Truth in Lending (Regulation Z), 83322-83329 [2023-25048]
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Federal Register / Vol. 88, No. 228 / Wednesday, November 29, 2023 / Rules and Regulations
5. Agricultural purpose. Agricultural
purpose means a purpose related to the
production, harvest, exhibition,
marketing, transportation, processing, or
manufacture of agricultural products by
a natural person who cultivates, plants,
propagates, or nurtures those
agricultural products, including but not
limited to the acquisition of personal
property and services used primarily in
farming. Agricultural products include
horticultural, viticultural, and dairy
products, livestock, wildlife, poultry,
bees, forest products, fish and shellfish,
and any products thereof, including
processed and manufactured products,
and any and all products raised or
produced on farms and any processed or
manufactured products thereof.
6. Organization or other entity. A
consumer lease does not include a lease
made to an organization such as a
corporation or a government agency or
instrumentality. Such a lease is not
covered by the regulation even if the
leased property is used (by an
employee, for example) primarily for
personal, family or household purposes,
or is guaranteed by or subsequently
assigned to a natural person.
7. Leases of personal property
incidental to a service. The following
leases of personal property are deemed
incidental to a service and thus are not
subject to the regulation:
i. Home entertainment systems
requiring the consumer to lease
equipment that enables a television to
receive the transmitted programming.
ii. Security alarm systems requiring
the installation of leased equipment
intended to monitor unlawful entries
into a home and in some cases to
provide fire protection.
iii. Propane gas service where the
consumer must lease a propane tank to
receive the service.
8. Safe deposit boxes. The lease of a
safe deposit box is not a consumer lease
under § 1013.2(e).
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
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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.
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.
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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.
ix. From January 1, 2018, through
December 31, 2018, the threshold
amount is $55,800.
x. From January 1, 2019, through
December 31, 2019, the threshold
amount is $57,200.
xi. From January 1, 2020, through
December 31, 2020, the threshold
amount is $58,300.
xii. From January 1, 2021, through
December 31, 2021, the threshold
amount is $58,300.
xiii. From January 1, 2022, through
December 31, 2022, the threshold
amount is $61,000.
xiv. From January 1, 2023, through
December 31, 2023, the threshold
amount is $66,400.
xv. From January 1, 2024, through
December 31, 2024, the threshold
amount is $69,500.
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By order of the Board of Governors of the
Federal Reserve System, acting through the
Secretary of the Board under delegated
authority.
Michele Taylor Fennell,
Deputy Associate Secretary of the Board.
Brian Shearer,
Senior Advisor, Consumer Financial
Protection Bureau.
[FR Doc. 2023–25049 Filed 11–28–23; 8:45 am]
BILLING CODE 4810–AM–P; 6210–01–P
FEDERAL RESERVE SYSTEM
12 CFR Part 226
[Docket No. R–1820]
RIN 7100–AG69
CONSUMER FINANCIAL PROTECTION
BUREAU
12 CFR Part 1026
Truth in Lending (Regulation Z)
Board of Governors of the
Federal Reserve System (Board) and
Consumer Financial Protection Bureau
(Bureau).
ACTION: Final rules, official
interpretations, and commentary.
AGENCY:
The Board and the Bureau
(collectively, the Agencies) are
publishing final rules amending the
official interpretations and commentary
for the Agencies’ regulations that
implement the Truth in Lending Act
(TILA). The Dodd-Frank Wall Street
SUMMARY:
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Federal Register / Vol. 88, No. 228 / Wednesday, November 29, 2023 / Rules and Regulations
Reform and Consumer Protection Act
(Dodd-Frank Act) amended TILA by
requiring that the dollar threshold for
exempt consumer credit transactions be
adjusted annually by the annual
percentage increase in the Consumer
Price Index for Urban Wage Earners and
Clerical Workers (CPI–W). Under
regulations adopted by the Agencies, if
there is no annual percentage increase
in the CPI–W, the Agencies will not
adjust this exemption threshold from
the prior year. Additionally, in years
following a year in which the exemption
threshold was not adjusted because the
CPI–W decreased, 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. Based on the
annual percentage increase in the CPI–
W as of June 1, 2023, the exemption
threshold will increase from $66,400 to
$69,500 effective January 1, 2024.
Because the Dodd-Frank Act also
requires similar adjustments in the
Consumer Leasing Act’s threshold for
exempt consumer leases, the Agencies
are making similar amendments to each
of their respective regulations
implementing the Consumer Leasing
Act elsewhere in the Rules section of
this issue of the Federal Register.
DATES: This final rule is effective
January 1, 2024.
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 TTY–TRS, please
call 711 from any telephone, anywhere
in the United States.
Bureau: Anna Boadwee and Adrien
Fernandez, Attorney-Advisors, Office of
Regulations, Consumer Financial
Protection Bureau, at (202) 435–7700. If
you require this document in an
alternative electronic format, please
contact CFPB_Accessibility@cfpb.gov.
SUPPLEMENTARY INFORMATION:
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I. Background
The Dodd-Frank Act increased the
threshold in TILA for exempt consumer
credit transactions,1 and the threshold
in the Consumer Leasing Act (CLA) for
exempt consumer leases, from $25,000
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).
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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 CPI–W, as published by
the Bureau of Labor Statistics.3 In April
2011, the Board issued a final rule
amending Regulation Z (which
implements TILA) consistent with these
provisions of the Dodd-Frank Act, along
with a similar final rule amending
Regulation M (which implements the
CLA) (collectively, the Board Final
Threshold Rules).4
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 Z implementing
TILA, 12 CFR part 1026, substantially
duplicating the Board’s Regulation Z.5
Although the Bureau has the authority
to issue rules to implement TILA for
most entities, the Board retains
authority to issue rules under TILA for
certain motor vehicle dealers covered by
section 1029(a) of the Dodd-Frank Act,
and the Board’s Regulation Z continues
to apply to those entities.6
The Agencies’ regulations,7 and their
accompanying commentaries, provide
that the exemption threshold will be
adjusted annually effective January 1 of
each year based on any annual
2 Public Law 111–203, section 1100E, 124 Stat.
1376, 2111 (2010).
3 Id.
4 76 FR 18354 (Apr. 4, 2011); 76 FR 18349 (Apr.
4, 2011).
5 See 76 FR 79768 (Dec. 22, 2011); 81 FR 25323
(Apr. 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 provides that ‘‘[s]ubsection (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).
7 12 CFR 226.3(b)(1)(ii) (Board) and 12 CFR
1026.3(b)(1)(ii) (Bureau).
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83323
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 $900.8 Since 2011,
the Agencies have adjusted the
Regulation Z exemption threshold
annually, in accordance with these
rules.
On November 30, 2016, the Agencies
published a final rule in the Federal
Register to memorialize the calculation
method used by the Agencies each year
to adjust the exemption threshold to
ensure that, as contemplated by section
1100E(b) of the Dodd-Frank Act, the
values for the exemption threshold keep
pace with the CPI–W (Regulation Z
Adjustment Calculation Rule).9 The
Regulation Z Adjustment Calculation
Rule memorialized the policy that, if
there is no annual percentage increase
in the CPI–W, the Agencies will not
adjust the exemption threshold from the
prior year. The Regulation Z Adjustment
Calculation Rule also provided that, in
years following a year in which the
exemption threshold was not adjusted
because there was a decrease in the CPI–
W from 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. 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; 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.
II. 2024 Adjustment and Commentary
Revision
Effective January 1, 2024, the
exemption threshold amount is
increased from $66,400 to $69,500. This
amount is based on the CPI–W in effect
on June 1, 2023, which was reported on
8 See comments 3(b)–1 in supplements I of 12
CFR parts 226 and 1026.
9 See 81 FR 86260 (Nov. 30, 2016).
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Federal Register / Vol. 88, No. 228 / Wednesday, November 29, 2023 / Rules and Regulations
May 10, 2023 (based on April 2023
data).10 The CPI–W is a subset of the
CPI–U index (based on all urban
consumers) and represents
approximately 30 percent of the U.S.
population. The CPI–W reported on
May 10, 2023, reflects a 4.6 percent
increase in the CPI–W from April 2022
to April 2023. Accordingly, the 4.6
percent increase in the CPI–W from
April 2022 to April 2023 results in an
exemption threshold amount of $69,500,
after rounding. The Agencies are
revising the commentaries to their
respective regulations to add new
comment 3(b)–3.xv to state that, from
January 1, 2024, through December 31,
2024, the threshold amount is $69,500.
These revisions are effective January 1,
2024.
III. Regulatory Analysis
Administrative Procedure Act
Under the Administrative Procedure
Act, notice and opportunity for public
comment are not required if the
Agencies find that notice and public
comment are impracticable,
unnecessary, or contrary to the public
interest.11 The amendments in this rule
are technical and apply the method
previously set forth in the Board Final
Threshold Rules and the Regulation Z
Adjustment Calculation Rule. For these
reasons, the Agencies have determined
that publishing a notice of proposed
rulemaking and providing opportunity
for public comment are unnecessary.
Therefore, the amendments are adopted
in final form.
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA)
does not apply to a rulemaking where a
general notice of proposed rulemaking
is not required.12 As noted previously,
the Agencies have determined that it is
unnecessary to publish a general notice
of proposed rulemaking for this joint
final rule. Accordingly, the RFA’s
requirements relating to an initial and
final regulatory flexibility analysis do
not apply.
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Paperwork Reduction Act
The information collections contained
in Regulation Z which implements TILA
are approved by OMB under Control
number 3170–0015. The current
approval for this control number expires
10 The
Bureau of Labor Statistics calculates
consumer-based indices for each month but does
not report those indices until the middle of the
following month. As such, the most recently
reported indices as of June 1, 2023, were reported
on May 10, 2023, and reflect economic conditions
in April 2023.
11 5 U.S.C. 553(b)(B).
12 5 U.S.C. 603(a), 604(a).
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on May 31st, 2026. In accordance with
the Paperwork Reduction Act of 1995,13
the Agencies reviewed this final rule.
The Agencies have determined that this
rule does not create any new
information collections or substantially
revise any existing collections.
Bureau Congressional Review Act
Statement
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
U.S. Senate, the U.S. House of
Representatives, and the Comptroller
General of the United States prior to the
rule taking effect. The Office of
Information and Regulatory Affairs has
designated this rule as not a ‘‘major
rule’’ as defined by 5 U.S.C. 804(2).
List of Subjects
12 CFR Part 226
Advertising, Consumer protection,
Federal Reserve System, Reporting and
recordkeeping requirements, Truth in
lending.
12 CFR Part 1026
Advertising, Banks, banking,
Consumer protection, Credit, Credit
unions, Mortgages, National banks,
Reporting and recordkeeping
requirements, Savings associations,
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
Z, 12 CFR part 226, as set forth below:
PART 226—TRUTH IN LENDING
(REGULATION Z)
1. The authority citation for part 226
continues to read as follows:
■
Authority: 12 U.S.C. 3806; 15 U.S.C. 1604,
1637(c)(5), 1639(l) and 1639h; Pub. L. 111–
24, section 2, 123 Stat. 1734; Pub. L. 111–
203, 124 Stat. 1376.
2. In Supplement I to part 226, under
Section 226.3—Exempt Transactions,
revise 3(b) Credit over applicable
threshold amount, to read as follows:
■
Supplement I to Part 226—Official Staff
Interpretations
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Subpart A—General
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Section 226.3—Exempt Transactions
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13 44
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U.S.C. 3506; 5 CFR part 1320.
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3(b) Credit over applicable threshold
amount.
1. Threshold amount. For purposes of
§ 226.3(b), the threshold amount in
effect during a particular period is the
amount stated in comment 3(b)–3 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 3(b)–3 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.
2. 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.
3. Threshold. For purposes of
§ 226.3(b), 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.
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Federal Register / Vol. 88, No. 228 / Wednesday, November 29, 2023 / Rules and Regulations
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.
ix. From January 1, 2018, through
December 31, 2018, the threshold
amount is $55,800.
x. From January 1, 2019, through
December 31, 2019, the threshold
amount is $57,200.
xi. From January 1, 2020, through
December 31, 2020, the threshold
amount is $58,300.
xii. From January 1, 2021, through
December 31, 2021, the threshold
amount is $58,300.
xiii. From January 1, 2022, through
December 31, 2022, the threshold
amount is $61,000.
xiv. From January 1, 2023, through
December 31, 2023, the threshold
amount is $66,400.
xv. From January 1, 2024, through
December 31, 2024, the threshold
amount is $69,500.
4. Open-end credit.
i. Qualifying for exemption. An openend account is exempt under § 226.3(b)
(unless secured by any real property, or
by personal property used or expected
to be used as the consumer’s principal
dwelling) if either of the following
conditions is met:
A. The creditor makes an initial
extension of credit at or after account
opening that exceeds the threshold
amount in effect at the time the initial
extension is made. If a creditor makes
an initial extension of credit after
account opening that does not exceed
the threshold amount in effect at the
time the extension is made, the creditor
must have satisfied all of the applicable
requirements of this part from the date
the account was opened (or earlier, if
applicable), including but not limited to
the requirements of § 226.6 (accountopening disclosures), § 226.7 (periodic
statements), § 226.52 (limitations on
fees), and § 226.55 (limitations on
increasing annual percentages rates,
fees, and charges). For example:
(1) Assume that the threshold amount
in effect on January 1 is $50,000. On
February 1, an account is opened but
the creditor does not make an initial
extension of credit at that time. On July
1, the creditor makes an initial
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extension of credit of $60,000. In this
circumstance, no requirements of this
part apply to the account.
(2) Assume that the threshold amount
in effect on January 1 is $50,000. On
February 1, an account is opened but
the creditor does not make an initial
extension of credit at that time. On July
1, the creditor makes an initial
extension of credit of $50,000 or less. In
this circumstance, the account is not
exempt, and the creditor must have
satisfied all of the applicable
requirements of this part from the date
the account was opened (or earlier, if
applicable).
B. The creditor makes a firm written
commitment at account opening to
extend a total amount of credit in excess
of the threshold amount in effect at the
time the account is opened with no
requirement of additional credit
information for any advances on the
account (except as permitted from time
to time with respect to open-end
accounts pursuant to § 226.2(a)(20)).
ii. Subsequent changes generally.
Subsequent changes to an open-end
account or the threshold amount may
result in the account no longer
qualifying for the exemption in
§ 226.3(b). In these circumstances, the
creditor must begin to comply with all
of the applicable requirements of this
part within a reasonable period of time
after the account ceases to be exempt.
Once an account ceases to be exempt,
the requirements of this part apply to
any balances on the account. The
creditor, however, is not required to
comply with the requirements of this
part with respect to the period of time
during which the account was exempt.
For example, if an open-end credit
account ceases to be exempt, the
creditor must within a reasonable
period of time provide the disclosures
required by § 226.6 reflecting the
current terms of the account and begin
to provide periodic statements
consistent with § 226.7. However, the
creditor is not required to disclose fees
or charges imposed while the account
was exempt. Furthermore, if the creditor
provided disclosures consistent with the
requirements of this part while the
account was exempt, it is not required
to provide disclosures required by
§ 226.6 reflecting the current terms of
the account. See also comment 3(b)–6.
iii. Subsequent changes when
exemption is based on initial extension
of credit. If a creditor makes an initial
extension of credit that exceeds the
threshold amount in effect at that time,
the open-end account remains exempt
under § 226.3(b) regardless of a
subsequent increase in the threshold
amount, including an increase pursuant
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83325
to § 226.3(b)(1)(ii) as a result of an
increase in the CPI–W. Furthermore, in
these circumstances, the account
remains exempt even if there are no
further extensions of credit, subsequent
extensions of credit do not exceed the
threshold amount, the account balance
is subsequently reduced below the
threshold amount (such as through
repayment of the extension), or the
credit limit for the account is
subsequently reduced below the
threshold amount. However, if the
initial extension of credit on an account
does not exceed the threshold amount
in effect at the time of the extension, the
account is not exempt under § 226.3(b)
even if a subsequent extension exceeds
the threshold amount or if the account
balance later exceeds the threshold
amount (for example, due to the
subsequent accrual of interest).
iv. Subsequent changes when
exemption is based on firm
commitment.
A. General. If a creditor makes a firm
written commitment at account opening
to extend a total amount of credit that
exceeds the threshold amount in effect
at that time, the open-end account
remains exempt under § 226.3(b)
regardless of a subsequent increase in
the threshold amount pursuant to
§ 226.3(b)(1)(ii) as a result of an increase
in the CPI–W. However, see comment
3(b)–8 with respect to the increase in
the threshold amount from $25,000 to
$50,000. If an open-end account is
exempt under § 226.3(b) based on a firm
commitment to extend credit, the
account remains exempt even if the
amount of credit actually extended does
not exceed the threshold amount. In
contrast, if the firm commitment does
not exceed the threshold amount at
account opening, the account is not
exempt under § 226.3(b) even if the
account balance later exceeds the
threshold amount. In addition, if a
creditor reduces a firm commitment, the
account ceases to be exempt unless the
reduced firm commitment exceeds the
threshold amount in effect at the time of
the reduction. For example:
(1) Assume that, at account opening
in year one, the threshold amount in
effect is $50,000 and the account is
exempt under § 226.3(b) based on the
creditor’s firm commitment to extend
$55,000 in credit. If during year one the
creditor reduces its firm commitment to
$53,000, the account remains exempt
under § 226.3(b). However, if during
year one the creditor reduces its firm
commitment to $40,000, the account is
no longer exempt under § 226.3(b).
(2) Assume that, at account opening
in year one, the threshold amount in
effect is $50,000 and the account is
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exempt under § 226.3(b) based on the
creditor’s firm commitment to extend
$55,000 in credit. If the threshold
amount is $56,000 on January 1 of year
six as a result of increases in the CPI–
W, the account remains exempt.
However, if the creditor reduces its firm
commitment to $54,000 on July 1 of year
six, the account ceases to be exempt
under § 226.3(b).
B. Initial extension of credit. If an
open-end account qualifies for a
§ 226.3(b) exemption at account opening
based on a firm commitment, that
account may also subsequently qualify
for a § 226.3(b) exemption based on an
initial extension of credit. However, that
initial extension must be a single
advance in excess of the threshold
amount in effect at the time the
extension is made. In addition, the
account must continue to qualify for an
exemption based on the firm
commitment until the initial extension
of credit is made. For example:
(1) Assume that, at account opening
in year one, the threshold amount in
effect is $50,000 and the account is
exempt under § 226.3(b) based on the
creditor’s firm commitment to extend
$55,000 in credit. The account is not
used for an extension of credit during
year one. On January 1 of year two, the
threshold amount is increased to
$51,000 pursuant to § 226.3(b)(1)(ii) as a
result of an increase in the CPI–W. On
July 1 of year two, the consumer uses
the account for an initial extension of
$52,000. As a result of this extension of
credit, the account remains exempt
under § 226.3(b) even if, after July 1 of
year two, the creditor reduces the firm
commitment to $51,000 or less.
(2) Same facts as in paragraph
4.iv.B(1) of this section except that the
consumer uses the account for an initial
extension of $30,000 on July 1 of year
two and for an extension of $22,000 on
July 15 of year two. In these
circumstances, the account is not
exempt under § 226.3(b) based on the
$30,000 initial extension of credit
because that extension did not exceed
the applicable threshold amount
($51,000), although the account remains
exempt based on the firm commitment
to extend $55,000 in credit.
(3) Same facts as in paragraph
4.iv.B(1) of this section except that, on
April 1 of year two, the creditor reduces
the firm commitment to $50,000, which
is below the $51,000 threshold then in
effect. Because the account ceases to
qualify for a § 226.3(b) exemption on
April 1 of year two, the account does
not qualify for a § 226.3(b) exemption
based on a $52,000 initial extension of
credit on July 1 of year two.
5. Closed-end credit.
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i. Qualifying for exemption. A closedend loan is exempt under § 226.3(b)
(unless the extension of credit is
secured by any real property, or by
personal property used or expected to
be used as the consumer’s principal
dwelling; or is a private education loan
as defined in § 226.46(b)(5)), if either of
the following conditions is met.
A. The creditor makes an extension of
credit at consummation that exceeds the
threshold amount in effect at the time of
consummation. In these circumstances,
the loan remains exempt under
§ 226.3(b) even if the amount owed is
subsequently reduced below the
threshold amount (such as through
repayment of the loan).
B. The creditor makes a commitment
at consummation to extend a total
amount of credit in excess of the
threshold amount in effect at the time of
consummation. In these circumstances,
the loan remains exempt under
§ 226.3(b) even if the total amount of
credit extended does not exceed the
threshold amount.
ii. Subsequent changes. If a creditor
makes a closed-end extension of credit
or commitment to extend closed-end
credit that exceeds the threshold
amount in effect at the time of
consummation, the closed-end loan
remains exempt under § 226.3(b)
regardless of a subsequent increase in
the threshold amount. However, a
closed-end loan is not exempt under
§ 226.3(b) merely because it is used to
satisfy and replace an existing exempt
loan, unless the new extension of credit
is itself exempt under the applicable
threshold amount. For example, assume
a closed-end loan that qualified for a
§ 226.3(b) exemption at consummation
in year one is refinanced in year ten and
that the new loan amount is less than
the threshold amount in effect in year
ten. In these circumstances, the creditor
must comply with all of the applicable
requirements of this part with respect to
the year ten transaction if the original
loan is satisfied and replaced by the
new loan, which is not exempt under
§ 226.3(b). See also comment 3(b)–6.
6. Addition of a security interest in
real property or a dwelling after account
opening or consummation.
i. Open-end credit. For open-end
accounts, if, after account opening, a
security interest is taken in real
property, or in personal property used
or expected to be used as the
consumer’s principal dwelling, a
previously exempt account ceases to be
exempt under § 226.3(b) and the
creditor must begin to comply with all
of the applicable requirements of this
part within a reasonable period of time.
See comment 3(b)–4.ii. If a security
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interest is taken in the consumer’s
principal dwelling, the creditor must
also give the consumer the right to
rescind the security interest consistent
with § 226.15.
ii. Closed-end credit. For closed-end
loans, if, after consummation, a security
interest is taken in any real property, or
in personal property used or expected to
be used as the consumer’s principal
dwelling, an exempt loan remains
exempt under § 226.3(b). However, the
addition of a security interest in the
consumer’s principal dwelling is a
transaction for purposes of § 226.23, and
the creditor must give the consumer the
right to rescind the security interest
consistent with that section. See
§ 226.23(a)(1) and the accompanying
commentary. In contrast, if a closed-end
loan that is exempt under § 226.3(b) is
satisfied and replaced by a loan that is
secured by any real property, or by
personal property used or expected to
be used as the consumer’s principal
dwelling, the new loan is not exempt
under § 226.3(b) and the creditor must
comply with all of the applicable
requirements of this part. See comment
3(b)–5.
7. Application to extensions secured
by mobile homes. Because a mobile
home can be a dwelling under
§ 226.2(a)(19), the exemption in
§ 226.3(b) does not apply to a credit
extension secured by a mobile home
that is used or expected to be used as
the principal dwelling of the consumer.
See comment 3(b)–6.
8. Transition rule for open-end
accounts exempt prior to July 21, 2011.
Section 226.3(b)(2) applies only to openend accounts opened prior to July 21,
2011. Section 226.3(b)(2) does not apply
if a security interest is taken by the
creditor in any real property, or in
personal property used or expected to
be used as the consumer’s principal
dwelling. If, on July 20, 2011, an openend account is exempt under § 226.3(b)
based on a firm commitment to extend
credit in excess of $25,000, the account
remains exempt under § 226.3(b)(2)
until December 31, 2011 (unless the
firm commitment is reduced to $25,000
or less). If the firm commitment is
increased on or before December 31,
2011, to an amount in excess of $50,000,
the account remains exempt under
§ 226.3(b)(1) regardless of subsequent
increases in the threshold amount as a
result of increases in the CPI–W. If the
firm commitment is not increased on or
before December 31, 2011, to an amount
in excess of $50,000, the account ceases
to be exempt under § 226.3(b) based on
a firm commitment to extend credit. For
example:
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i. Assume that, on July 20, 2011, the
account is exempt under § 226.3(b)
based on the creditor’s firm
commitment to extend $30,000 in
credit. On November 1, 2011, the
creditor increases the firm commitment
on the account to $55,000. In these
circumstances, the account remains
exempt under § 226.3(b)(1) regardless of
subsequent increases in the threshold
amount as a result of increases in the
CPI–W.
ii. Same facts as paragraph 8.i. of this
section except, on November 1, 2011,
the creditor increases the firm
commitment on the account to $40,000.
In these circumstances, the account
ceases to be exempt under § 226.3(b)(2)
after December 31, 2011, and the
creditor must begin to comply with the
applicable requirements of this part.
*
*
*
*
*
CONSUMER FINANCIAL
PROTECTION BUREAU
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)
3. 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.
4. In Supplement I to part 1026, under
Section 1026.3—Exempt Transactions,
revise 3(b)—Credit Over Applicable
Threshold Amount to read as follows:
■
Supplement I to Part 1026—Official
Interpretations
*
*
*
*
*
Section 1026.3—Exempt Transactions
ddrumheller on DSK120RN23PROD with RULES1
*
*
*
*
*
3(b) Credit Over Applicable Threshold
Amount
1. Threshold amount. For purposes of
§ 1026.3(b), the threshold amount in
effect during a particular period is the
amount stated in comment 3(b)–3 below
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 3(b)–3 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
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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.
2. 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.
3. Threshold. For purposes of
§ 1026.3(b), 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.
ix. From January 1, 2018, through
December 31, 2018, the threshold
amount is $55,800.
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83327
x. From January 1, 2019, through
December 31, 2019, the threshold
amount is $57,200.
xi. From January 1, 2020, through
December 31, 2020, the threshold
amount is $58,300.
xii. From January 1, 2021, through
December 31, 2021, the threshold
amount is $58,300.
xiii. From January 1, 2022, through
December 31, 2022, the threshold
amount is $61,000.
xiv. From January 1, 2023, through
December 31, 2023, the threshold
amount is $66,400.
xv. From January 1, 2024, through
December 31, 2024, the threshold
amount is $69,500.
4. Open-end credit. i. Qualifying for
exemption. An open-end account is
exempt under § 1026.3(b) (unless
secured by real property, or by personal
property used or expected to be used as
the consumer’s principal dwelling) if
either of the following conditions is
met:
A. The creditor makes an initial
extension of credit at or after account
opening that exceeds the threshold
amount in effect at the time the initial
extension is made. If a creditor makes
an initial extension of credit after
account opening that does not exceed
the threshold amount in effect at the
time the extension is made, the creditor
must have satisfied all of the applicable
requirements of this part from the date
the account was opened (or earlier, if
applicable), including but not limited to
the requirements of § 1026.6 (accountopening disclosures), § 1026.7 (periodic
statements), § 1026.52 (limitations on
fees), and § 1026.55 (limitations on
increasing annual percentage rates, fees,
and charges). For example:
1. Assume that the threshold amount
in effect on January 1 is $50,000. On
February 1, an account is opened but
the creditor does not make an initial
extension of credit at that time. On July
1, the creditor makes an initial
extension of credit of $60,000. In this
circumstance, no requirements of this
part apply to the account.
2. Assume that the threshold amount
in effect on January 1 is $50,000. On
February 1, an account is opened but
the creditor does not make an initial
extension of credit at that time. On July
1, the creditor makes an initial
extension of credit of $50,000 or less. In
this circumstance, the account is not
exempt, and the creditor must have
satisfied all of the applicable
requirements of this part from the date
the account was opened (or earlier, if
applicable).
B. The creditor makes a firm written
commitment at account opening to
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extend a total amount of credit in excess
of the threshold amount in effect at the
time the account is opened with no
requirement of additional credit
information for any advances on the
account (except as permitted from time
to time with respect to open-end
accounts pursuant to § 1026.2(a)(20)).
ii. Subsequent changes generally.
Subsequent changes to an open-end
account or the threshold amount may
result in the account no longer
qualifying for the exemption in
§ 1026.3(b). In these circumstances, the
creditor must begin to comply with all
of the applicable requirements of this
part within a reasonable period of time
after the account ceases to be exempt.
Once an account ceases to be exempt,
the requirements of this part apply to
any balances on the account. The
creditor, however, is not required to
comply with the requirements of this
part with respect to the period of time
during which the account was exempt.
For example, if an open-end credit
account ceases to be exempt, the
creditor must within a reasonable
period of time provide the disclosures
required by § 1026.6 reflecting the
current terms of the account and begin
to provide periodic statements
consistent with § 1026.7. However, the
creditor is not required to disclose fees
or charges imposed while the account
was exempt. Furthermore, if the creditor
provided disclosures consistent with the
requirements of this part while the
account was exempt, it is not required
to provide disclosures required by
§ 1026.6 reflecting the current terms of
the account. See also comment 3(b)–6.
iii. Subsequent changes when
exemption is based on initial extension
of credit. If a creditor makes an initial
extension of credit that exceeds the
threshold amount in effect at that time,
the open-end account remains exempt
under § 1026.3(b) regardless of a
subsequent increase in the threshold
amount, including an increase pursuant
to § 1026.3(b)(1)(ii) as a result of an
increase in the CPI–W. Furthermore, in
these circumstances, the account
remains exempt even if there are no
further extensions of credit, subsequent
extensions of credit do not exceed the
threshold amount, the account balance
is subsequently reduced below the
threshold amount (such as through
repayment of the extension), or the
credit limit for the account is
subsequently reduced below the
threshold amount. However, if the
initial extension of credit on an account
does not exceed the threshold amount
in effect at the time of the extension, the
account is not exempt under § 1026.3(b)
even if a subsequent extension exceeds
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the threshold amount or if the account
balance later exceeds the threshold
amount (for example, due to the
subsequent accrual of interest).
iv. Subsequent changes when
exemption is based on firm
commitment.
A. General. If a creditor makes a firm
written commitment at account opening
to extend a total amount of credit that
exceeds the threshold amount in effect
at that time, the open-end account
remains exempt under § 1026.3(b)
regardless of a subsequent increase in
the threshold amount pursuant to
§ 1026.3(b)(1)(ii) as a result of an
increase in the CPI–W. However, see
comment 3(b)–8 with respect to the
increase in the threshold amount from
$25,000 to $50,000. If an open-end
account is exempt under § 1026.3(b)
based on a firm commitment to extend
credit, the account remains exempt even
if the amount of credit actually
extended does not exceed the threshold
amount. In contrast, if the firm
commitment does not exceed the
threshold amount at account opening,
the account is not exempt under
§ 1026.3(b) even if the account balance
later exceeds the threshold amount. In
addition, if a creditor reduces a firm
commitment, the account ceases to be
exempt unless the reduced firm
commitment exceeds the threshold
amount in effect at the time of the
reduction. For example:
1. Assume that, at account opening in
year one, the threshold amount in effect
is $50,000 and the account is exempt
under § 1026.3(b) based on the creditor’s
firm commitment to extend $55,000 in
credit. If during year one the creditor
reduces its firm commitment to $53,000,
the account remains exempt under
§ 1026.3(b). However, if during year one
the creditor reduces its firm
commitment to $40,000, the account is
no longer exempt under § 1026.3(b).
2. Assume that, at account opening in
year one, the threshold amount in effect
is $50,000 and the account is exempt
under § 1026.3(b) based on the creditor’s
firm commitment to extend $55,000 in
credit. If the threshold amount is
$56,000 on January 1 of year six as a
result of increases in the CPI–W, the
account remains exempt. However, if
the creditor reduces its firm
commitment to $54,000 on July 1 of year
six, the account ceases to be exempt
under § 1026.3(b).
B. Initial extension of credit. If an
open-end account qualifies for a
§ 1026.3(b) exemption at account
opening based on a firm commitment,
that account may also subsequently
qualify for a § 1026.3(b) exemption
based on an initial extension of credit.
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However, that initial extension must be
a single advance in excess of the
threshold amount in effect at the time
the extension is made. In addition, the
account must continue to qualify for an
exemption based on the firm
commitment until the initial extension
of credit is made. For example:
1. Assume that, at account opening in
year one, the threshold amount in effect
is $50,000 and the account is exempt
under § 1026.3(b) based on the creditor’s
firm commitment to extend $55,000 in
credit. The account is not used for an
extension of credit during year one. On
January 1 of year two, the threshold
amount is increased to $51,000 pursuant
to § 1026.3(b)(1)(ii) as a result of an
increase in the CPI–W. On July 1 of year
two, the consumer uses the account for
an initial extension of $52,000. As a
result of this extension of credit, the
account remains exempt under
§ 1026.3(b) even if, after July 1 of year
two, the creditor reduces the firm
commitment to $51,000 or less.
2. Same facts as in paragraph 4.iv.B.1
of this section except that the consumer
uses the account for an initial extension
of $30,000 on July 1 of year two and for
an extension of $22,000 on July 15 of
year two. In these circumstances, the
account is not exempt under § 1026.3(b)
based on the $30,000 initial extension of
credit because that extension did not
exceed the applicable threshold amount
($51,000), although the account remains
exempt based on the firm commitment
to extend $55,000 in credit.
3. Same facts as in paragraph 4.iv.B.1
of this section except that, on April 1 of
year two, the creditor reduces the firm
commitment to $50,000, which is below
the $51,000 threshold then in effect.
Because the account ceases to qualify
for a § 1026.3(b) exemption on April 1
of year two, the account does not qualify
for a § 1026.3(b) exemption based on a
$52,000 initial extension of credit on
July 1 of year two.
5. Closed-end credit. i. Qualifying for
exemption. A closed-end loan is exempt
under § 1026.3(b) (unless the extension
of credit is secured by real property, or
by personal property used or expected
to be used as the consumer’s principal
dwelling; or is a private education loan
as defined in § 1026.46(b)(5)), if either of
the following conditions is met:
A. The creditor makes an extension of
credit at consummation that exceeds the
threshold amount in effect at the time of
consummation. In these circumstances,
the loan remains exempt under
§ 1026.3(b) even if the amount owed is
subsequently reduced below the
threshold amount (such as through
repayment of the loan).
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B. The creditor makes a commitment
at consummation to extend a total
amount of credit in excess of the
threshold amount in effect at the time of
consummation. In these circumstances,
the loan remains exempt under
§ 1026.3(b) even if the total amount of
credit extended does not exceed the
threshold amount.
ii. Subsequent changes. If a creditor
makes a closed-end extension of credit
or commitment to extend closed-end
credit that exceeds the threshold
amount in effect at the time of
consummation, the closed-end loan
remains exempt under § 1026.3(b)
regardless of a subsequent increase in
the threshold amount. However, a
closed-end loan is not exempt under
§ 1026.3(b) merely because it is used to
satisfy and replace an existing exempt
loan, unless the new extension of credit
is itself exempt under the applicable
threshold amount. For example, assume
a closed-end loan that qualified for a
§ 1026.3(b) exemption at consummation
in year one is refinanced in year ten and
that the new loan amount is less than
the threshold amount in effect in year
ten. In these circumstances, the creditor
must comply with all of the applicable
requirements of this part with respect to
the year ten transaction if the original
loan is satisfied and replaced by the
new loan, which is not exempt under
§ 1026.3(b). See also comment 3(b)–6.
6. Addition of a security interest in
real property or a dwelling after account
opening or consummation. i. Open-end
credit. For open-end accounts, if after
account opening a security interest is
taken in real property, or in personal
property used or expected to be used as
the consumer’s principal dwelling, a
previously exempt account ceases to be
exempt under § 1026.3(b) and the
creditor must begin to comply with all
of the applicable requirements of this
part within a reasonable period of time.
See comment 3(b)–4.ii. If a security
interest is taken in the consumer’s
principal dwelling, the creditor must
also give the consumer the right to
rescind the security interest consistent
with § 1026.15.
ii. Closed-end credit. For closed-end
loans, if after consummation a security
interest is taken in real property, or in
personal property used or expected to
be used as the consumer’s principal
dwelling, an exempt loan remains
exempt under § 1026.3(b). However, the
addition of a security interest in the
consumer’s principal dwelling is a
transaction for purposes of § 1026.23,
and the creditor must give the consumer
the right to rescind the security interest
consistent with that section. See
§ 1026.23(a)(1) and its commentary. In
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contrast, if a closed-end loan that is
exempt under § 1026.3(b) is satisfied
and replaced by a loan that is secured
by real property, or by personal property
used or expected to be used as the
consumer’s principal dwelling, the new
loan is not exempt under § 1026.3(b),
and the creditor must comply with all
of the applicable requirements of this
part. See comment 3(b)–5.
7. Application to extensions secured
by mobile homes. Because a mobile
home can be a dwelling under
§ 1026.2(a)(19), the exemption in
§ 1026.3(b) does not apply to a credit
extension secured by a mobile home
that is used or expected to be used as
the principal dwelling of the consumer.
See comment 3(b)–6.
8. Transition rule for open-end
accounts exempt prior to July 21, 2011.
Section 1026.3(b)(2) applies only to
open-end accounts opened prior to July
21, 2011. Section 1026.3(b)(2) does not
apply if a security interest is taken by
the creditor in real property, or in
personal property used or expected to
be used as the consumer’s principal
dwelling. If, on July 20, 2011, an openend account is exempt under § 1026.3(b)
based on a firm commitment to extend
credit in excess of $25,000, the account
remains exempt under § 1026.3(b)(2)
until December 31, 2011 (unless the
firm commitment is reduced to $25,000
or less). If the firm commitment is
increased on or before December 31,
2011, to an amount in excess of $50,000,
the account remains exempt under
§ 1026.3(b)(1) regardless of subsequent
increases in the threshold amount as a
result of increases in the CPI–W. If the
firm commitment is not increased on or
before December 31, 2011, to an amount
in excess of $50,000, the account ceases
to be exempt under § 1026.3(b) based on
a firm commitment to extend credit. For
example:
i. Assume that, on July 20, 2011, the
account is exempt under § 1026.3(b)
based on the creditor’s firm
commitment to extend $30,000 in
credit. On November 1, 2011, the
creditor increases the firm commitment
on the account to $55,000. In these
circumstances, the account remains
exempt under § 1026.3(b)(1) regardless
of subsequent increases in the threshold
amount as a result of increases in the
CPI–W.
ii. Same facts as paragraph 8.i of this
section except, on November 1, 2011,
the creditor increases the firm
commitment on the account to $40,000.
In these circumstances, the account
ceases to be exempt under § 1026.3(b)(2)
after December 31, 2011, and the
PO 00000
Frm 00025
Fmt 4700
Sfmt 4700
83329
creditor must begin to comply with the
applicable requirements of this part.
*
*
*
*
*
By order of the Board of Governors of the
Federal Reserve System, acting through the
Secretary of the Board under delegated
authority.
Michele Taylor Fennell,
Deputy Associate Secretary of the Board.
Brian Shearer,
Senior Advisor, Consumer Financial
Protection Bureau.
[FR Doc. 2023–25048 Filed 11–28–23; 8:45 am]
BILLING CODE 4810–AM–P; 6210–01–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 327
RIN 3064–AF93
Special Assessment Pursuant to
Systemic Risk Determination
Federal Deposit Insurance
Corporation (FDIC).
ACTION: Final rule.
AGENCY:
The FDIC is adopting a final
rule to implement a special assessment
to recover the loss to the Deposit
Insurance Fund (DIF or Fund) arising
from the protection of uninsured
depositors following the closures of
Silicon Valley Bank, Santa Clara, CA,
and Signature Bank, New York, NY. The
FDIC will collect the $16.3 billion
special assessment at a quarterly rate of
3.36 basis points, multiplied by an
insured depository institution’s (IDI)
estimated uninsured deposits, reported
for the quarter that ended December 31,
2022, adjusted to exclude the first $5
billion in estimated uninsured deposits
from the IDI, or for IDIs that are part of
a holding company with one or more
subsidiary IDIs, at the banking
organization level. The FDIC will collect
the special assessment over eight
quarterly assessment periods, although
the collection period may change due to
updates to the estimated loss pursuant
to the systemic risk determination or if
assessments collected change due to
corrective amendments to the amount of
uninsured deposits reported for the
December 31, 2022, reporting period.
DATES: The final rule is effective on
April 1, 2024, with the first collection
for the special assessment reflected on
the invoice for the first quarterly
assessment period of 2024 (i.e., January
1 through March 31, 2024), with a
payment date of June 28, 2024.
SUMMARY:
FOR FURTHER INFORMATION CONTACT:
Division of Insurance and Research:
E:\FR\FM\29NOR1.SGM
29NOR1
Agencies
- FEDERAL RESERVE SYSTEM
- CONSUMER FINANCIAL PROTECTION BUREAU
[Federal Register Volume 88, Number 228 (Wednesday, November 29, 2023)]
[Rules and Regulations]
[Pages 83322-83329]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25048]
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
12 CFR Part 226
[Docket No. R-1820]
RIN 7100-AG69
CONSUMER FINANCIAL PROTECTION BUREAU
12 CFR Part 1026
Truth in Lending (Regulation Z)
AGENCY: Board of Governors of the Federal Reserve System (Board) and
Consumer Financial Protection Bureau (Bureau).
ACTION: Final rules, official interpretations, and commentary.
-----------------------------------------------------------------------
SUMMARY: The Board and the Bureau (collectively, the Agencies) are
publishing final rules amending the official interpretations and
commentary for the Agencies' regulations that implement the Truth in
Lending Act (TILA). The Dodd-Frank Wall Street
[[Page 83323]]
Reform and Consumer Protection Act (Dodd-Frank Act) amended TILA by
requiring that the dollar threshold for exempt consumer credit
transactions be adjusted annually by the annual percentage increase in
the Consumer Price Index for Urban Wage Earners and Clerical Workers
(CPI-W). Under regulations adopted by the Agencies, if there is no
annual percentage increase in the CPI-W, the Agencies will not adjust
this exemption threshold from the prior year. Additionally, in years
following a year in which the exemption threshold was not adjusted
because the CPI-W decreased, 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. Based on
the annual percentage increase in the CPI-W as of June 1, 2023, the
exemption threshold will increase from $66,400 to $69,500 effective
January 1, 2024. Because the Dodd-Frank Act also requires similar
adjustments in the Consumer Leasing Act's threshold for exempt consumer
leases, the Agencies are making similar amendments to each of their
respective regulations implementing the Consumer Leasing Act elsewhere
in the Rules section of this issue of the Federal Register.
DATES: This final rule is effective January 1, 2024.
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 TTY-TRS, please
call 711 from any telephone, anywhere in the United States.
Bureau: Anna Boadwee and Adrien Fernandez, Attorney-Advisors,
Office of Regulations, Consumer Financial Protection Bureau, at (202)
435-7700. If you require this document in an alternative electronic
format, please contact [email protected].
SUPPLEMENTARY INFORMATION:
I. Background
The Dodd-Frank Act increased the threshold in 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 CPI-W,
as published by the Bureau of Labor Statistics.\3\ In April 2011, the
Board issued a final rule amending Regulation Z (which implements TILA)
consistent with these provisions of the Dodd-Frank Act, along with a
similar final rule amending Regulation M (which implements the CLA)
(collectively, the Board Final Threshold Rules).\4\
---------------------------------------------------------------------------
\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, 2111
(2010).
\3\ Id.
\4\ 76 FR 18354 (Apr. 4, 2011); 76 FR 18349 (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 Z
implementing TILA, 12 CFR part 1026, substantially duplicating the
Board's Regulation Z.\5\ Although the Bureau has the authority to issue
rules to implement TILA for most entities, the Board retains authority
to issue rules under TILA for certain motor vehicle dealers covered by
section 1029(a) of the Dodd-Frank Act, and the Board's Regulation Z
continues to apply to those entities.\6\
---------------------------------------------------------------------------
\5\ See 76 FR 79768 (Dec. 22, 2011); 81 FR 25323 (Apr. 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 provides that ``[s]ubsection (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).
---------------------------------------------------------------------------
The Agencies' regulations,\7\ 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.\8\ Since 2011, the Agencies have adjusted the
Regulation Z exemption threshold annually, in accordance with these
rules.
---------------------------------------------------------------------------
\7\ 12 CFR 226.3(b)(1)(ii) (Board) and 12 CFR 1026.3(b)(1)(ii)
(Bureau).
\8\ See comments 3(b)-1 in supplements I of 12 CFR parts 226 and
1026.
---------------------------------------------------------------------------
On November 30, 2016, the Agencies published a final rule in the
Federal Register to memorialize the calculation method used by the
Agencies each year to adjust the exemption threshold to ensure that, as
contemplated by section 1100E(b) of the Dodd-Frank Act, the values for
the exemption threshold keep pace with the CPI-W (Regulation Z
Adjustment Calculation Rule).\9\ The Regulation Z Adjustment
Calculation Rule memorialized the policy that, if there is no annual
percentage increase in the CPI-W, the Agencies will not adjust the
exemption threshold from the prior year. The Regulation Z Adjustment
Calculation Rule also provided that, in years following a year in which
the exemption threshold was not adjusted because there was a decrease
in the CPI-W from 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. 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; 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.
---------------------------------------------------------------------------
\9\ See 81 FR 86260 (Nov. 30, 2016).
---------------------------------------------------------------------------
II. 2024 Adjustment and Commentary Revision
Effective January 1, 2024, the exemption threshold amount is
increased from $66,400 to $69,500. This amount is based on the CPI-W in
effect on June 1, 2023, which was reported on
[[Page 83324]]
May 10, 2023 (based on April 2023 data).\10\ The CPI-W is a subset of
the CPI-U index (based on all urban consumers) and represents
approximately 30 percent of the U.S. population. The CPI-W reported on
May 10, 2023, reflects a 4.6 percent increase in the CPI-W from April
2022 to April 2023. Accordingly, the 4.6 percent increase in the CPI-W
from April 2022 to April 2023 results in an exemption threshold amount
of $69,500, after rounding. The Agencies are revising the commentaries
to their respective regulations to add new comment 3(b)-3.xv to state
that, from January 1, 2024, through December 31, 2024, the threshold
amount is $69,500. These revisions are effective January 1, 2024.
---------------------------------------------------------------------------
\10\ The Bureau of Labor Statistics calculates consumer-based
indices for each month but does not report those indices until the
middle of the following month. As such, the most recently reported
indices as of June 1, 2023, were reported on May 10, 2023, and
reflect economic conditions in April 2023.
---------------------------------------------------------------------------
III. Regulatory Analysis
Administrative Procedure Act
Under the Administrative Procedure Act, notice and opportunity for
public comment are not required if the Agencies find that notice and
public comment are impracticable, unnecessary, or contrary to the
public interest.\11\ The amendments in this rule are technical and
apply the method previously set forth in the Board Final Threshold
Rules and the Regulation Z Adjustment Calculation Rule. For these
reasons, the Agencies have determined that publishing a notice of
proposed rulemaking and providing opportunity for public comment are
unnecessary. Therefore, the amendments are adopted in final form.
---------------------------------------------------------------------------
\11\ 5 U.S.C. 553(b)(B).
---------------------------------------------------------------------------
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) does not apply to a rulemaking
where a general notice of proposed rulemaking is not required.\12\ As
noted previously, the Agencies have determined that it is unnecessary
to publish a general notice of proposed rulemaking for this joint final
rule. Accordingly, the RFA's requirements relating to an initial and
final regulatory flexibility analysis do not apply.
---------------------------------------------------------------------------
\12\ 5 U.S.C. 603(a), 604(a).
---------------------------------------------------------------------------
Paperwork Reduction Act
The information collections contained in Regulation Z which
implements TILA are approved by OMB under Control number 3170-0015. The
current approval for this control number expires on May 31st, 2026. In
accordance with the Paperwork Reduction Act of 1995,\13\ the Agencies
reviewed this final rule. The Agencies have determined that this rule
does not create any new information collections or substantially revise
any existing collections.
---------------------------------------------------------------------------
\13\ 44 U.S.C. 3506; 5 CFR part 1320.
---------------------------------------------------------------------------
Bureau Congressional Review Act Statement
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 U.S. Senate, the U.S. House of Representatives, and
the Comptroller General of the United States prior to the rule taking
effect. The Office of Information and Regulatory Affairs has designated
this rule as not a ``major rule'' as defined by 5 U.S.C. 804(2).
List of Subjects
12 CFR Part 226
Advertising, Consumer protection, Federal Reserve System, Reporting
and recordkeeping requirements, Truth in lending.
12 CFR Part 1026
Advertising, Banks, banking, Consumer protection, Credit, Credit
unions, Mortgages, National banks, Reporting and recordkeeping
requirements, Savings associations, 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 Z, 12 CFR part 226, as set forth below:
PART 226--TRUTH IN LENDING (REGULATION Z)
0
1. The authority citation for part 226 continues to read as follows:
Authority: 12 U.S.C. 3806; 15 U.S.C. 1604, 1637(c)(5), 1639(l)
and 1639h; Pub. L. 111-24, section 2, 123 Stat. 1734; Pub. L. 111-
203, 124 Stat. 1376.
0
2. In Supplement I to part 226, under Section 226.3--Exempt
Transactions, revise 3(b) Credit over applicable threshold amount, to
read as follows:
Supplement I to Part 226--Official Staff Interpretations
* * * * *
Subpart A--General
* * * * *
Section 226.3--Exempt Transactions
* * * * *
3(b) Credit over applicable threshold amount.
1. Threshold amount. For purposes of Sec. 226.3(b), the threshold
amount in effect during a particular period is the amount stated in
comment 3(b)-3 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 3(b)-3 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.
2. 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.
3. Threshold. For purposes of Sec. 226.3(b), 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.
[[Page 83325]]
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.
ix. From January 1, 2018, through December 31, 2018, the threshold
amount is $55,800.
x. From January 1, 2019, through December 31, 2019, the threshold
amount is $57,200.
xi. From January 1, 2020, through December 31, 2020, the threshold
amount is $58,300.
xii. From January 1, 2021, through December 31, 2021, the threshold
amount is $58,300.
xiii. From January 1, 2022, through December 31, 2022, the
threshold amount is $61,000.
xiv. From January 1, 2023, through December 31, 2023, the threshold
amount is $66,400.
xv. From January 1, 2024, through December 31, 2024, the threshold
amount is $69,500.
4. Open-end credit.
i. Qualifying for exemption. An open-end account is exempt under
Sec. 226.3(b) (unless secured by any real property, or by personal
property used or expected to be used as the consumer's principal
dwelling) if either of the following conditions is met:
A. The creditor makes an initial extension of credit at or after
account opening that exceeds the threshold amount in effect at the time
the initial extension is made. If a creditor makes an initial extension
of credit after account opening that does not exceed the threshold
amount in effect at the time the extension is made, the creditor must
have satisfied all of the applicable requirements of this part from the
date the account was opened (or earlier, if applicable), including but
not limited to the requirements of Sec. 226.6 (account-opening
disclosures), Sec. 226.7 (periodic statements), Sec. 226.52
(limitations on fees), and Sec. 226.55 (limitations on increasing
annual percentages rates, fees, and charges). For example:
(1) Assume that the threshold amount in effect on January 1 is
$50,000. On February 1, an account is opened but the creditor does not
make an initial extension of credit at that time. On July 1, the
creditor makes an initial extension of credit of $60,000. In this
circumstance, no requirements of this part apply to the account.
(2) Assume that the threshold amount in effect on January 1 is
$50,000. On February 1, an account is opened but the creditor does not
make an initial extension of credit at that time. On July 1, the
creditor makes an initial extension of credit of $50,000 or less. In
this circumstance, the account is not exempt, and the creditor must
have satisfied all of the applicable requirements of this part from the
date the account was opened (or earlier, if applicable).
B. The creditor makes a firm written commitment at account opening
to extend a total amount of credit in excess of the threshold amount in
effect at the time the account is opened with no requirement of
additional credit information for any advances on the account (except
as permitted from time to time with respect to open-end accounts
pursuant to Sec. 226.2(a)(20)).
ii. Subsequent changes generally. Subsequent changes to an open-end
account or the threshold amount may result in the account no longer
qualifying for the exemption in Sec. 226.3(b). In these circumstances,
the creditor must begin to comply with all of the applicable
requirements of this part within a reasonable period of time after the
account ceases to be exempt. Once an account ceases to be exempt, the
requirements of this part apply to any balances on the account. The
creditor, however, is not required to comply with the requirements of
this part with respect to the period of time during which the account
was exempt. For example, if an open-end credit account ceases to be
exempt, the creditor must within a reasonable period of time provide
the disclosures required by Sec. 226.6 reflecting the current terms of
the account and begin to provide periodic statements consistent with
Sec. 226.7. However, the creditor is not required to disclose fees or
charges imposed while the account was exempt. Furthermore, if the
creditor provided disclosures consistent with the requirements of this
part while the account was exempt, it is not required to provide
disclosures required by Sec. 226.6 reflecting the current terms of the
account. See also comment 3(b)-6.
iii. Subsequent changes when exemption is based on initial
extension of credit. If a creditor makes an initial extension of credit
that exceeds the threshold amount in effect at that time, the open-end
account remains exempt under Sec. 226.3(b) regardless of a subsequent
increase in the threshold amount, including an increase pursuant to
Sec. 226.3(b)(1)(ii) as a result of an increase in the CPI-W.
Furthermore, in these circumstances, the account remains exempt even if
there are no further extensions of credit, subsequent extensions of
credit do not exceed the threshold amount, the account balance is
subsequently reduced below the threshold amount (such as through
repayment of the extension), or the credit limit for the account is
subsequently reduced below the threshold amount. However, if the
initial extension of credit on an account does not exceed the threshold
amount in effect at the time of the extension, the account is not
exempt under Sec. 226.3(b) even if a subsequent extension exceeds the
threshold amount or if the account balance later exceeds the threshold
amount (for example, due to the subsequent accrual of interest).
iv. Subsequent changes when exemption is based on firm commitment.
A. General. If a creditor makes a firm written commitment at
account opening to extend a total amount of credit that exceeds the
threshold amount in effect at that time, the open-end account remains
exempt under Sec. 226.3(b) regardless of a subsequent increase in the
threshold amount pursuant to Sec. 226.3(b)(1)(ii) as a result of an
increase in the CPI-W. However, see comment 3(b)-8 with respect to the
increase in the threshold amount from $25,000 to $50,000. If an open-
end account is exempt under Sec. 226.3(b) based on a firm commitment
to extend credit, the account remains exempt even if the amount of
credit actually extended does not exceed the threshold amount. In
contrast, if the firm commitment does not exceed the threshold amount
at account opening, the account is not exempt under Sec. 226.3(b) even
if the account balance later exceeds the threshold amount. In addition,
if a creditor reduces a firm commitment, the account ceases to be
exempt unless the reduced firm commitment exceeds the threshold amount
in effect at the time of the reduction. For example:
(1) Assume that, at account opening in year one, the threshold
amount in effect is $50,000 and the account is exempt under Sec.
226.3(b) based on the creditor's firm commitment to extend $55,000 in
credit. If during year one the creditor reduces its firm commitment to
$53,000, the account remains exempt under Sec. 226.3(b). However, if
during year one the creditor reduces its firm commitment to $40,000,
the account is no longer exempt under Sec. 226.3(b).
(2) Assume that, at account opening in year one, the threshold
amount in effect is $50,000 and the account is
[[Page 83326]]
exempt under Sec. 226.3(b) based on the creditor's firm commitment to
extend $55,000 in credit. If the threshold amount is $56,000 on January
1 of year six as a result of increases in the CPI-W, the account
remains exempt. However, if the creditor reduces its firm commitment to
$54,000 on July 1 of year six, the account ceases to be exempt under
Sec. 226.3(b).
B. Initial extension of credit. If an open-end account qualifies
for a Sec. 226.3(b) exemption at account opening based on a firm
commitment, that account may also subsequently qualify for a Sec.
226.3(b) exemption based on an initial extension of credit. However,
that initial extension must be a single advance in excess of the
threshold amount in effect at the time the extension is made. In
addition, the account must continue to qualify for an exemption based
on the firm commitment until the initial extension of credit is made.
For example:
(1) Assume that, at account opening in year one, the threshold
amount in effect is $50,000 and the account is exempt under Sec.
226.3(b) based on the creditor's firm commitment to extend $55,000 in
credit. The account is not used for an extension of credit during year
one. On January 1 of year two, the threshold amount is increased to
$51,000 pursuant to Sec. 226.3(b)(1)(ii) as a result of an increase in
the CPI-W. On July 1 of year two, the consumer uses the account for an
initial extension of $52,000. As a result of this extension of credit,
the account remains exempt under Sec. 226.3(b) even if, after July 1
of year two, the creditor reduces the firm commitment to $51,000 or
less.
(2) Same facts as in paragraph 4.iv.B(1) of this section except
that the consumer uses the account for an initial extension of $30,000
on July 1 of year two and for an extension of $22,000 on July 15 of
year two. In these circumstances, the account is not exempt under Sec.
226.3(b) based on the $30,000 initial extension of credit because that
extension did not exceed the applicable threshold amount ($51,000),
although the account remains exempt based on the firm commitment to
extend $55,000 in credit.
(3) Same facts as in paragraph 4.iv.B(1) of this section except
that, on April 1 of year two, the creditor reduces the firm commitment
to $50,000, which is below the $51,000 threshold then in effect.
Because the account ceases to qualify for a Sec. 226.3(b) exemption on
April 1 of year two, the account does not qualify for a Sec. 226.3(b)
exemption based on a $52,000 initial extension of credit on July 1 of
year two.
5. Closed-end credit.
i. Qualifying for exemption. A closed-end loan is exempt under
Sec. 226.3(b) (unless the extension of credit is secured by any real
property, or by personal property used or expected to be used as the
consumer's principal dwelling; or is a private education loan as
defined in Sec. 226.46(b)(5)), if either of the following conditions
is met.
A. The creditor makes an extension of credit at consummation that
exceeds the threshold amount in effect at the time of consummation. In
these circumstances, the loan remains exempt under Sec. 226.3(b) even
if the amount owed is subsequently reduced below the threshold amount
(such as through repayment of the loan).
B. The creditor makes a commitment at consummation to extend a
total amount of credit in excess of the threshold amount in effect at
the time of consummation. In these circumstances, the loan remains
exempt under Sec. 226.3(b) even if the total amount of credit extended
does not exceed the threshold amount.
ii. Subsequent changes. If a creditor makes a closed-end extension
of credit or commitment to extend closed-end credit that exceeds the
threshold amount in effect at the time of consummation, the closed-end
loan remains exempt under Sec. 226.3(b) regardless of a subsequent
increase in the threshold amount. However, a closed-end loan is not
exempt under Sec. 226.3(b) merely because it is used to satisfy and
replace an existing exempt loan, unless the new extension of credit is
itself exempt under the applicable threshold amount. For example,
assume a closed-end loan that qualified for a Sec. 226.3(b) exemption
at consummation in year one is refinanced in year ten and that the new
loan amount is less than the threshold amount in effect in year ten. In
these circumstances, the creditor must comply with all of the
applicable requirements of this part with respect to the year ten
transaction if the original loan is satisfied and replaced by the new
loan, which is not exempt under Sec. 226.3(b). See also comment 3(b)-
6.
6. Addition of a security interest in real property or a dwelling
after account opening or consummation.
i. Open-end credit. For open-end accounts, if, after account
opening, a security interest is taken in real property, or in personal
property used or expected to be used as the consumer's principal
dwelling, a previously exempt account ceases to be exempt under Sec.
226.3(b) and the creditor must begin to comply with all of the
applicable requirements of this part within a reasonable period of
time. See comment 3(b)-4.ii. If a security interest is taken in the
consumer's principal dwelling, the creditor must also give the consumer
the right to rescind the security interest consistent with Sec.
226.15.
ii. Closed-end credit. For closed-end loans, if, after
consummation, a security interest is taken in any real property, or in
personal property used or expected to be used as the consumer's
principal dwelling, an exempt loan remains exempt under Sec. 226.3(b).
However, the addition of a security interest in the consumer's
principal dwelling is a transaction for purposes of Sec. 226.23, and
the creditor must give the consumer the right to rescind the security
interest consistent with that section. See Sec. 226.23(a)(1) and the
accompanying commentary. In contrast, if a closed-end loan that is
exempt under Sec. 226.3(b) is satisfied and replaced by a loan that is
secured by any real property, or by personal property used or expected
to be used as the consumer's principal dwelling, the new loan is not
exempt under Sec. 226.3(b) and the creditor must comply with all of
the applicable requirements of this part. See comment 3(b)-5.
7. Application to extensions secured by mobile homes. Because a
mobile home can be a dwelling under Sec. 226.2(a)(19), the exemption
in Sec. 226.3(b) does not apply to a credit extension secured by a
mobile home that is used or expected to be used as the principal
dwelling of the consumer. See comment 3(b)-6.
8. Transition rule for open-end accounts exempt prior to July 21,
2011. Section 226.3(b)(2) applies only to open-end accounts opened
prior to July 21, 2011. Section 226.3(b)(2) does not apply if a
security interest is taken by the creditor in any real property, or in
personal property used or expected to be used as the consumer's
principal dwelling. If, on July 20, 2011, an open-end account is exempt
under Sec. 226.3(b) based on a firm commitment to extend credit in
excess of $25,000, the account remains exempt under Sec. 226.3(b)(2)
until December 31, 2011 (unless the firm commitment is reduced to
$25,000 or less). If the firm commitment is increased on or before
December 31, 2011, to an amount in excess of $50,000, the account
remains exempt under Sec. 226.3(b)(1) regardless of subsequent
increases in the threshold amount as a result of increases in the CPI-
W. If the firm commitment is not increased on or before December 31,
2011, to an amount in excess of $50,000, the account ceases to be
exempt under Sec. 226.3(b) based on a firm commitment to extend
credit. For example:
[[Page 83327]]
i. Assume that, on July 20, 2011, the account is exempt under Sec.
226.3(b) based on the creditor's firm commitment to extend $30,000 in
credit. On November 1, 2011, the creditor increases the firm commitment
on the account to $55,000. In these circumstances, the account remains
exempt under Sec. 226.3(b)(1) regardless of subsequent increases in
the threshold amount as a result of increases in the CPI-W.
ii. Same facts as paragraph 8.i. of this section except, on
November 1, 2011, the creditor increases the firm commitment on the
account to $40,000. In these circumstances, the account ceases to be
exempt under Sec. 226.3(b)(2) after December 31, 2011, and the
creditor must begin to comply with the applicable requirements of this
part.
* * * * *
CONSUMER FINANCIAL PROTECTION BUREAU
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
3. 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.
0
4. In Supplement I to part 1026, under Section 1026.3--Exempt
Transactions, revise 3(b)--Credit Over Applicable Threshold Amount to
read as follows:
Supplement I to Part 1026--Official Interpretations
* * * * *
Section 1026.3--Exempt Transactions
* * * * *
3(b) Credit Over Applicable Threshold Amount
1. Threshold amount. For purposes of Sec. 1026.3(b), the threshold
amount in effect during a particular period is the amount stated in
comment 3(b)-3 below 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 3(b)-3 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.
2. 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.
3. Threshold. For purposes of Sec. 1026.3(b), 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.
ix. From January 1, 2018, through December 31, 2018, the threshold
amount is $55,800.
x. From January 1, 2019, through December 31, 2019, the threshold
amount is $57,200.
xi. From January 1, 2020, through December 31, 2020, the threshold
amount is $58,300.
xii. From January 1, 2021, through December 31, 2021, the threshold
amount is $58,300.
xiii. From January 1, 2022, through December 31, 2022, the
threshold amount is $61,000.
xiv. From January 1, 2023, through December 31, 2023, the threshold
amount is $66,400.
xv. From January 1, 2024, through December 31, 2024, the threshold
amount is $69,500.
4. Open-end credit. i. Qualifying for exemption. An open-end
account is exempt under Sec. 1026.3(b) (unless secured by real
property, or by personal property used or expected to be used as the
consumer's principal dwelling) if either of the following conditions is
met:
A. The creditor makes an initial extension of credit at or after
account opening that exceeds the threshold amount in effect at the time
the initial extension is made. If a creditor makes an initial extension
of credit after account opening that does not exceed the threshold
amount in effect at the time the extension is made, the creditor must
have satisfied all of the applicable requirements of this part from the
date the account was opened (or earlier, if applicable), including but
not limited to the requirements of Sec. 1026.6 (account-opening
disclosures), Sec. 1026.7 (periodic statements), Sec. 1026.52
(limitations on fees), and Sec. 1026.55 (limitations on increasing
annual percentage rates, fees, and charges). For example:
1. Assume that the threshold amount in effect on January 1 is
$50,000. On February 1, an account is opened but the creditor does not
make an initial extension of credit at that time. On July 1, the
creditor makes an initial extension of credit of $60,000. In this
circumstance, no requirements of this part apply to the account.
2. Assume that the threshold amount in effect on January 1 is
$50,000. On February 1, an account is opened but the creditor does not
make an initial extension of credit at that time. On July 1, the
creditor makes an initial extension of credit of $50,000 or less. In
this circumstance, the account is not exempt, and the creditor must
have satisfied all of the applicable requirements of this part from the
date the account was opened (or earlier, if applicable).
B. The creditor makes a firm written commitment at account opening
to
[[Page 83328]]
extend a total amount of credit in excess of the threshold amount in
effect at the time the account is opened with no requirement of
additional credit information for any advances on the account (except
as permitted from time to time with respect to open-end accounts
pursuant to Sec. 1026.2(a)(20)).
ii. Subsequent changes generally. Subsequent changes to an open-end
account or the threshold amount may result in the account no longer
qualifying for the exemption in Sec. 1026.3(b). In these
circumstances, the creditor must begin to comply with all of the
applicable requirements of this part within a reasonable period of time
after the account ceases to be exempt. Once an account ceases to be
exempt, the requirements of this part apply to any balances on the
account. The creditor, however, is not required to comply with the
requirements of this part with respect to the period of time during
which the account was exempt. For example, if an open-end credit
account ceases to be exempt, the creditor must within a reasonable
period of time provide the disclosures required by Sec. 1026.6
reflecting the current terms of the account and begin to provide
periodic statements consistent with Sec. 1026.7. However, the creditor
is not required to disclose fees or charges imposed while the account
was exempt. Furthermore, if the creditor provided disclosures
consistent with the requirements of this part while the account was
exempt, it is not required to provide disclosures required by Sec.
1026.6 reflecting the current terms of the account. See also comment
3(b)-6.
iii. Subsequent changes when exemption is based on initial
extension of credit. If a creditor makes an initial extension of credit
that exceeds the threshold amount in effect at that time, the open-end
account remains exempt under Sec. 1026.3(b) regardless of a subsequent
increase in the threshold amount, including an increase pursuant to
Sec. 1026.3(b)(1)(ii) as a result of an increase in the CPI-W.
Furthermore, in these circumstances, the account remains exempt even if
there are no further extensions of credit, subsequent extensions of
credit do not exceed the threshold amount, the account balance is
subsequently reduced below the threshold amount (such as through
repayment of the extension), or the credit limit for the account is
subsequently reduced below the threshold amount. However, if the
initial extension of credit on an account does not exceed the threshold
amount in effect at the time of the extension, the account is not
exempt under Sec. 1026.3(b) even if a subsequent extension exceeds the
threshold amount or if the account balance later exceeds the threshold
amount (for example, due to the subsequent accrual of interest).
iv. Subsequent changes when exemption is based on firm commitment.
A. General. If a creditor makes a firm written commitment at
account opening to extend a total amount of credit that exceeds the
threshold amount in effect at that time, the open-end account remains
exempt under Sec. 1026.3(b) regardless of a subsequent increase in the
threshold amount pursuant to Sec. 1026.3(b)(1)(ii) as a result of an
increase in the CPI-W. However, see comment 3(b)-8 with respect to the
increase in the threshold amount from $25,000 to $50,000. If an open-
end account is exempt under Sec. 1026.3(b) based on a firm commitment
to extend credit, the account remains exempt even if the amount of
credit actually extended does not exceed the threshold amount. In
contrast, if the firm commitment does not exceed the threshold amount
at account opening, the account is not exempt under Sec. 1026.3(b)
even if the account balance later exceeds the threshold amount. In
addition, if a creditor reduces a firm commitment, the account ceases
to be exempt unless the reduced firm commitment exceeds the threshold
amount in effect at the time of the reduction. For example:
1. Assume that, at account opening in year one, the threshold
amount in effect is $50,000 and the account is exempt under Sec.
1026.3(b) based on the creditor's firm commitment to extend $55,000 in
credit. If during year one the creditor reduces its firm commitment to
$53,000, the account remains exempt under Sec. 1026.3(b). However, if
during year one the creditor reduces its firm commitment to $40,000,
the account is no longer exempt under Sec. 1026.3(b).
2. Assume that, at account opening in year one, the threshold
amount in effect is $50,000 and the account is exempt under Sec.
1026.3(b) based on the creditor's firm commitment to extend $55,000 in
credit. If the threshold amount is $56,000 on January 1 of year six as
a result of increases in the CPI-W, the account remains exempt.
However, if the creditor reduces its firm commitment to $54,000 on July
1 of year six, the account ceases to be exempt under Sec. 1026.3(b).
B. Initial extension of credit. If an open-end account qualifies
for a Sec. 1026.3(b) exemption at account opening based on a firm
commitment, that account may also subsequently qualify for a Sec.
1026.3(b) exemption based on an initial extension of credit. However,
that initial extension must be a single advance in excess of the
threshold amount in effect at the time the extension is made. In
addition, the account must continue to qualify for an exemption based
on the firm commitment until the initial extension of credit is made.
For example:
1. Assume that, at account opening in year one, the threshold
amount in effect is $50,000 and the account is exempt under Sec.
1026.3(b) based on the creditor's firm commitment to extend $55,000 in
credit. The account is not used for an extension of credit during year
one. On January 1 of year two, the threshold amount is increased to
$51,000 pursuant to Sec. 1026.3(b)(1)(ii) as a result of an increase
in the CPI-W. On July 1 of year two, the consumer uses the account for
an initial extension of $52,000. As a result of this extension of
credit, the account remains exempt under Sec. 1026.3(b) even if, after
July 1 of year two, the creditor reduces the firm commitment to $51,000
or less.
2. Same facts as in paragraph 4.iv.B.1 of this section except that
the consumer uses the account for an initial extension of $30,000 on
July 1 of year two and for an extension of $22,000 on July 15 of year
two. In these circumstances, the account is not exempt under Sec.
1026.3(b) based on the $30,000 initial extension of credit because that
extension did not exceed the applicable threshold amount ($51,000),
although the account remains exempt based on the firm commitment to
extend $55,000 in credit.
3. Same facts as in paragraph 4.iv.B.1 of this section except that,
on April 1 of year two, the creditor reduces the firm commitment to
$50,000, which is below the $51,000 threshold then in effect. Because
the account ceases to qualify for a Sec. 1026.3(b) exemption on April
1 of year two, the account does not qualify for a Sec. 1026.3(b)
exemption based on a $52,000 initial extension of credit on July 1 of
year two.
5. Closed-end credit. i. Qualifying for exemption. A closed-end
loan is exempt under Sec. 1026.3(b) (unless the extension of credit is
secured by real property, or by personal property used or expected to
be used as the consumer's principal dwelling; or is a private education
loan as defined in Sec. 1026.46(b)(5)), if either of the following
conditions is met:
A. The creditor makes an extension of credit at consummation that
exceeds the threshold amount in effect at the time of consummation. In
these circumstances, the loan remains exempt under Sec. 1026.3(b) even
if the amount owed is subsequently reduced below the threshold amount
(such as through repayment of the loan).
[[Page 83329]]
B. The creditor makes a commitment at consummation to extend a
total amount of credit in excess of the threshold amount in effect at
the time of consummation. In these circumstances, the loan remains
exempt under Sec. 1026.3(b) even if the total amount of credit
extended does not exceed the threshold amount.
ii. Subsequent changes. If a creditor makes a closed-end extension
of credit or commitment to extend closed-end credit that exceeds the
threshold amount in effect at the time of consummation, the closed-end
loan remains exempt under Sec. 1026.3(b) regardless of a subsequent
increase in the threshold amount. However, a closed-end loan is not
exempt under Sec. 1026.3(b) merely because it is used to satisfy and
replace an existing exempt loan, unless the new extension of credit is
itself exempt under the applicable threshold amount. For example,
assume a closed-end loan that qualified for a Sec. 1026.3(b) exemption
at consummation in year one is refinanced in year ten and that the new
loan amount is less than the threshold amount in effect in year ten. In
these circumstances, the creditor must comply with all of the
applicable requirements of this part with respect to the year ten
transaction if the original loan is satisfied and replaced by the new
loan, which is not exempt under Sec. 1026.3(b). See also comment 3(b)-
6.
6. Addition of a security interest in real property or a dwelling
after account opening or consummation. i. Open-end credit. For open-end
accounts, if after account opening a security interest is taken in real
property, or in personal property used or expected to be used as the
consumer's principal dwelling, a previously exempt account ceases to be
exempt under Sec. 1026.3(b) and the creditor must begin to comply with
all of the applicable requirements of this part within a reasonable
period of time. See comment 3(b)-4.ii. If a security interest is taken
in the consumer's principal dwelling, the creditor must also give the
consumer the right to rescind the security interest consistent with
Sec. 1026.15.
ii. Closed-end credit. For closed-end loans, if after consummation
a security interest is taken in real property, or in personal property
used or expected to be used as the consumer's principal dwelling, an
exempt loan remains exempt under Sec. 1026.3(b). However, the addition
of a security interest in the consumer's principal dwelling is a
transaction for purposes of Sec. 1026.23, and the creditor must give
the consumer the right to rescind the security interest consistent with
that section. See Sec. 1026.23(a)(1) and its commentary. In contrast,
if a closed-end loan that is exempt under Sec. 1026.3(b) is satisfied
and replaced by a loan that is secured by real property, or by personal
property used or expected to be used as the consumer's principal
dwelling, the new loan is not exempt under Sec. 1026.3(b), and the
creditor must comply with all of the applicable requirements of this
part. See comment 3(b)-5.
7. Application to extensions secured by mobile homes. Because a
mobile home can be a dwelling under Sec. 1026.2(a)(19), the exemption
in Sec. 1026.3(b) does not apply to a credit extension secured by a
mobile home that is used or expected to be used as the principal
dwelling of the consumer. See comment 3(b)-6.
8. Transition rule for open-end accounts exempt prior to July 21,
2011. Section 1026.3(b)(2) applies only to open-end accounts opened
prior to July 21, 2011. Section 1026.3(b)(2) does not apply if a
security interest is taken by the creditor in real property, or in
personal property used or expected to be used as the consumer's
principal dwelling. If, on July 20, 2011, an open-end account is exempt
under Sec. 1026.3(b) based on a firm commitment to extend credit in
excess of $25,000, the account remains exempt under Sec. 1026.3(b)(2)
until December 31, 2011 (unless the firm commitment is reduced to
$25,000 or less). If the firm commitment is increased on or before
December 31, 2011, to an amount in excess of $50,000, the account
remains exempt under Sec. 1026.3(b)(1) regardless of subsequent
increases in the threshold amount as a result of increases in the CPI-
W. If the firm commitment is not increased on or before December 31,
2011, to an amount in excess of $50,000, the account ceases to be
exempt under Sec. 1026.3(b) based on a firm commitment to extend
credit. For example:
i. Assume that, on July 20, 2011, the account is exempt under Sec.
1026.3(b) based on the creditor's firm commitment to extend $30,000 in
credit. On November 1, 2011, the creditor increases the firm commitment
on the account to $55,000. In these circumstances, the account remains
exempt under Sec. 1026.3(b)(1) regardless of subsequent increases in
the threshold amount as a result of increases in the CPI-W.
ii. Same facts as paragraph 8.i of this section except, on November
1, 2011, the creditor increases the firm commitment on the account to
$40,000. In these circumstances, the account ceases to be exempt under
Sec. 1026.3(b)(2) after December 31, 2011, and the creditor must begin
to comply with the applicable requirements of this part.
* * * * *
By order of the Board of Governors of the Federal Reserve
System, acting through the Secretary of the Board under delegated
authority.
Michele Taylor Fennell,
Deputy Associate Secretary of the Board.
Brian Shearer,
Senior Advisor, Consumer Financial Protection Bureau.
[FR Doc. 2023-25048 Filed 11-28-23; 8:45 am]
BILLING CODE 4810-AM-P; 6210-01-P