2019 Regulation Z Thresholds

On August 27, 2018, the CFPB published a number of annual threshold adjustments to Regulation Z in the Federal Register.  Effective January 1, 2019, the final rule implements the Truth in Lending Act and satisfies the CFPB’s requirement to calculate annually the dollar amounts for several provisions in Regulation Z.  The 2019 threshold adjustments to Regulation Z are as follows.

Minimum Interest Charge Disclosure Thresholds for Credit Cards

The first threshold adjustment considered by the CFPB relates to open-end consumer credit plans (credit cards) under the Truth in Lending Act.  Sections 1026.6(b)(2)(iii) and 1026.60(b)(3) require the disclosure of any minimum interest charge exceeding $1.00 that could be imposed during a billing cycle and provide that, for open-end consumer credit plans, the minimum interest charge thresholds will be recalculated annually based on the Consumer Price Index effective on June 1 of each year.  

The CFPB announced that the minimum interest charge will remain at $1.00 for 2019.

Penalty Fee Safe Harbor for Credit Cards

The second threshold adjustment considered by the CFPB relates to the open-end consumer credit card plans.  Specifically, section 1026.52(b)(1)(ii)(A) and (B) of Regulation Z establish the mermissible penalty fee thresholds for obtaining a safe harbor.  These thresholds are re-calculated annual based on the Consumer Price Index that was effective on the preceding June 1.

For 2019, the adjusted dollar amount for the safe harbor for a first violation penalty fee will increase by $1 to $28 and the adjusted dollar amount for the safe harbor for subsequent violation penalty fees will increase by $1 to $39.

HOEPA Annual Threshold Adjustments

The next threshold adjustment considered by the CFPB relates to high cost mortgage loans under the Homeowners Equity Protection Act.  Each year, the CFPB is required to consider thresholds for two separate elements of these loans. First, the CFPB considers the loan amount threshold for high cost mortgages which is used when determining whether a transaction is a high-cost mortgage.  Secondly, the CFPB annually considers the adjusted points-and-fees dollar trigger for high-cost mortgages.

For 2019, the adjusted total loan amount threshold for high-cost mortgages has increased by 2.5% to $21,549 while the adjusted points-and-fees dollar trigger for high-cost mortgages also increased by 2.5% to $1,077.

Qualified Mortgages Annual Threshold Adjustments

The final threshold under Regulation Z considered by the CFPB relates to certain numbers used to determine whether a loan is considered a qualified mortgage.  The original rule actually set five different thresholds in place for loans of different amounts: a tier for loans greater than or equal to $100,000 with maximum points and fees of 3% of the total loan amount; a tier for loan amounts greater than or equal to $60,000 but less than $100,000 with a maximum points and fees of $3,000; a tier for loan amounts  greater than or equal to $20,000 but less than $60,000 that contained a maximum points and fees of 5% of the total loan amount; a tier for loan amounts greater than or equal to $20,000 but less than $12,500 which had a maximum points and fees of $1,000; and a tier for loan amounts less than $12,500 which had a maximum points and fees of 8% of the total loan amount.  Both the limits and loan amounts are required to be recalculated annually based on the Consumer Price Index in effect on June 1 of each year.

The 2019 qualified mortgage annual threshold amounts have increased by 2.5% and are as follows:

  • 3% of the total loan amount for a loan greater than or equal to $107,747

  • $3,232 for a loan amount greater than or equal to $64,648 but less than $107,747

  • 5% of the total loan amount for a loan greater than or equal to $21,549 but less than $64,648

  • $1,077 for a loan amount greater than or equal to $13,468 but less than $21,549

  • 8% of the total loan amount for a loan amount less than $13,468

Actions Needed by Financial Institutions

While most of these annual threshold adjustments will be handled by the loan operating system (LOS) vendors, financial institutions should ensure that these changes are understood and any updates to bank systems are made.  For example, some vendors may require financial institutions to input these numbers while other financial institutions may have these numbers incorporated into applicable policies and procedures, which may need adjusted with the new threshold numbers.

Link to 2019 Regulation Z Thresholds

The CFPB final rule can be found here.  https://www.federalregister.gov/documents/2018/08/27/2018-18209/truth-in-lending-regulation-z-annual-threshold-adjustments-credit-cards-hoepa-and-qualified

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