The CFPB has issued a final rule regarding various annual adjustments it is required to make under provisions of Regulation Z under the Truth in Lending Act (TILA) that implement the CARD Act, Home Ownership and Equity Protection Act (HOEPA), and the ability to repay/qualified mortgage provisions of TILA. The adjustments reflect changes in the Consumer Price Index (CPI) in effect on June 1, 2024 and will take effect January 1, 2025. The adjustments do not include adjustments to the credit card penalty fees safe harbor.
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 2025 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 recent adjustments, 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” (emphasis added). The “late fee” rule issued by the CFPB, which would set an $8 safe harbor for late fees assessed by all issuers other than “smaller” card issuers, a safe harbor for smaller card issuers of $32 for the first late payment and $43 for repeat violations within six months, and a safe harbor for all other penalty fees of $32 for the first violation and $43 for repeat violations within six months, purports to eliminate any inflation adjustment for the $8 late fee while retaining the inflation adjustment for all other fees. However, the effective date of that rule has been stayed in pending litigation.
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 2025, the CFPB increased the total loan amount threshold to $26,968, and the points and fees threshold to $1,348. As a result, in 2025, under the points and fees trigger a transaction will be a high-cost mortgage (1) if the total loan amount is $26,968 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 $26,968 and the points and fees exceed the lesser of $1,348 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 annually adjusting 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 2025 to the following:
- For a loan amount greater than or equal to $134,841, points and fees may not exceed 3 percent of the total loan amount;
- For a loan amount greater than or equal to $80,905 but less than $134,841, points and fees may not exceed $4,045;
- For a loan amount greater than or equal to $26,968 but less than $80,905, points and fees may not exceed 5 percent of the total loan amount;
- For a loan amount greater than or equal to $16,855 but less than $26,968, points and fees may not exceed $1,348; and
- For a loan amount less than $16,855, 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 2025, 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 $134,841;
- 3.5 or more percentage points for a first lien loan with a loan amount greater than or equal to $80,905 but less than $134,841;
- 6.5 or more percentage points for a first lien loan with a loan amount less than $80,905;
- 6.5 or more percentage points for a first lien loan on a manufactured home with a loan amount less than $134,841;
- 3.5 or more percentage points for a subordinate lien loan with a loan amount greater than or equal to $80,905;
- 6.5 or more percentage points for a subordinate lien loan with a loan amount less than $80,905.