Agencies Issue Proposal on Method to Adjust Thresholds for Exempting Certain Consumer Credit and Lease Transactions

The Federal Reserve Board and the Consumer Financial Protection Bureau (CFPB) today issued a proposal detailing the method that will be used to adjust the thresholds for exempting certain consumer credit and lease transactions from the Truth in Lending Act and Consumer Leasing Act.

The Dodd-Frank Act requires that the exemption thresholds in the Truth in Lending Act and the Consumer Leasing Act be adjusted annually based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The calculation method proposed would allow the thresholds to keep pace with the CPI-W. Among other clarifications, the proposal details 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 protections of the Truth in Lending Act and the Consumer Leasing Act generally apply to consumer credit transactions and consumer leases at or below the thresholds. However, private education loans and loans secured by real property (such as mortgages) are subject to the Truth in Lending Act regardless of the amount of the loan.

The Dodd-Frank Act generally transferred rulemaking authority under the Truth in Lending Act and the Consumer Leasing Act to the CFPB. However, the Board retains authority to issue rules for certain motor vehicle dealers. Therefore, the agencies are issuing these notices jointly.

Comments will be due 30 days after the rule is published in the Federal Register, which is expected shortly.

The proposals are available at: https://www.consumerfinance.gov/rules-policy/notice-opportunities-comment/archive-closed/consumer-leasing-regulation-m/ and https://www.consumerfinance.gov/rules-policy/final-rules/truth-lending-regulation-z-threshold-adjustments/