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The Consumer Financial Protection Bureau (CFPB) and the Federal Reserve have announced an increase in the dollar thresholds for consumer credit and leasing transactions under the Truth in Lending (Regulation Z) and Consumer Leasing (Regulation M) rules. Starting in 2025, these regulations will apply to consumer credit transactions and leases valued at $71,900 or less, according to a joint press release issued on Friday, October 4.
These adjustments are made annually, based on the percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The latest increase of 3.4%, as of June 1, 2024, reflects this year’s rise in the CPI-W.
However, the regulators clarified that certain types of loans, including private education loans and loans secured by real property (such as mortgages), will remain subject to Regulation Z regardless of the loan amount.
In related news, the CFPB updated its “frequently asked questions” (FAQ) section regarding Buy Now, Pay Later (BNPL) providers, affirming that pay-in-four BNPL loans are also subject to Regulation Z. The Truth in Lending Act mandates that lenders disclose key information, such as interest rates, to borrowers and assess the borrower’s ability to repay the loan.
The CFPB explained that while pay-in-four BNPL loans are generally treated as credit cards under Regulation Z, there are exceptions. For example, if a consumer uses a digital account with a BNPL provider solely to access a stored credit card from a different credit card company, that account may not be classified as a credit card under Regulation Z.
Additionally, the CFPB noted that pay-in-four loans are required to provide periodic statements to borrowers with a credit or debt balance exceeding $1, except in cases where specific exemptions apply.
The new regulations aim to enhance consumer protections by ensuring clear disclosures and accountability across a wider range of lending and leasing transactions.
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