Small Creditor Definition and Rural/Underserved Area Provisions (Regulation Z)

Updated 2026-05-17

Under Truth in Lending Act (TILA) and Regulation Z, a creditor is generally considered a "small creditor" if it meets specific criteria related to its lending volume and asset size. This designation is crucial as it allows such creditors to benefit from certain regulatory exceptions, particularly when operating in "rural or underserved areas."

Definition of a Small Creditor

A creditor is generally considered a "small creditor" if, during the preceding calendar year:

1. The creditor and its affiliates together extended no more than 2,000 first-lien Covered Transactions that were transferred by the creditor or affiliate to another person or that were subject to commitment to be acquired by another person at consummation; AND
2. The assets of the creditor and its affiliates that regularly extended first-lien covered loans are less than $2 billion (as adjusted annually).

For applications received prior to April 1 of a given year, a creditor is also considered a small creditor if these conditions were met during either of the two preceding calendar years.

Expanded Eligibility for Special Provisions

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) expanded the eligibility criteria for small creditors to utilize certain special provisions related to Qualified Mortgages, High Cost Mortgages, and Rural Area Definition and Special Provisions for Small Creditors (Regulation Z)s.

Effective March 31, 2016, the "predominantly" requirement was removed. A small creditor is now eligible for these special provisions if it originated at least one covered transaction secured by a first lien on a property located in a rural or underserved area in the preceding calendar year. For applications received before April 1 of a given year, eligibility can be based on either of the two preceding calendar years.

The Interim Final Rule did not change the fundamental definition of a "small creditor" itself, but rather the criteria for applying certain special provisions to small creditors operating in rural or underserved areas.

Rural or Underserved Area Definition

A "rural or underserved area" is a geographical designation used by the Consumer Financial Protection Bureau (CFPB) in mortgage lending regulations. It identifies regions where consumers may have limited access to financial services, including mortgage loans. This designation is particularly relevant for small creditors, who can benefit from specific regulatory exceptions when operating in these areas.

Regulatory Importance and Exceptions for Small Creditors

The "rural or underserved area" designation is crucial for several regulatory exceptions, primarily benefiting small creditors under the Ability-to-Repay (ATR) rule and for Higher-Priced Mortgage Loans (HPMLs). These exceptions aim to facilitate access to credit in areas where lenders might otherwise be deterred from operating due to regulatory burden.

Specifically, loans originated by small creditors in these areas can benefit from specific exceptions, such as:

• The authorization to offer balloon-payment qualified mortgages.
• The authorization to offer balloon-payment high-cost mortgages.
• The exemption from the requirement to establish an escrow account for Higher-Priced Mortgage Loans (HPMLs).

Definition of Rural Area

A "rural" area is defined in two ways:

1. A county that is not in a metropolitan statistical area nor in a micropolitan statistical area adjacent to a metropolitan statistical area, as defined by the U.S. Office of Management and Budget (OMB) and applied under currently applicable U.S. Department of Agriculture’s Economic Research Service (USDA–ERS) Urban Influence Codes (UICs).
2. A census block that is not in an urban area as defined by the U.S. Census Bureau in the latest decennial U.S. census.

Definition of Underserved Area

An "underserved" area is defined as a county where no more than two creditors extend five or more first-lien covered transactions on properties in the county, based on Home Mortgage Disclosure Act (HMDA) data from the preceding calendar year. The CFPB issues interpretive rules and lists to guide creditors in determining underserved areas.

Official Lists and Tools

The CFPB annually publishes a revised list of counties and equivalent entities considered rural or underserved. These lists are based on specific criteria, often related to population density and access to banking services.

For the year 2025, the list of rural areas is available via the CFPB List of Rural Areas (2025). The list of underserved areas for 2025 is detailed in the document CFPB List of Underserved Areas (2025). The combined list is available via the CFPB List of Rural and Underserved Areas (2025).

Creditors may rely on the following resources to determine if a property is located in a rural or underserved area for the applicable year:

• Lists of counties classified as rural or underserved posted annually on the CFPB's website.
• The Rural or Underserved Areas Tool provided on the CFPB's public website.
• Any automated address search tool provided on the U.S. Census Bureau's website that specifically indicates the urban or rural designations of properties.

The determination of an area's eligibility is made by consulting the official CFPB list, which uses FIPS codes to identify geographical entities.

It is essential for Mortgage Loan Originators (MLOs) and creditors to always refer to the most recent list published by the CFPB to determine if a property is located in an area designated as rural or underserved for the current year to ensure compliance.

Citation: 12 CFR §§ 1026.35(b)(2)(iii)(A), 35(b)(2)(iv)(A), 35(b)(2)(iv)(B), and 35(b)(2)(iv)(C) (Source: CFPB Factsheet, "Small Creditors Operating in a Rural or Underserved Area," April 2016; CFPB TILA-HPML Escrow Compliance Guide, March 2016)