NEWS: The Consumer Financial Protection Bureau (CFPB) has released its annual updates to three threshold dollar figures that are important for credit unions with credit card and mortgage loan programs. The new figures go into effect Jan. 1, 2022. Please see the final rule for details.
CARD Act penalty fee safe harbor
During 2010, a number of Reg. Z rules took effect under the Credit Card Accountability, Responsibility, and Disclosure Act (the CARD Act). The League’s Guide to the Feb. 22 Reg. Z Changes summarized significant CARD Act changes that went into effect in February 2010.
Among other things, the rules say that penalty charges, like late payment and over-the-limit fees, must be reasonable and proportional to the violation. Card issuers can either base their penalty fees on a reasonable proportion of the costs they incur because of a specific type of violation, or they can use a “safe harbor,” imposing fees within certain dollar limits for a first violation and higher limits for more violations of the same type during the next six billing cycles. The CARD Act requires the CFPB to calculate annual adjustments to these safe harbors.
Based on its calculations, the CFPB is increasing the 2022 safe harbor penalty fees to $30 for a member’s first late payment and to $41 for subsequent violations within the same six-month period.
The CARD Act also requires the CFPB to calculate annual adjustments of the minimum interest charge threshold that triggers disclosure of the minimum interest charge in credit card applications, solicitations and account opening disclosures. Its calculations did not result in a change for 2022 to the current minimum interest charge threshold (which requires disclosure of any minimum interest charge above $1.00).
HOEPA triggers
As explained in The League’s ii Release No. B062, certain “high-cost” mortgage loans are subject to the Home Ownership and Equity Protection Act (HOEPA) rules in Reg. Z. Whether a mortgage loan is “high-cost” depends on three separate tests, based on the loan’s annual percentage rate, its points and fees, and the prepayment penalties that may be charged.
The CFPB has now increased the thresholds used in the points-and-fees test.
In 2022, a loan will be a high-cost mortgage if its points and fees exceed either of the following thresholds:
- 5% of the total loan amount for a loan amount greater than or equal to $22,969; or
- 8% of the total loan amount or $1,148 (whichever is less) for a loan amount less than $22,969.
Qualified mortgage points-and-fees caps
As explained in The League’s ii Release No. B074, certain mortgage loans are presumed to comply with the ability-to-repay rules if they are “qualified mortgages” (QMs). A mortgage cannot be a QM, however, if its points and fees are beyond certain thresholds.
For 2022, the points-and-fees caps will be:
- 3% of the total loan amount for a loan greater than or equal to $114,847.
- $3,445 for a loan amount greater than or equal to $68,908 but less than $114,847.
- 5% of the total loan amount for a loan greater than or equal to $22,969 but less than $68,908.
- $1,148 for a loan amount greater than or equal to $14,356 but less than $22,969.
- 8% of the total loan amount for a loan amount less than $14,356.