The CFPB recently posted on its website a final rule regarding various annual adjustments it is required to make under provisions of Regulation Z (TILA) that implement the CARD Act, HOEPA, and the ability to repay/qualified mortgage provisions of Dodd-Frank. The adjustments reflect changes in the Consumer Price Index (CPI) in effect on June 1, 2023 and will take effect January 1, 2024. The adjustments do not include adjustments to the credit card penalty fees safe harbor.

Last year the CFPB published the annual adjustments late in December, prompting criticism from the industry and our firm, as the adjustments became effective on January 1, 2023.

CARD Act. Regulation Z provides for the CFPB to annually adjust (1) the minimum interest charge threshold that triggers disclosure of the minimum interest charge in credit card applications, solicitations and account opening disclosures, and (2) the penalty fees safe harbor amounts.

In the notice, the CFPB announced that the calculation did not result in a change for 2024 to the current minimum interest charge threshold (which requires disclosure of any minimum interest charge above $1.00). (An increase in the minimum interest charge requires the change in the CPI to cause an increase in the minimum charge of at least $1.00.)

As was the case with the adjustments for 2023, the notice does not mention the credit card penalty fees safe harbors, which are set forth in Regulation Z Section 1026.52(b)(1)(ii)(A) and (B). Section 1026.52(b)(1)(ii)(D) provides that that these amounts “will be adjusted annually by the Bureau to reflect changes in the Consumer Price Index.” For purposes of determining whether to make an adjustment in the minimum interest charge threshold, the CFPB used the CPI for Urban Wage Earners and Clerical Workers (CPI–W), which increased by 4.6 percent over the relevant period, significantly less than the 8.9 percent increase used to compute the 2023 adjustments. Since the CFPB has also used the CPI-W when making past adjustments to the penalty fees safe harbor amounts, an adjustment for 2024 to the safe harbor amounts using the CPI-W presumably would reflect the 4.6 percent and 8.9 percent increases. The safe harbor amounts were last adjusted for inflation in 2022, and are $30 for a first late payment and $41 for each subsequent late payment.

In February 2023, the CFPB posted on its website a proposed rule regarding credit card late fees. The CFPB is proposing to amend Regulation Z to reduce the safe harbor dollar amount for credit card late fees to a flat $8 amount that would apply to both first and subsequent late payments.

HOEPA. Regulation Z provides for the CFPB to annually adjust the total loan amount and fee thresholds that determine whether a transaction is a high cost mortgage. In the final rule, for 2024, the CFPB increased the total loan amount threshold to $26,092, and the points and fees threshold to $1,305. As a result, in 2024, under the points and fees trigger a transaction will be a high-cost mortgage (1) if the total loan amount is $26,092 or more and the points and fees exceed 5 percent of the total loan amount, or (2) if the total loan amount is less than $26,092 and the points and fees exceed the lesser of $1,305 or 8 percent of the total loan amount.

Ability to repay/QM rule. The CFPB’s ability to repay/QM rule provides for the CFPB to annually adjust the points and fees limits that a loan cannot exceed to satisfy the requirements for a QM. The CFPB must also annually adjust the related loan amount limits. In the final rule the CFPB increased these limits for 2024 to the following:

• For a loan amount greater than or equal to $130,461, points and fees may not exceed 3 percent of the total loan amount;

• For a loan amount greater than or equal to $78,277 but less than $130,461, points and fees may not exceed $3,914;

• For a loan amount greater than or equal to $26,092 but less than $78,277, points and fees may not exceed 5 percent of the total loan amount;

• For a loan amount greater than or equal to $16,308 but less than $26,092, points and fees may not exceed $1,305; and

• For a loan amount less than $16,308, points and fees may not exceed 8 percent of the total loan amount.

Additionally, under the general qualified mortgage requirements, to be a QM the annual percentage rate on the loan may not exceed the average prime offer rate by a specified percentage, which varies based on the loan amount, lien status and home type. A number of the loan amounts used for the points and fees trigger also are used for this purpose. In 2024, to be a QM the annual percentage rate on the loan may not exceed the average prime offer rate by:

• 2.25 or more percentage points for a first lien loan with a loan amount greater than or equal to $130,461;

• 3.5 or more percentage points for a first lien loan with a loan amount greater than or equal to $78,277 but less than $130,461;

• 6.5 or more percentage points for a first lien loan with a loan amount less than $78,277;

• 6.5 or more percentage points for a first lien loan on a manufactured home with a loan amount less than $130,461;

• 3.5 or more percentage points for a subordinate lien loan with a loan amount greater than or equal to $78,277;

• 6.5 or more percentage points for a subordinate lien loan with a loan amount less than $78,277.

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