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From Banking and Finance Law Daily, July 22, 2016

Agencies propose new method of calculating threshold exemptions under TILA

By Lisa M. Goolik, J.D.

The Consumer Financial Protection Bureau, Federal Reserve Board, and Office of the Comptroller of the Currency have issued a proposed rule detailing the method used to make annual inflation adjustments to the thresholds for exempting small loans from higher-priced mortgage loan appraisal requirements. The CFPB and Fed also issued similar proposals for the method used to adjust the thresholds for exempting certain consumer credit and lease transactions from the Truth in Lending Act and Consumer Leasing Act. Comments on the proposals are due 30 days after the rules are published in the Federal Register.

Special appraisal requirements. The Dodd-Frank Act amended TILA to add special appraisal requirements for higher-priced mortgage loans, including a requirement that creditors obtain a written appraisal based on a physical visit to the home's interior before making a higher-priced mortgage loan. The rules implementing these requirements exempted transactions of $25,000 or less and required that the exemption threshold be adjusted annually to reflect increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

According to the agencies, the proposed calculation method would allow the thresholds to keep pace with the CPI-W. In addition, the proposal clarifies that if there is no annual percentage increase in the CPI-W, the agencies will not adjust the exemption threshold from the prior year.

Interested parties are encouraged to submit written comments jointly to the agencies, using the title "Appraisals for Higher-Priced Mortgage Loans" to facilitate the organization and distribution of comments. Detailed instructions for submitting the comments are provided in the proposal.

Consumer lease requirements. Similarly, the Dodd-Frank Act requires that the exemption thresholds for consumer credit transactions and consumer leases in TILA and CLA be adjusted annually based on the percentage increase in the CPI-W. The proposals utilize the same method for calculation used to calculate threshold exemptions from the special appraisal requirements, including the clarification that if there is no annual percentage increase in the CPI-W, the agencies will not adjust the exemption thresholds from the prior year.

The notices also suggest that commenters submit written comments jointly to the Fed and the CFPB. For comments on the proposed changes to the TILA requirements, commenters should use the title "Truth in Lending (Regulation Z)" to facilitate the organization and distribution of comments. For comments on the proposed changes to the CLA requirements, commenters should use the title "Consumer Leasing (Regulation M)." Detailed instructions for submitting comments are provided in the proposal.

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