CFPB, regulators raise real lending standards threshold by 4.5%

The Federal Reserve and the Consumer Financial Protection Bureau on Monday raised the applicable threshold for regulations implementing the Truth in Lending Act and the Consumer Leasing Act by more than 4.5% to combat inflation.

Bloomberg News

Federal regulators on Monday raised thresholds for certain lending rules for consumer credit, small loans and certain mortgages by more than 4.5%.

Consumer Financial Protection Bureau and Federal Reserve announce new cutoff amounts to determine regulatory eligibility Truth in Lending Actor TILA, and consumer leasing actor CLA, governed by Z rule and rule M, respectively.

The TILA and CLA thresholds that will take effect next year will both increase from $66,400 to $69,500, an increase of 4.6%, meaning that most transactions below that figure will be subject to enhanced disclosure requirements and consumer revocation rights.

The CFPB, the Federal Reserve and the Office of the Comptroller of the Currency also adjusted the threshold for so-called high-priced mortgages that require special appraisal, raising it from $31,000 to $32,400, an increase of just over 4.5%.

Last year, the CFPB raised the threshold for Regulation Z and M from $61,000 to $66,400, an increase of 8.8%, while the regulator raised the threshold for high-priced loans from $28,500 to $31,000, an increase of 8.9%. The 2024 threshold comes from $31,000, an increase of 8.9%. The 2024 threshold comes from milder inflation this year.

The 2010 Dodd-Frank Act gave the CFPB the authority to enforce Regulations Z and M. The CFPB adjusts the TILA and CLA thresholds annually based on changes in the U.S. Bureau of Labor Statistics’ Consumer Price Index for Urban Wage Earners and Clerical Workers.

TILA was enacted in the late 1960s to standardize the way costs and fees were incorporated into consumer credit products. The CLA was originally a provision of TILA but was later incorporated into its own statute in 1981. Thresholds are implemented as part of TILA. Dodd-Frank Act.

The reform package also requires special assessments for certain high-risk mortgages. The Federal Reserve, OCC, CFPB, Federal Deposit Insurance Corporation, and National Credit Union Administration jointly developed a rule setting the initial threshold for application of this standard at $25,000. , the OCC and the CFPB are tasked with adjusting prices annually.

In addition to protecting against inaccurate and unfair credit issuance and billing practices and guaranteeing rescission rights, these laws impose restrictions on certain home-secured loans, home equity lines of credit, and certain closed-end mortgages. TILA also includes minimum standards for loans to be secured by someone’s home and establishes standards for determining whether mortgage lending practices are unfair or deceptive.

The substance standards of TILA and CLA apply only to consumer loans, meaning loans to businesses, governments, and other institutions are generally forgiven even if they fall below the threshold.

At the same time, certain consumer-facing products, such as private education loans and loans secured by real property (including mortgages), must comply with these standards regardless of their size.

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