Fed announces adjustment to disclosure trigger

The Federal Reserve Board Nov. 21 published its annual adjustment of the dollar amount that triggers additional disclosure requirements under the Truth in Lending Act for mortgage loans that bear rates or fees above a certain amount.

Under the revision to the board's staff commentary to Regulation Z, the dollar amount of the fee-based trigger has been adjusted from $451 for 2000 to $465 for 2001, based on the annual percentage change reflected in the Consumer Price Index that was in effect June 1, 2000.

The adjustment is effective Jan. 1, 2001.

The Truth in Lending Act requires creditors to disclose credit terms and the cost of consumer credit as an annual percentage rate.

The act requires additional disclosures for loans secured by a consumer's home, and it permits consumers to cancel certain transactions that involve their principal dwelling.

The act is implemented by the board's Regulation Z.

The board's official staff commentary interprets the regulation, and provides guidance to creditors in applying the regulation to specific transactions.

In 1995, the board published amendments to Regulation Z implementing the Home Ownership and Equity Protection Act, contained in the Riegle Community Development and Regulatory Improvement Act of 1994.

These amendments impose substantive limitations and additional disclosure requirements on certain closed-end mortgage loans if the total points and fees payable by the consumer at or before loan consummation exceed the greater of $400 or 8 percent of the total loan amount.

The Truth in Lending Act and Regulation Z provide that the $400 figure shall be adjusted annually on Jan. 1 by the annual percentage change in the Consumer Price Index reported on the preceding June 1.

The board uses the CPI-U index, which is based on all urban consumers and represents approximately 80 percent of the U.S. population, as the index for adjusting the $400 figure.