Reference: CFPB 2025
The Consumer Financial Protection Bureau (CFPB) and the Federal Reserve Board (FRB) have jointly issued a formal bulletin to update the specific dollar thresholds governing the applicability of the Truth in Lending Act (TILA) and Regulation Z, as well as Regulation M governing residential mortgage transactions.
This update is critical for financial institutions, lenders, lessors, and their compliance departments. The primary goal of this update is to ensure that consumer protections provided under these regulations remain effective in light of economic inflation and market changes over the past few years.
The following memo provides a legal analysis of the new thresholds, identifies the impacted entities, and outlines the compliance steps required by December 31, 2025, for full implementation before January 1, 2026.
Executive Summary
- Announcement: The CFPB and FRB are announcing new dollar thresholds for TILA and Regulation Z, as well as Regulation M, applicable to transactions occurring in 2026.
- Effective Date: These new thresholds will apply to covered transactions initiated on or after January 1, 2026.
- Applicable Regulations: The updates affect Regulation Z (Truth in Lending Act), Regulation M (Residential Mortgages), and related consumer protection rules.
- Who is Impacted: The changes primarily impact lenders, creditors, lessors, and retailers offering credit to consumers. Small businesses may be exempt from certain reporting requirements if they remain below new thresholds.
- Compliance Deadline: Financial institutions must review their existing policies, update their software systems, and train staff on the new thresholds by December 31, 2025.
- Legal Basis: The updates are made pursuant to the Dodd-Frank Act and the Economic Growth and Regulatory Paperwork Reduction Act (EGRA) authority.
- Key Action Item: All covered entities must ensure their credit policies do not inadvertently exclude consumers who now qualify for coverage under the new thresholds.
What the Regulators Issued
The CFPB and FRB released a formal bulletin detailing the calculation of new thresholds for the application of key consumer financial protections. This bulletin supersedes previous thresholds established for prior years (such as 2023-2025).
The regulators have established that the specific monetary amounts used to determine if a transaction is “covered” under TILA/Regulation Z and Regulation M will be adjusted to reflect economic conditions. This adjustment is consistent with the statutory requirement to periodically revise these thresholds to maintain the effectiveness of consumer protection laws.
The bulletin specifically references the calculation methodology, which typically involves adjusting for the Consumer Price Index for All Urban Consumers (CPI-U) or similar economic indicators.
This release clarifies that while the exact numerical values are determined in the formal rulemaking, the process for determining these values is robust and legally grounded.
Institutions are reminded that failing to adhere to the correct thresholds can result in regulatory enforcement actions, including fines and remediation orders.
Who Is Impacted by the New Thresholds
The impact of these threshold updates is widespread across the lending and leasing industry. The following categories of entities are primarily affected:
1. Lenders and Creditors
Lenders must ensure that their eligibility criteria do not inadvertently disqualify applicants who fall under the new thresholds. If a loan amount exceeds the threshold for a specific type of consumer loan, the lender must comply with all applicable TILA/Regulation Z requirements, including providing specific disclosures and avoiding prohibited fees.
2. Residential Mortgage Lenders
Under Regulation M, lenders must ensure that mortgage transactions adhere to the new thresholds. This includes ensuring that the amount of the transaction, along with the terms of the loan, triggers the applicability of the rule. Lenders must also be aware of the impact on “high-cost” mortgage transactions.
3. Leasing Companies
Retailers offering credit or leasing arrangements must ensure their contracts comply with the new thresholds. If a lease is entered into for a specific amount, the lease contract may now trigger consumer protection disclosures that were not required under the previous thresholds.
4. Small Businesses
The thresholds also impact small businesses. The regulations allow for certain exemptions for small businesses, but these exemptions are subject to the new thresholds. Entities must review their size and the amounts of credit they extend to determine if they remain eligible for exemptions or if they must now report under the new rules.
5. Credit Reporting Agencies
While not directly the primary target of the thresholds, credit reporting agencies must ensure that their data feeds and scoring models account for the new applicability criteria, ensuring that credit data is reported and used in accordance with the law.
6. FinTechs and Digital Lenders
Digital lenders, often operating across state lines, must ensure that their automated decision-making systems correctly classify transactions under the new thresholds. Automation errors could lead to non-compliance, where covered transactions are treated as non-covered.
Compliance Steps and Deadlines
Financial institutions must take immediate steps to ensure compliance by the 2026 effective date. The CFPB and FRB have established specific timelines for the implementation of these updates.
Deadline 1: Policy and Procedure Review
By September 1, 2025, institutions must conduct a comprehensive review of their existing compliance policies and procedures. This review must identify any gaps between current practices and the new threshold requirements. Institutions must document their findings and create a remediation plan.
Deadline 2: System and Software Updates
By November 15, 2025, institutions must ensure that their lending and lease origination systems are updated to reflect the new thresholds. This includes adjusting the logic used to classify transactions, calculating Annual Percentage Rates (APR), and generating the necessary disclosures (such as Loan Estimates).
Deadline 3: Staff Training
By December 31, 2025, all relevant staff must be trained on the new thresholds. This training must cover the legal implications of the new rules, the updated disclosure requirements, and the consequences of non-compliance.
Deadline 4: Filing Requirements
If the bulletin requires any specific filings with the CFPB or FRB, institutions must submit these filings by the designated deadline. Failure to file required reports may result in enforcement action.
Deadline 5: Disclosure Delivery
Once the new thresholds are in effect on January 1, 2026, institutions must ensure that all disclosures are delivered in accordance with the new requirements. This includes providing the initial disclosures, the Loan Estimate, and the Closing Disclosure for covered mortgage transactions.
Implications for Consumer Protection
The new thresholds are designed to enhance consumer protection. By updating the thresholds, the CFPB and FRB aim to ensure that consumers who were previously denied coverage are now included under the regulations. This helps prevent predatory lending practices and ensures that consumers receive the information and protections they deserve.
For example, a consumer who previously might have received a loan that was exempt from the requirements because it was below the threshold may now be covered if the threshold has been lowered or if the loan amount has been reclassified.
This change is particularly important for consumers who are borrowing for large purchases, such as vehicles, where interest rates and terms are negotiated. Consumers will benefit from increased transparency regarding fees and rates.
However, the impact on consumers is also complex. The new thresholds may increase the reporting burden on some lenders, which could be passed on to consumers in the form of higher fees or interest rates. Institutions must balance the need for compliance with the need to provide competitive and affordable credit.
Legal and Regulatory Context
The update to the thresholds is based on the authority granted to the CFPB and FRB under the Dodd-Frank Act and the Economic Growth and Regulatory Paperwork Reduction Act (EGRA). These laws require the agencies to periodically review and update the thresholds to ensure that they remain relevant.
The bulletin also references the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the Farm Credit Administration (FCA), which play a role in the supervision of covered entities. The agencies have consulted with these offices to ensure a coordinated approach to the threshold updates.
Furthermore, the bulletin acknowledges the importance of protecting small businesses and other entities that may be disproportionately affected by the new rules. The agencies have sought to minimize the burden on these entities while ensuring that consumer protections remain effective.
Regulatory guidance is also provided to help entities understand how to transition to the new thresholds. This guidance includes examples of how to calculate the thresholds, how to adjust their systems, and how to document their compliance efforts.
Entities are encouraged to consult with legal counsel and compliance experts to ensure they fully understand the implications of the new thresholds. The regulatory landscape for consumer finance is complex, and staying compliant is a critical part of doing business.
Conclusion
The CFPB and FRB have issued a bulletin to update the thresholds for TILA and Regulation M, effective 2026. This update is a necessary step to ensure that consumer protections remain effective in the face of economic changes. Financial institutions must take immediate action to review their policies, update their systems, and train their staff. Failure to comply with the new thresholds may result in significant penalties and enforcement actions. By staying informed and proactive, institutions can ensure that they remain compliant with the latest regulatory requirements.
For further information, please refer to the official bulletin and guidance provided by the CFPB and FRB. It is recommended that all covered entities monitor the regulatory landscape closely as the CFPB and FRB continue to issue new guidance and updates.
Disclaimer: This document is for informational purposes only and does not constitute legal advice. Institutions should consult with qualified legal counsel for specific advice regarding their compliance obligations.
