Summary: Interim Final Rule

Consumer Financial Protection Bureau
Operations in Rural Areas Under the Truth in Lending Act (Regulation Z)

Prepared by the NASCUS Legislative and Regulatory Affairs Department
April 2016

The Consumer Financial Protection Bureau (CFPB) issued an interim final rule that amended certain provisions of Regulation Z in accordance with the Helping Expand Lending Practices in Rural Communities Act or the “HELP Act.”  

The Act broadens the class of creditors that may be eligible under the Truth in Lending Act (TILA) for provisions that relieve burden for small, rural mortgage creditors.  Also, it requires the Bureau to establish a process under which a person may apply to have an area designated by the Bureau as a rural area for purposes of a Federal consumer financial law.

The final interim rule was effective as of March 31, 2016.  However, the CFPB accepted comments until April 25, 2016. The interim final rule can be accessed here

The amendments to Regulation Z concern two matters:

  • The eligibility of certain small creditors that operate in rural or underserved areas for special provisions that permit the origination of balloon-payment qualified mortgages and balloon-payment high cost mortgages, and for an exemption from the requirement to establish an escrow account for higher-priced mortgage loans.
    • The special provision and exemption is extended to certain small creditors that operate in rural or underserved areas and removes Regulation Z’s prior requirement that eligible creditors must operate “predominately” in such areas. 
    • Under the interim final rule, a creditor satisfies the rural or underserved component of the eligibility criteria if: (i) the creditor originated a covered transaction secured by a property located in a rural or underserved area in the preceding calendar year or, if the application for the transaction was received before April 1 of the current calendar year (during either of the two preceding calendar years).
    • The interim final rule also amends the current eligibility criteria for the escrow exemption to ensure that creditors that established escrow accounts solely to comply with the current rule will be eligible for the exemption if they otherwise meet its criterial under the interim rule.
  • The determination of whether an area is rural for the purposes of Regulation Z.
    • The interim final rule sets forth the rule for determining whether an area is rural for the purposes of Regulation Z by inserting a reference to any areas designated as rural through the application process mandated by the Act.