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CFPB Announces Revised Regulation Z Thresholds for 2021

michaelchristians • July 21, 2020

On July 17th, 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, 2021.

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 Section 1026.52, 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 value of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

In 2021, these safe harbor amounts will remain unchanged at:

$29 for a first-time violation; and
$40 for a subsequent violation (of the same type).

Adjustment to the 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 value of the Consumer Price Index for all Urban Consumers (CPI-U).

Effective January 1, 2021, 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 $22,052 or greater;
For loans of less than $22,052, the lesser of 8% of the loan amount or $1,103.

Adjustment to the 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 the 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 value of the Consumer Price Index for all Urban Consumers (CPI-U).

Effective January 1, 2021, the points and fees caps for a qualified mortgage will be as follows:

Loan Amount	Cap
Greater than $110,260	3% of the loan amount
$66,156 to $110,260	$3,308
$22,052 to $66,156	5% of the loan amount
$13,783 to $22,052	$1,103
Less than $13,783	8% of the loan amount

The post CFPB Announces Revised Regulation Z Thresholds for 2021 appeared first on Michael Christians Consulting, LLC.

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