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CFPB Announces Revised Regulation Z Thresholds for 2020

michaelchristians • August 4, 2019

On August 1st, the Consumer Financial Protection Bureau (CFPB) issued a final rule updating several Regulation Z thresholds for the next calendar year. The final rule is effective January 1, 2020.

Safe Harbor Amount for Credit Card Penalty Fees
Section 1026.52 of Regulation Z establishes a safe harbor for the imposition of penalty fees in connection with a credit card account. To remain in compliance with this safe harbor provision, a card issuer may not impose a penalty fee above a certain dollar amount for:
• First time violations of the terms or other requirements of a credit card account; and
• Subsequent violations (of the same type) of the terms or other requirements of a credit card account.

These safe harbor dollar amounts are adjusted annually by the CFPB based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) in effect on the preceding June 1st.

Effective January 1, 2020, the safe harbor dollar amounts will be:
• $29 for a first time violation; and
• $40 for a subsequent violation (of the same type).

Adjustment to Points and Fees Trigger for High-Cost Mortgages
Section 1026.32 of Regulation Z outlines the three tests that must be applied to determine whether a loan is classified as a high-cost mortgage. The three tests include an APR trigger, a prepayment penalty trigger and a points and fees trigger.

The points and fees trigger provides that if the total points and fees charged in connection with the transaction exceed a certain threshold, the loan will be classified as high-cost. These amounts are adjusted annually by the CFPB based on the Consumer Price Index for All Urban Consumers (CPI-U) in effect on the preceding June 1st.

Effective January 1, 2020, if the total points and fees charged in connection with the transaction exceed the following, the loan will be classified as high-cost:
• 5% of the loan amount for loans of $21,980 or greater;
• For loans of less than $21,980, the lesser of 8% of the loan amount or $1,099.

Adjustment to Qualified Mortgage Limitation on Points and Fees
Section 1026.43 of Regulation Z identifies the requirements a loan must meet to be considered a qualified mortgage. The elements of a qualified mortgage are as follows:
• Regular, periodic payments;
• A term that does not exceed 30 years;
• The borrower’s debt-to-income ratio does not exceed 43%; and
• A limitation on points and fees charged in connection with the transaction.

The points and fees caps associated with a qualified mortgage are adjusted annually by the CFPB based on the Consumer Price Index for All Urban Consumers (CPI-U) in effect on the preceding June 1st.

Effective January 1, 2020, the points and fees caps for a qualified mortgage will be as follows:

Loan Amount	Cap
Greater than $109,898	3% of the loan amount
$65,939 to $109,898	$3,297
$21,980 to $65,939	5% of the loan amount
$13,737 to $21,980	$1,099
Less than $13,737	8% of the loan amount

For more information, contact Michael Christians Consulting, LLC at michael@mchristiansconsulting.com.

The post CFPB Announces Revised Regulation Z Thresholds for 2020 appeared first on Michael Christians Consulting, LLC.

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