In a final rule issued this week, the Consumer Financial Protection Bureau (“CFPB”) expanded the exemptions for smaller financial institutions contained in Regulation Z, which implements the Truth-in-Lending Act (“TILA”). This will positively impact community banks and credit unions. The most important change increased the small creditor exemption within the qualified mortgage (“QM”) rules from 500 total loans per year to 2,000. Additionally, the rule excludes loans that the creditor or its affiliate originates and keeps in its portfolio from the loan origination limit.
The final rule also impacts the definition and application of “rural area,” which impacts other exemptions. Importantly, the rule broadens the definition of rural area and adds new safe harbors, including an automated lookup tool on the U.S. Census Bureau’s website. For institutions that make loans in rural areas, this expansion is helpful to offer certain products to consumers while still making qualified loans.
The CFPB has published a summary that is helpful in describing the above changes as well as other updates in the rule.
Should you have further questions, please contact Spilman.