Final Rule Issued on Small Creditors and Rural or Underserved Areas

• September 22, 2015
• CLA Regulatory Compliance Team

On September 21, 2015, the Consumer Financial Protection Bureau (CFPB) issued a final rule changing the definition of “small creditor” and “rural area” in Regulation Z. The rule was proposed in January 2015 and becomes effective January 1, 2016.

Areas of Regulation Z impacted by the change include the ability-to-repay rules, higher-priced mortgage loan escrow requirements, and high-cost mortgage rules.

Some of the changes include the following:

• Increases the loan origination threshold for determining eligibility of small creditor status from 500 to 2,000 first-lien covered transactions.
• Excludes portfolio loans from the loan origination limit.
• Includes assets of an affiliate that regularly extend first-lien covered transaction in the asset limit for determining small-creditor status.
• Expands the definition of a “rural area”.
• Reduces the time period for determining when a creditor is operating predominantly in a rural or underserved area.
• Adds a grace period when a creditor does not meet one or more of the “small creditor” or “creditor operating in rural or underserved area” requirements.

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