CFPB Should Drop APR Proposal

Sixteen trade groups, including ABA and the National Association of Federal Credit Unions, urged the Consumer Financial Protection Bureau to drop a proposal to create a new, higher “all in” annual percentage rate calculation that would include additional fees and charges. The APR measure is part of the CFPB’s massive proposed rule intended to combine and simplify mortgage disclosure requirements under the Truth in Lending Act and Real Estate Settlement Procedures Act.

The trade groups noted that the CFPB’s own research shows that consumers confuse the APR with the note rate and it is of little value to them. “Simply adding additional fees to an unhelpful formulation that consumers do not use or understand will add significant costs and complications to the rulemaking effort, with no measurable benefit to the borrower,” they said.

The trade groups also pointed out that the APR is embedded in numerous other mortgage finance rules as a trigger for added compliance requirements, and it isn’t clear how the reconfigured APR would affect such rules. They emphasized that the Dodd-Frank Act doesn’t require wholesale changes to the APR and urged the CFPB to simplify the RESPA-TILA rulemaking by focusing only on elements needed to implement the statute’s requirements.

Finally, the trade groups asked the CFPB to publish a single version of Regulation Z that would reflect how it would be amended by all pending proposals. “This would improve our ability to provide input that CFPB will need before the comment periods close,” they said.

Read the letter.