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Calculating adjustments to the safe harbor limits on credit card issuer fees

The Bureau of Consumer Financial Protection is required to annually calculate the inflation-adjusted dollar amounts for several provisions in Regulation Z, which implements the Truth in Lending Act.

Two such annual calculations relate to § 1026.52(b)(1)(ii), which is a safe harbor provision allowing credit card issuers to impose penalty fees on consumers for violating account terms without violating the restrictions on penalty fees established by the Credit Card Accountability Responsibility and Disclosure Act of 2009. One calculation is an adjustment to the safe harbor fee amount that credit card issuers are permitted to impose on a consumer for the consumer’s first violation of the terms of a credit card agreement. The other calculation is an adjustment to the safe harbor fee amount that credit card issuers can impose on a consumer for subsequent violations of the same type. This diagram offers an easy way to understand how those thresholds are calculated.

For the sake of brevity, the diagram demonstrates only the step-by-step calculation for the first-violation safe harbor fee amount. The subsequent-violation safe harbor fee amount is calculated in the same fashion, however, and the resulting value is included in the summary at the bottom of this page.

Step 1

Gather starting information.

2019 CPI-W & 2020 CPI-W 

Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) in effect on June 1 of each year. Usually, this is the April CPI-W, which is published in mid-May. CPI data are available on the Bureau of Labor Statistics website at bls.gov .

2020 Change (carried over)

Cumulative change to the fee carried over from the previous year. The calculation is described in Step 5 (below).

2020 Adjusted dollar amount

The first-violation safe harbor penalty fee from Regulation Z, § 1026.52(b)(1)(ii)(A) in effect in 2020.

CPI-W

2019

2020

2021

CPI-W

<span style="background-color: #fff0dd">249.332</span>

<span style="background-color: #fff0dd">249.515</span>

 

% change in CPI-W

     

First-violation fee

2019

2020

2021

Change (current year)

     

Change (carried over)

 

<span style="background-color: #d6e8fa">$0.055</span>

 

Cumulative change

     

Adjusted dollar amount

 

<span style="background-color: #e2efd8">$29.00</span>

 

Step 2

Calculate the percent change in CPI-W from 2019 to 2020.

(2020 CPI-W - 2019 CPI-W) ÷ 2019 CPI-W = 2020% change in CPI-W

(249.515 - 249.332) ÷ 249.332 = 0.073%

CPI-W

2019

2020

2021

CPI-W

<span style="background-color: #d6e8fa">249.332</span> 

<span style="background-color: #fff0dd">249.515</span>

 

% change in CPI-W

 

<span style="background-color: #e2efd8">0.073%</span>

 

First-violation fee

2019

2020

2021

Change (current year)

     

Change (carried over)

 

<span style="background-color: #d6e8fa">$0.055</span>

 

Cumulative change

     

Adjusted dollar amount

 

<span style="background-color: #e2efd8">$29.00</span>

 

Step 3

Calculate the 2020 Change (current year) value.

2020% change in CPI-W x 2020 Adjusted dollar amount = 2020 Change (current year)

0.00073 x 29 = 0.021

CPI-W

2019

2020

2021

CPI-W

249.332

249.515

 

% change in CPI-W

 

<span style="background-color: #fff0dd">0.073%</span>

 

First-violation fee

2019

2020

2021

Change (current year)

 

<span style="background-color: #e2efd8">$0.021</span>

 

Change (carried over)

 

$0.055

 

Cumulative change

     

Adjusted dollar amount

 

<span style="background-color: #d6e8fa">$29.00</span>

 

Step 4

Calculate the 2020 Cumulative change.

2020 Change (current year) + 2020 Change (carried over) = 2020 Cumulative change

0.021 + 0.055 = 0.076

CPI-W

2019

2020

2021

CPI-W

249.332

249.515

 

% change in CPI-W

 

0.073%

 

First-violation fee

2019

2020

2021

Change (current year)

 

<span style="background-color: #fff0dd">$0.021</span>

 

Change (carried over)

 

<span style="background-color: #d6e8fa">$0.055</span>

 

Cumulative change

 

<span style="background-color: #e2efd8">$0.076</span>

 

Adjusted dollar amount

 

$29.00

 

Step 5

Calculate the 2021 Adjusted dollar amount and 2021 Change (carried over).

If the 2020 Cumulative change is ≥ $1

Then the 2021 Adjusted dollar amount will be $1 greater than the 2020 Adjusted dollar amount, and the 2021 Change (carried over) will be $1 less than the 2020 Cumulative change.

If the 2020 Cumulative change is ≤ $-1

Then the 2021 Adjusted dollar amount will be $1 less than the 2020 Adjusted dollar amount, and the 2021 Change (carried over) will be $1 greater than the 2020 Cumulative change.

If the 2020 Cumulative change is between $-1 and $1

Then the 2021 Adjusted dollar amount will be the same as the 2020 Adjusted dollar amount, and the 2021 Change (carried over) will be the same as the 2020 Cumulative change.

CPI-W

2019

2020

2021

CPI-W

249.332

249.515

 

% change in CPI-W

 

0.073%

 

First-violation fee

2019

2020

2021

Change (current year)

 

$0.021

 

Change (carried over)

 

$0.055

<span style="background-color: #fff0dd">$0.076</span>

Cumulative change

 

<span style="background-color: #fff0dd">$0.076</span>

 

Adjusted dollar amount

 

<span style="background-color: #d6e8fa">$29.00</span>

<span style="background-color: #d6e8fa">$29.00</span>

Summary

Below are the full calculations for both the first-violation fee and subsequent-violation fee safe harbor thresholds.

CPI-W

2019

2020

2021

CPI-W

249.332

249.515

 

% change in CPI-W

 

0.073%

 

First-violation fee

2019

2020

2021

Change (current year)

 

$0.021

 

Change (carried over)

 

$0.055

$0.076

Cumulative change

 

$0.076

 

Adjusted dollar amount

 

$29.00

$29.00

Subsequent-violation fee

2019

2020

2021

Change (current year)

 

$0.029

 

Change (carried over)

 

$0.723

$0.752

Cumulative change

 

$0.752

 

Adjusted dollar amount

 

$40.00

$40.00