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

The Consumer Financial Protection Bureau 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.

Step 1

Gather starting information.

2016 CPI-W & 2017 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 is available on the Bureau of Labor Statistic’s website at bls.gov

2017 Change (carried over)

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

2017 Adjusted dollar amount

The first violation safe harbor penalty fee from Regulation Z, § 1026.52(b)(1)(ii)(A) in effect in 2017. Find the value from the CFPB.

CPI-W

2016

2017

2018

CPI-W

233.438

238.432

% change in CPI-W

First violation fee

2016

2017

2018

Change (current year)

Change (carried over)

$0.237

Cumulative change

Adjusted dollar amount

$27.00

Step 2

Calculate the percent change in CPI-W from 2016 to 2017.

(2017 CPI-W - 2016 CPI-W) ÷ 2016 CPI-W = 2017% change in CPI-W

(238.432 - 233.438) ÷ 233.438 = 2.139%

CPI-W

2016

2017

2018

CPI-W

233.438 

238.432

% change in CPI-W

2.139%

First violation fee

2016

2017

2018

Change (current year)

Change (carried over)

$0.237

Cumulative change

Adjusted dollar amount

$27.00

Step 3

Calculate the 2017 Change (current year) value.

2017% change in CPI-W x 2017 Adjusted dollar amount = 2017 Change (current year)

0.02139 x 27 = 0.578

CPI-W

2016

2017

2018

CPI-W

233.438

238.432

% change in CPI-W

2.139%

First violation fee

2016

2017

2018

Change (current year)

$0.578

Change (carried over)

$0.237

Cumulative change

Adjusted dollar amount

$27.00

Step 4

Calculate the 2017 Cumulative change.

2017 Change (current year) + 2017 Change (carried over) = 2017 Cumulative change

0.578 + 0.237 = 0.815

CPI-W

2016

2017

2018

CPI-W

233.438

238.432

% change in CPI-W

2.139%

First violation fee

2016

2017

2018

Change (current year)

$0.578

Change (carried over)

$0.237

Cumulative change

$0.815

Adjusted dollar amount

$27.00

Step 5

Calculate the 2018 Adjusted dollar amount and 2018 Change (carried over).

If the 2017 Cumulative change is ≥ $1

Then the 2018 Adjusted dollar amount amount will be $1 greater than the 2017 Adjusted dollar amount, and the 2018 Change (carried over) will be $1 less than the 2017 Cumulative change.

If the 2017 Cumulative change is ≤ $-1

Then the 2018 Adjusted dollar amount will be $1 less than the 2017 Adjusted dollar amount, and the 2018 Change (carried over) will be $1 greater than the 2017 Cumulative change.

If the 2017 Cumulative change is between $-1 and $1

Then the 2018 Adjusted dollar amount will be the same as the 2017 Adjusted dollar amount, and the 2018 Change (carried over) will be the same as the 2017 Cumulative change.

CPI-W

2016

2017

2018

CPI-W

233.438

238.432

% change in CPI-W

2.139%

First violation fee

2016

2017

2018

Change (current year)

$0.578

Change (carried over)

$0.237

$0.815

Cumulative change

$0.815

Adjusted dollar amount

$27.00

$27.00

Summary

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

CPI-W

2016

2017

2018

CPI-W

233.438

238.432

% change in CPI-W

2.139%

First violation fee

2016

2017

2018

Change (current year)

$0.578

Change (carried over)

$0.237

$0.815

Cumulative change

$0.815

Adjusted dollar amount

$27.00

$27.00

Subsequent violation fee

2016

2017

2018

Change (current year)

$0.813

Change (carried over)

$0.173

$0.986

Cumulative change

$0.986

Adjusted dollar amount

$38.00

$38.00