Today's Trends in Credit Regulation

Federal Reserve Board Issues HOEPA Points and Fees Dollar Amount and New TILA and CLA Thresholds
By Catherine M. Brennan

On Monday, June 13, 2011, the Federal Reserve Board published its annual adjustment to the amount of fees that triggers additional disclosure requirements under the Truth in Lending Act and the Home Ownership and Equity Protection Act of 1994 for home mortgage loans that bear rates or fees above a certain amount. Also on Monday, the Board adjusted Regulation Z (TILA) and Regulation M (Consumer Leasing Act) by increasing the dollar threshold for exempt consumer credit and lease transactions. The dollar amount of the fee-based trigger has been adjusted to $611 for 2012 based on the annual percentage change reflected in the consumer price index that was in effect as of June 1, 2011.

The HOEPA adjustment - required by statute and effective January 1, 2012 - increases the fee-based trigger to $611. HOEPA restricts credit terms such as balloon payments and requires additional disclosures when total points and fees payable by the consumer exceed the larger of the fee-based trigger or 8% of the total loan amount. The adjustment does not affect the rules for “higher-priced mortgage loans” adopted by the Board in July 2008. Coverage of mortgage loans under the July 2008 rules is determined using a different rate-based trigger.

Effective July 21, 2011, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) amends TILA and the CLA to expand consumer protections by increasing the thresholds for exempt consumer credit transactions and consumer leases from $25,000 to $50,000. In addition, Dodd-Frank provides that, on or after December 31, 2011, these thresholds must be adjusted annually by any annual percentage increase in the consumer price index. Based on the adjustments announced Monday, the protections of TILA and the CLA generally will apply to consumer credit transactions and consumer leases of $51,800 or less in 2012. However, TILA also applies to private education loans and loans secured by real property (such as mortgages) regardless of the loan amount.

Catherine M. Brennan is a partner in the Maryland office of Hudson Cook, LLP. Cathy can be reached at 410-865-5405 or by email at

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