Agencies Issue Annual Reg Z & Reg M Dollar Threshold Adjustments for 2025
On October 15, the Consumer Financial Protection Bureau (CFPB) and the Federal Reserve Board (Fed) published final rules to revise the dollar thresholds for consumer credit (Regulation Z) and consumer lease (Regulation M) transactions that will take effect in 2025. These final rules apply to all federally insured credit unions engaged in consumer credit transactions and in the leasing of personal property.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) amended TILA by requiring that the dollar threshold for exempt consumer credit transactions be adjusted annually by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Based on the annual percentage increase in the CPI-W as of June 1, 2024, the exemption threshold will increase from $69,500 to $71,900 effective January 1, 2025. This amount is based on the CPI–W in effect on June 1, 2024, which was reported on May 15, 2024 (based on April 2024 data).
The Dodd-Frank Act also amended the Consumer Leasing Act by requiring that the dollar threshold for exempt consumer leases be adjusted annually by the annual percentage increase in the CPI-W. If there is no annual percentage increase in the CPI-W, the Fed and the CFPB will not adjust this exemption threshold from the prior year. However, in years following a year in which the exemption threshold was not adjusted, the threshold is calculated by applying the annual percentage change in the CPI-W to the dollar amount that would have resulted, after rounding, if the decreases and any subsequent increases in the CPI-W had been taken into account. Based on the annual percentage increase in the CPI-W as of June 1, 2024, the exemption threshold for consumer leases will increase from $69,500 to $71,900, effective Jan. 1, 2025.
Transactions at or below the threshold amounts are subject to regulation protection. However, private education loans and loans secured by real property, such as mortgages, or personal property used or expected to be used as the consumer’s principal dwelling, are subject to Regulation Z regardless of the loan amount.
The CFPB, Fed, and Office of the Comptroller of the Currency also issued a final rule on October 15 finalizing amendments to the official interpretations and commentary for the agencies’ regulations that implement section 129H of TILA. Section 129H of TILA establishes special appraisal requirements for “higher-risk mortgages,” termed “higher-priced mortgage loans” or “HPMLs” in the agencies’ regulations. Based on the CPI-W as of June 1, 2024, the exemption threshold will increase from $32,400 to $33,500, effective January 1, 2025.
The agencies’ rules exempted, among other loan types, transactions of $25,000 or less, and required that this loan amount be adjusted annually based on any annual percentage increase in the CPI-W. If there is no annual percentage increase in the CPI-W, the OCC, the Fed, and the CFPB will not adjust this exemption threshold from the prior year. However, in years following a year in which the exemption threshold was not adjusted, the threshold is calculated by applying the annual percentage increase in the CPI-W to the dollar amount that would have resulted, after rounding, if the decreases and any subsequent increases in the CPI-W had been taken into account.
Based on the CPI-W as of June 1, 2024, the exemption threshold will increase from $32,400 to $33,500, effective January 1, 2025.
The lending, risk management/compliance and operations departments should review their policies and procedures to make the changes necessary to reflect the revised threshold amounts.