from imposing 
more than one fee, the event or transaction constitutes a single 
violation for purposes of Sec.  1026.52(b)(1)(ii). Furthermore, 
consistent with Sec.  1026.56(j)(1)(i), no more than one violation for 
exceeding an account's credit limit can occur during a single billing 
cycle for purposes of Sec.  1026.52(b)(1)(ii). However, Sec.  
1026.52(b)(2)(ii) does not prohibit a card issuer from imposing fees 
for exceeding the credit limit in consecutive billing cycles based on 
the same over-the-limit transaction to the extent permitted by Sec.  
1026.56(j)(1). In these circumstances, the second and third over-the-
limit fees permitted by Sec.  1026.56(j)(1) may be imposed pursuant to 
Sec.  1026.52(b)(1)(ii)(B). See comment 52(b)(2)(ii)-1.
    iii. Examples. The following examples illustrate the application of 
Sec.  1026.52(b)(1)(ii)(A) and (b)(1)(ii)(B) with respect to credit 
card accounts under an open-end (not home-secured) consumer credit plan 
that are not charge card accounts. For purposes of these examples, 
assume that the billing cycles for the account begin on the first day 
of the month and end on the last day of the month and that the payment 
due date for the account is the twenty-fifth day of the month.
    A. Violations of same type (late payments). A required minimum 
periodic payment of $50 is due on March 25. On March 26, a late payment 
has occurred because no payment has been received. Accordingly, 
consistent with Sec.  1026.52(b)(1)(ii)(A), the card issuer imposes a 
$25 late payment fee on March 26. In order for the card issuer to 
impose a $35 late payment fee pursuant to Sec.  1026.52(b)(1)(ii)(B), a 
second late payment must occur during the April, May, June, July, 
August, or September billing cycles.
    1. The card issuer does not receive any payment during the March 
billing cycle. A required minimum periodic payment of $100 is due on 
April 25. On April 20, the card issuer receives a $50 payment. No 
further payment is received during the April billing cycle. 
Accordingly, consistent with Sec.  1026.52(b)(1)(ii)(B), the card 
issuer may impose a $35 late payment fee on April 26. Furthermore, the 
card issuer may impose a $35 late payment fee for any late payment that 
occurs during the May, June, July, August, September, or October 
billing cycles.
    2. Same facts as in paragraph A above. On March 30, the card issuer 
receives a $50 payment and the required minimum periodic payments for 
the April, May, June, July, August, and September billing cycles are 
received on or before the payment due date. A required minimum periodic 
payment of $60 is due on October 25. On October 26, a late payment has 
occurred because the required minimum periodic payment due on October 
25 has not been received. However, because this late payment did not 
occur during the six billing cycles following the March billing cycle, 
Sec.  1026.52(b)(1)(ii) only permits the card issuer to impose a late 
payment fee of $25.
    B. Violations of different types (late payment and over the credit 
limit). The credit limit for an account is $1,000. Consistent with 
Sec.  1026.56, the consumer has affirmatively consented to the payment 
of transactions that exceed the credit limit. A required minimum 
periodic payment of $30 is due on August 25. On August 26, a late 
payment has occurred because no payment has been received. Accordingly, 
consistent with Sec.  1026.52(b)(1)(ii)(A), the card issuer imposes a 
$25 late payment fee on August 26. On August 30, the card issuer 
receives a $30 payment. On September 10, a transaction causes the 
account balance to increase to $1,150, which exceeds the account's 
$1,000 credit limit. On September 11, a second transaction increases 
the account balance to $1,350. On September 23, the card issuer 
receives the $50 required minimum periodic payment due on September 25, 
which reduces the account balance to $1,300. On September 30, the card 
issuer imposes a $25 over-the-limit fee, consistent with Sec.  
1026.52(b)(1)(ii)(A). On October 26, a late payment has occurred 
because the $60 required minimum periodic payment due on October 25 has 
not been received. Accordingly, consistent with Sec.  
1026.52(b)(1)(ii)(B), the card issuer imposes a $35 late payment fee on 
October 26.
    C. Violations of different types (late payment and returned 
payment). A required minimum periodic payment of $50 is due on July 25. 
On July 26, a late payment has occurred because no payment has been 
received. Accordingly, consistent with Sec.  1026.52(b)(1)(ii)(A), the 
card issuer imposes a $25 late payment fee on July 26. On July 30, the 
card issuer receives a $50 payment. A required minimum periodic payment 
of $50 is due on August 25. On August 24, a $50 payment is received. On 
August 27, the $50 payment is returned to the card issuer for 
insufficient funds. In these circumstances, Sec.  1026.52(b)(2)(ii) 
permits the card issuer to impose either a late payment fee or a 
returned payment fee but not both because the late payment and the 
returned payment result from the same event or transaction. 
Accordingly, for purposes of Sec.  1026.52(b)(1)(ii), the event or 
transaction constitutes a single violation. However, if the card issuer 
imposes a late payment fee, Sec.  1026.52(b)(1)(ii)(B) permits the 
issuer to impose a fee of $35 because the late payment occurred during 
the six billing cycles following the July billing cycle. In contrast, 
if the card issuer imposes a

[[Page 37570]]

returned payment fee, the amount of the fee may be no more than $25 
pursuant to Sec.  1026.52(b)(1)(ii)(A).
    2. Adjustments based on Consumer Price Index. For purposes of Sec.  
1026.52(b)(1)(ii)(A) and (b)(1)(ii)(B), the Bureau shall calculate each 
year price level adjusted amounts using the Consumer Price Index in 
effect on June 1 of that year. When the cumulative change in the 
adjusted minimum value derived from applying the annual Consumer Price 
level to the current amounts in Sec.  1026.52(b)(1)(ii)(A) and 
(b)(1)(ii)(B) has risen by a whole dollar, those amounts will be 
increased by $1.00. Similarly, when the cumulative change in the 
adjusted minimum value derived from applying the annual Consumer Price 
level to the current amounts in Sec.  1026.52(b)(1)(ii)(A) and 
(b)(1)(ii)(B) has decreased by a whole dollar, those amounts will be 
decreased by $1.00. The Bureau will publish adjustments to the amounts 
in Sec.  1026.52(b)(1)(ii)(A) and (b)(1)(ii)(B).
    i. Historical thresholds.
    A. Card issuers were permitted to impose a fee for violating the 
terms of an agreement if the fee did not exceed $25 under Sec.  
1026.52(b)(1)(ii)(A) and $35 under Sec.  1026.52(b)(1)(ii)(B), through 
December 31, 2013.
    B. Card issuers were permitted to impose a fee for violating the 
terms of an agreement if the fee did not exceed $26 under Sec.  
1026.52(b)(1)(ii)(A) and $37 under Sec.  1026.52(b)(1)(ii)(B), through 
December 31, 2014.
    C. Card issuers were permitted to impose a fee for violating the 
terms of an agreement if the fee did not exceed $27 under Sec.  
1026.52(b)(1)(ii)(A) and $38 under Sec.  1026.52(b)(1)(ii)(B), through 
December 31, 2015.
    D. Card issuers were permitted to impose a fee for violating the 
terms of an agreement if the fee did not exceed $27 under Sec.  
1026.52(b)(1)(ii)(A), through December 31, 2016. Card issuers were 
permitted to impose a fee for violating the terms of an agreement if 
the fee did not exceed $37 under Sec.  1026.52(b)(1)(ii)(B), through 
June 26, 2016, and $38 under Sec.  1026.52(b)(1)(ii)(B) from June 27, 
2016 through December 31, 2016.
    E. Card issuers were permitted to impose a fee for violating the 
terms of an agreement if the fee did not exceed $27 under Sec.  
1026.52(b)(1)(ii)(A) and $38 under Sec.  1026.52(b)(1)(ii)(B), through 
December 31, 2017.
    F. Card issuers were permitted to impose a fee for violating the 
terms of an agreement if the fee did not exceed $27 under Sec.  
1026.52(b)(1)(ii)(A) and $38 under Sec.  1026.52(b)(1)(ii)(B), through 
December 31, 2018.
    G, Card issuers were permitted to impose a fee for violating the 
terms of an agreement if the fee did not exceed $28 under Sec.  
1026.52(b)(1)(ii)(A) and $39 under Sec.  1026.52(b)(1)(ii)(B), through 
December 31, 2019.
    3. Delinquent balance for charge card accounts. Section 
1026.52(b)(1)(ii)(C) provides that, when a charge card issuer that 
requires payment of outstanding balances in full at the end of each 
billing cycle has not received the required payment for two or more 
consecutive billing cycles, the card issuer may impose a late payment 
fee that does not exceed three percent of the delinquent balance. For 
purposes of Sec.  1026.52(b)(1)(ii)(C), the delinquent balance is any 
previously billed amount that remains unpaid at the time the late 
payment fee is imposed pursuant to Sec.  1026.52(b)(1)(ii)(C). 
Consistent with Sec.  1026.52(b)(2)(ii), a charge card issuer that 
imposes a fee pursuant to Sec.  1026.52(b)(1)(ii)(C) with respect to a 
late payment may not impose a fee pursuant to Sec.  
1026.52(b)(1)(ii)(B) with respect to the same late payment. The 
following examples illustrate the application of Sec.  
1026.52(b)(1)(ii)(C):
    i. Assume that a charge card issuer requires payment of outstanding 
balances in full at the end of each billing cycle and that the billing 
cycles for the account begin on the first day of the month and end on 
the last day of the month. At the end of the June billing cycle, the 
account has a balance of $1,000. On July 5, the card issuer provides a 
periodic statement disclosing the $1,000 balance consistent with Sec.  
1026.7. During the July billing cycle, the account is used for $300 in 
transactions, increasing the balance to $1,300. At the end of the July 
billing cycle, no payment has been received and the card issuer imposes 
a $25 late payment fee consistent with Sec.  1026.52(b)(1)(ii)(A). On 
August 5, the card issuer provides a periodic statement disclosing the 
$1,325 balance consistent with Sec.  1026.7. During the August billing 
cycle, the account is used for $200 in transactions, increasing the 
balance to $1,525. At the end of the August billing cycle, no payment 
has been received. Consistent with Sec.  1026.52(b)(1)(ii)(C), the card 
issuer may impose a late payment fee of $40, which is 3% of the $1,325 
balance that was due at the end of the August billing cycle. Section 
1026.52(b)(1)(ii)(C) does not permit the card issuer to include the 
$200 in transactions that occurred during the August billing cycle.
    ii. Same facts as above except that, on August 25, a $100 payment 
is received. Consistent with Sec.  1026.52(b)(1)(ii)(C), the card 
issuer may impose a late payment fee of $37, which is 3% of the unpaid 
portion of the $1,325 balance that was due at the end of the August 
billing cycle ($1,225).
    iii. Same facts as in paragraph A above except that, on August 25, 
a $200 payment is received. Consistent with Sec.  1026.52(b)(1)(ii)(C), 
the card issuer may impose a late payment fee of $34, which is 3% of 
the unpaid portion of the $1,325 balance that was due at the end of the 
August billing cycle ($1,125). In the alternative, the card issuer may 
impose a late payment fee of $35 consistent with Sec.  
1026.52(b)(1)(ii)(B). However, Sec.  1026.52(b)(2)(ii) prohibits the 
card issuer from imposing both fees.
* * * * *

    Dated: July 24, 2019.
Thomas Pahl,
Policy Associate Director, Bureau of Consumer Financial Protection.
[FR Doc. 2019-16300 Filed 7-31-19; 8:45 am]
 BILLING CODE 4810-AM-P