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6500 - Consumer Protection
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PART 213CONSUMER LEASING (REGULATION M)
Sec. 213.1
Authority, scope, purpose, and enforcement.
213.2
Definitions.
213.3
General disclosure requirements.
213.4
Content of disclosures.
213.5
Renegotiations, extensions, and assumptions.
213.6
[Reserved]
213.7
Advertising.
213.8
Record retention.
213.9
Relation to state laws.
Appendix A to Part
213Model Forms
Appendix B to Part
213Federal Enforcement Agencies
Appendix C to Part
213Issuance of Staff Interpretations
Supplement I to Part
213Official Staff Commentary to Regulation M
AUTHORITY: 15 U.S.C. 1604;
1667f
SOURCE: The provisions of this Part 213 appear at 61 Fed. Reg.
52258, October 7, 1996, except as otherwise
noted.
§ 213.1 Authority, scope, purpose, and enforcement.
(a) Authority. The regulation in this part, known as
Regulation M, is issued by the Board of Governors of the Federal
Reserve System to implement the consumer leasing provisions of the
Truth in Lending Act, which is Title I of the Consumer Credit
Protection Act, as amended (15 U.S.C. 1601 et seq.).
Information collection requirements contained in this regulation have
been approved by the Office of Management and Budget under the
provisions of 44 U.S.C. 3501 et seq. and have been assigned
OMB control number 7100--0202.
(b) Scope and purpose. This part applies to all persons
that are lessors of personal property under consumer leases as those
terms are defined in § 213.2(e)(1) and (h). The purpose of this part
is:
(1) To ensure that lessees of personal property receive
meaningful disclosures that enable them to compare lease terms with
other leases and, where appropriate, with credit transactions;
(2) To limit the amount of balloon payments in consumer lease
transactions; and
(3) To provide for the accurate disclosure of lease terms in
advertising.
(c) Enforcement and liability. Section 108 of the act
contains the administrative enforcement provisions. Sections 112, 130,
131, and 185 of the act contain the liability provisions for failing to
comply with the requirements of the act and this part.
[Codified to 12 C.F.R. § 213.1]
[Section 213.1 amended at 61 Fed. Reg. 52258, October 7, 1996,
effective October 31, 1996; 62 Fed. Reg. 15367, April 1, 1997,
effective April 1, 1997 but is compliance is optional until October 1,
1997]
§ 213.2 Definitions.
For the purposes of this part the following definitions apply:
(a) Act means the Truth in Lending Act (15 U.S.C. 1601
et seq.) and the Consumer Leasing Act is chapter 5 of the Truth in
Lending Act.
(b) Advertisement means a commercial message in any
medium that directly or indirectly promotes a consumer lease
transaction.
(c) Board refers to the Board of Governors of the
Federal Reserve System.
(d) Closed-end lease means a consumer lease other than
an open-end lease as defined in this section.
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(e)(1) Consumer lease means a contract in the form of a
bailment or lease for the use of personal property by a natural person
primarily for personal, family, or household purposes, for a period
exceeding four months and for a total contractual obligation not
exceeding $25,000, whether or not the lessee has the option to purchase
or otherwise become the owner of the property at the expiration of the
lease. Unless the context indicates otherwise, in this part
"lease" means "consumer lease."
(2) The term does not include a lease that meets the definition
of a credit sale in Regulation Z (12
CFR 226.2(a)). It also does not include a lease for
agricultural, business, or commercial purposes or a lease made to an
organization.
(3) This part does not apply to a lease transaction of personal
property which is incident to the lease of real property and which
provides that:
(i) The lessee has no liability for the value of the personal
property at the end of the lease term except for abnormal wear and
tear; and
(ii) The lessee has no option to purchase the leased property.
(f) Gross capitalized cost means the amount agreed upon
by the lessor and the lessee as the value of the leased property and
any items that are capitalized or amortized during the lease term,
including but not limited to taxes, insurance, service agreements, and
any outstanding prior credit or lease balance. Capitalized cost
reduction means the total amount of any rebate, cash payment, net
trade-in allowance, and noncash credit that reduces the gross
capitalized cost. The adjusted capitalized cost equals the
gross capitalized cost less the capitalized cost reduction, and is the
amount used by the lessor in calculating the base periodic payment.
(g) Lessee means a natural person who enters into or is
offered a consumer lease.
(h) Lessor means a person who regularly leases, offers
to lease, or arranges for the lease of personal property under a
consumer lease. A person who has leased, offered, or arranged to lease
personal property more than five times in the preceding calendar year
or more than five times in the current calendar year is subject to the
act and this part.
(i) Open-end lease means a consumer lease in which the
lessee's liability at the end of the lease term is based on the
difference between the residual value of the leased property and its
realized value.
(j) Organization means a corporation, trust, estate,
partnership, cooperative, association, or government entity or
instrumentality.
(k) Person means a natural person or an organization.
(l) Personal property means any property that is not
real property under the law of the state where the property is located
at the time it is offered or made available for lease.
(m) Realized value means:
(1) The price received by the lessor for the lease property at
disposition;
(2) The highest offer for disposition of the leased property; or
(3) The fair market value of the leased property at the end of
the lease term.
(n) Residual value means the value of the leased
property at the end of the lease term, as estimated or assigned at
consummation by the lessor, used in calculating the base periodic
payment.
(o) Security interest and security mean any interest in
property that secures the payment or performance of an obligation.
(p) State means any state, the District of Columbia, the
Commonwealth of Puerto Rico, and any territory or possession of the
United States.
[Codified to 12 C.F.R. § 213.2]
[Section 213.2 amended at 61 Fed. Reg. 52258,
October 7, 1996, effective October 31, 1996; 62 Fed. Reg. 15367, April
1, 1997, effective April 1, 1997, but compliance is optional until
October 1, 1997]
§ 213.3 General disclosure requirements.
(a) General requirements. A lessor shall make
the disclosures required by § 213.4, as applicable. The disclosures
shall be made clearly and conspicuously in writing in a form the
consumer may keep, in accordance with this section. The disclosures
required by this part may be provided to the lessee in electronic form,
subject to compliance with the consumer consent and other applicable
provisions of the Electronic Signatures in Global and National Commerce
Act (E-Sign Act) (15 U.S.C. § 7001 et seq.). For an
advertisement accessed by
{{12-31-07 p.6687}}the consumer in electronic
form, the disclosures required by § 213.7 may be provided to the
consumer in electronic form in the advertisement, without regard to the
consumer consent or other provisions of the E-Sign Act.
(1) Form of disclosures. The disclosures required by
§ 213.4 shall be given to the lessee together in a dated statement
that identifies the lessor and the lessee; the disclosures may be made
either in a separate statement that identifies the consumer lease
transaction or in the contract or other document evidencing the lease.
Alternatively, the disclosures required to be segregated from other
information under paragraph (a)(2) of this section may be provided in a
separate dated statement that identifies the lease, and the other
required disclosures may be provided in the lease contract or other
document evidencing the lease. In a lease of multiple items, the
property description required by § 213.4(a) may be given in a
separate statement that is incorporated by reference in the disclosure
statement required by this paragraph.
(2) Segregation of certain disclosures. The following
disclosures shall be segregated from other information and shall
contain only directly related information: §§ 213.4(b) through (f),
(g)(2), (h)(3), (i)(1), (j), and (m)(1). The headings, content, and
format for the disclosures referred to in this paragraph (a)(2) shall
be provided in a manner substantially similar to the applicable model
form in appendix A of this part.
(3) Timing of disclosures. A lessor shall provide the
disclosures to the lessee prior to the consummation of a consumer
lease.
(4) Language of disclosures. The disclosures required
by § 213.4 may be made in a language other than English provided that
they are made available in English upon the lessee's request.
(5) Electronic communication. For rules governing the
electronic delivery of disclosures, including a definition of
electronic communication, see § 213.6.
(b) Additional information; nonsegregated disclosures.
Additional information may be provided with any disclosure not
listed in paragraph (a)(2) of this section, but it shall not be stated,
used, or placed so as to mislead or confuse the lessee or contradict,
obscure, or detract attention from any disclosure required by this
part.
(c) Multiple lessors or lessees. When a transaction
involves more than one lessor, the disclosures required by this part
may be made by one lessor on behalf of all the lessors. When a lease
involves more than one lessee, the lessor may provide the disclosures
to any lessee who is primarily liable on the lease.
(d) Use of estimates. If an amount or other item needed
to comply with a required disclosure is unknown or unavailable after
reasonable efforts have been made to ascertain the information, the
lessor may use a reasonable estimate that is based on the best
information available to the lessor, is clearly identified as an
estimate, and is not used to circumvent or evade any disclosures
required by this part.
(e) Effect of subsequent occurrence. If a required
disclosure becomes inaccurate because of an event occurring after
consummation, the inaccuracy is not a violation of this part.
(f) Minor variations. A lessor may disregard the effects
of the following in making disclosures:
(1) That payments must be collected in whole cents;
(2) That dates of scheduled payments may be different because a
scheduled date is not a business day;
(3) That months have different numbers of days; and
(4) That February 29 occurs in a leap year.
[Codified to 12 C.F.R. § 213.3]
[Section 213.3 amended at 61 Fed. Reg. 52259, October 7, 1996,
effective October 31, 1996; 66 Fed. Reg. 17328, March 30, 2001,
effective March 30, 2001; 72 Fed. Reg. 63461 November 9, 2007,
effective December 10, 2007, the mandatory compliance date is October
1, 2008]
§ 213.4 Content of disclosures.
For any consumer lease subject to this part, the lessor shall
disclose the following information, as applicable:
(a) Description of property. A brief description of the
leased property sufficient to identify the property to the lessee and
lessor.
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(b) Amount due at lease signing or delivery. The total
amount to be paid prior to or at consummation by delivery, if delivery
occurs after consummation, using the term "amount due at lease
signing or delivery." The lessor shall itemize each component by
type and amount, including any refundable security deposit, advance
monthly or other periodic payment, and capitalized cost reduction; and
in motor-vehicle leases, shall itemize how the amount due will be paid,
by type and amount, including any net trade-in allowance, rebates,
noncash credits, and cash payments in a format substantially similar to
the model forms in appendix A of this part.
(c) Payment schedule and total amount of periodic payments.
The number, amount, and due dates or periods of payments scheduled
under the lease, and the total amount of the periodic payments.
(d) Other charges. The total amount of other charges
payable to the lessor, itemized by type and amount, that are not
included in the periodic payments. Such charges include the amount of
any liability the lease imposes upon the lessee at the end of the lease
term; the potential difference between the residual and realized values
referred to in paragraph (k) of this section is excluded.
(e) Total of payments. The total of payments, with a
description such as "the amount you will have paid by the end of the
lease." This amount is the sum of the amount due at lease signing
(less any refundable amounts), the total amount of periodic payments
(less any portion of the periodic payment paid at lease signing), and
other charges under paragraphs (b), (c), and (d) of this section. In an
open-end lease, a description such as "you will owe an additional
amount if the actual value of the vehicle is less than the residual
value" shall accompany the disclosure.
(f) Payment calculation. In a motor-vehicle lease, a
mathematical progression of how the scheduled periodic payment is
derived, in a format substantially similar to the applicable model form
in appendix A of this part, which shall contain the following:
(1) Gross capitalized cost. The gross capitalized
cost, including a disclosure of the agreed upon value of the vehicle, a
description such as "the agreed upon value of the vehicle [state
the amount] and any items you pay for over the lease term (such as
service contracts, insurance, and any outstanding prior credit or lease
balance)," and a statement of the lessee's option to receive a
separate written itemization of the gross capitalized cost. If
requested by the lessee, the itemization shall be provided before
consummation.
(2) Capitalized cost reduction. The capitalized cost
reduction, with a description such as "the amount of any net
trade-in allowance, rebate, noncash credit, or cash you pay that
reduces the gross capitalized cost."
(3) Adjusted capitalized cost. The adjusted
capitalized cost, with a description such as "the amount used in
calculating your base [periodic] payment."
(4) Residual value. The residual value, with a
description such as "the value of the vehicle at the end of the
lease used in calculating your base [periodic] payment."
(5) Depreciation and any amortized amounts. The
depreciation and any amortized amounts, which is the difference between
the adjusted capitalized cost and the residual value, with a
description such as "the amount charged for the vehicle's decline in
value through normal use and for any other items paid over the lease
term."
(6) Rent charge. The rent charge, with a description
such as "the amount charged in addition to the depreciation and any
amortized amounts." This amount is the difference between the total
of the base periodic payments over the lease term minus the
depreciation and any amortized amounts.
(7) Total of base periodic payments. The total of base
periodic payments with a description such as "depreciation and any
amortized amounts plus the rent charge."
(8) Lease payments. The lease payments with a
description such as "the number of payments in your lease."
(9) Base periodic payment. The total of the base
periodic payments divided by the number of payment periods in the
lease.
(10) Itemization of other charges. An itemization of
any other charges that are part of the periodic payment.
(11) Total periodic payments. The sum of the base
periodic payment and any other charges that are part of the periodic
payment.
{{4-30-01 p.6689}}
(g) Early termination--(1) Conditions and
disclosure of charges. A statement of the conditions under which
the lessee or lessor may terminate the lease prior to the end of the
lease term; and the amount or a description of the method for
determining the amount of any penalty or other charge for early
termination, which must be reasonable.
(2) Early-termination notice. In a motor-vehicle
lease, a notice substantially similar to the following: "Early
Termination. You may have to pay a substantial charge if you end this
lease early. The charge may be up to several thousand dollars.
The actual charge will depend on when the lease is terminated. The
earlier you end the lease, the greater this charge is likely to be."
(h) Maintenance responsibilities. The following
provisions are required:
(1) Statement of responsibilities. A statement
specifying whether the lessor or the leasee is responsible for
maintaining or servicing the leased property, together with a brief
description of the responsibility;
(2) Wear and use standard. A statement of the lessor's
standards for wear and use (if any), which must be reasonable; and
(3) Notice of wear and use standard. In a
motor-vehicle lease, a notice regarding wear and use substantially
similar to the following: "Excessive Wear and Use. You may be
charged for excessive wear based on our standards for normal use."
The notice shall also specify the amount or method for determining any
charge for excess mileage.
(i) Purchase option. A statement of whether or not the
lessee has the option to purchase the leased property, and:
(1) End of lease term. If at the end of the lease
term, the purchase price; and
(2) During lease term. If prior to the end of the
lease term, the purchase price or the method for determining the price
and when the lessee may exercise this option.
(j) Statement referencing nonsegregated disclosures. A
statement that the lessee should refer to the lease documents for
additional information on early termination, purchase options and
maintenance responsibilities, warranties, late and default charges,
insurance, and any security interests, if applicable.
(k) Liability between residual and realized values. A
statement of the lessee's liability, if any, at early termination or at
the end of the lease term for the difference between the residual value
of the leased property and its realized value.
(l) Right of appraisal. If the lessee's liability at
early termination or at the end of the lease term is based on the
realized value of the leased property, a statement that the lessee may
obtain, at the lessee's expense, a professional appraisal by an
independent third party (agreed to by the lessee and the lessor) of the
value that could be realized at sale of the leased property. The
appraisal shall be final and binding on the parties.
(m) Liability at end of lease term based on residual value.
If the lessee is liable at the end of the lease term for the
difference between the residual value of the leased property and its
realized value:
(1) Rent and other charges. The rent and other
charges, paid by the lessee and required by the lessor as an incident
to the lease transaction, with a description such as "the total
amount of rent and other charges imposed in connection with your lease
[state the amount]."
(2) Excess liability. A statement about a rebuttable
presumption that, at the end of the lease term, the residual value of
the leased property is unreasonable and not in good faith to the extent
that the residual value exceeds the realized value by more than three
times the base monthly payment (or more than three times the average
payment allocable to a monthly period, if the lease calls for periodic
payments other than monthly); and that the lessor cannot collect the
excess amount unless the lessor brings a successful court action and
pays the lessee's reasonable attorney's fees, or unless the excess of
the residual value over the realized value is due to unreasonable or
excessive wear or use of the leased property (in which case the
rebuttable presumption does not apply).
(3) Mutually agreeable final adjustment. A statement
that the lessee and lessor are permitted, after termination of the
lease, to make any mutually agreeable final adjustment regarding excess
liability.
(n) Fees and taxes. The total dollar amount for all
official and license fees, registration, title, or taxes required to be
paid in connection with the lease.
{{4-30-01 p.6690}}
(o) Insurance. A brief identification of insurance in
connection with the lease including:
(1) Through the lessor. If the insurance is provided
by or paid through the lessor, the types and amounts of coverage and
the cost to the lessee; or
(2) Through a third party. If the lessee must obtain
the insurance, the types and amounts of coverage required of the
lessee.
(p) Warranties or guarantees. A statement identifying
all express warranties and guarantees from the manufacturer or lessor
with respect to the leased property that apply to the lessee.
(q) Penalties and other charges for delinquency. The
amount or the method of determining the amount of any penalty or other
charge for delinquency, default, or late payments, which must be
reasonable.
(r) Security interest. A description of any security
interest, other than a security deposit disclosed under paragraph (b)
of this section, held or to be retained by the lessor; and a clear
identification of the property to which the security interest relates.
(s) Limitations on rate information. If a lessor
provides a percentage rate in an advertisement or in documents
evidencing the lease transaction, a notice stating that "this
percentage may not measure the overall cost of financing this lease"
shall accompany the rate disclosure. The lessor shall not use the term
"annual percentage rate," "annual lease rate," or any
equivalent term.
(t) Non-motor vehicle open-end leases. Non-motor vehicle
open-end leases remain subject to section 182(10) of the act regarding
end of term liability.
[Codified to 12 C.F.R. § 213.4]
[Section 213.4 amended at 61 Fed. Reg. 52259, October 7,
1996, effective October 31, 1996; 62 Fed. Reg. 15367, April 1, 1997,
effective April 1, 1997, but compliance is optional until October 1,
1997; 63 Fed. Reg. 52109, September 29, 1998, effective September 24,
1998]
§ 213.5 Renegotiations, extensions, and assumptions.
(a) Renegotiation. A renegotiation occurs when a
consumer lease subject to this part is satisfied and replaced by a new
lease undertaken by the same consumer. A renegotiation requires new
disclosures, except as provided in paragraph (d) of this section.
(b) Extension. An extension is a continuation, agreed to
by the lessor and the lessee, of an existing consumer lease beyond the
originally scheduled end of the lease term, except when the
continuation is the result of a renegotiation. An extension that
exceeds six months requires new disclosures, except as provided in
paragraph (d) of this section.
(c) Assumption. New disclosures are not required when a
consumer lease is assumed by another person, whether or not the lessor
charges an assumption fee.
(d) Exceptions. New disclosures are not required for the
following, even if they meet the definition of a renegotiation or an
extension:
(1) A reduction in the rent charge;
(2) The deferment of one or more payments, whether or not a fee
is charged;
(3) The extension of a lease for not more than six months on a
month-to-month basis or otherwise;
(4) A substitution of leased property with property that has a
substantially equivalent or greater economic value, provided no other
lease terms are changed;
(5) The addition, deletion, or substitution of leased property in
a multiple-item lease, provided the average periodic payment does not
change by more than 25 percent; or
(6) An agreement resulting from a court proceeding.
[Codified to 12 C.F.R. § 213.5]
[Section 213.5 amended at 61 Fed. Reg. 52260, October 7,
1996, effective October 31, 1996; 62 Fed. Reg. 15367, April 1, 1997,
effective April 1, 1997, but compliance is optional until October 1,
1997]
{{12-31-07 p.6691}}
§ 213.6 [Reserved]
§ 213.7 Advertising.
(a) General rule. An advertisement for a consumer lease
may state that a specific lease of property at specific amounts or
terms is available only if the lessor usually and customarily leases or
will lease the property at those amounts or terms.
(b) Clear and conspicuous standard. Disclosures required
by this section shall be made clearly and conspicuously.
(1) Amount due at lease signing or delivery. Except
for the statement of a periodic payment, any affirmative or negative
reference to a charge that is a part of the disclosure required under
paragraph (d)(2)(ii) of this section shall not be more prominent than
that disclosure.
(2) Advertisement of a lease rate. If a lessor
provides a percentage rate in an advertisement, the rate shall not be
more prominent than any of the disclosures in § 213.4, with the
exception of notice in § 213.4(s) required to accompany the rate; and
the lessor shall not use the term ""annual percentage rate,"
"annual lease rate," or equivalent term.
(c) Catalogs or other multipage advertisements; electronic
advertisements. A catalog or other multipage advertisement, or an
electronic advertisement (such as an advertisement appearing on an
Internet Web site), that provides a table or schedule of the required
disclosures shall be considered a single advertisement if, for lease
terms that appear without all the required disclosures, the
advertisement refers to the page or pages on which the table or
schedule appears.
(d) Advertisement of terms that require additional
disclosure--(1) Triggering terms. An advertisement
that states any of the following items shall contain the disclosures
required by paragraph (d)(2) of this section, except as provided in
paragraphs (e) and (f) of this section;
(i) The amount of any payment; or
(ii) A statement of any capitalized cost reduction or other
payment (or that no payment is required) prior to or at consummation or
by delivery, if delivery occurs after consummation.
(2) Additional terms. An advertisement stating any
item listed in paragraph (d)(1) of this section shall also state the
following items:
(i) That the transaction advertised is a lease;
(ii) The total amount due prior to or at consummation or by
delivery, if delivery occurs after consummation;
(iii) The number, amounts, and due dates or periods of scheduled
payments under the lease;
(iv) A statement of whether or not a security deposit is
required; and
(v) A statement that an extra charge may be imposed at the end of
the lease term where the lessee's liability (if any) is based on the
difference between the residual value of the leased property and its
realized value at the end of the lease term.
(e) Alternative disclosures--merchandise tags. A
merchandise tag stating any item listed in paragraph (d)(1) of this
section may comply with paragraph (d)(2) of this section by referring
to a sign or display prominently posted in the lessor's place of
business that contains a table or schedule of the required disclosures.
(f) Alternative disclosures--television or radio
advertisements--(1) Toll-free number or print
advertisement. An advertisement made through television or radio
stating any item listed in paragraph (d)(1) of this section complies
with paragraph (d)(2) of this section if the advertisement states the
items listed in paragraphs (d)(2)(i) through (iii) of this section,
and:
(i) Lists a toll-free telephone number along with a reference
that such number may be used by consumers to obtain the information
required by paragraph (d)(2) of this section; or
(ii) Directs the consumer to a written advertisement in a
publication of general circulation in the community served by the media
station, including the name and the date
{{12-31-07 p.6692}}of the publication, with a
statement that information required by paragraph (d)(2) of this section
is included in the advertisement. The written advertisement shall be
published beginning at least three days before and ending at least ten
days after the broadcast.
(2) Establishment of toll-free number. (i) The
toll-free telephone number shall be available for no fewer than ten
days, beginning on the date of the broadcast.
(ii) The lessor shall provide the information required by
paragraph (d)(2) of this section orally, or in writing upon request.
[Codified to 12 C.F.R. § 213.7]
[Section 213.7 amended at 61 Fed. Reg. 52261, October 7, 1996,
effective October 31, 1996; 62 Fed. Reg. 15367, April 1, 1997,
effective April 1, 1997, but compliance is optional until October 1,
1997; 63 Fed. Reg. 52109, September 29, 1998, effective September 24,
1998; 72 Fed. Reg. 63461 November 9, 2007, effective December 10, 2007,
the mandatory compliance date is October 1, 2008]
§ 213.8 Record retention.
A lessor shall retain evidence of compliance with the requirements
imposed by this part, other than the advertising requirements under
§ 213.7, for a period of not less than two years after the date the
disclosures are required to be made or an action is required to be
taken.
[Codified to 12 C.F.R. § 213.8]
[Section 213.8 amended at 61 Fed. Reg. 52261, October 7,
1996, effective October 31, 1996; 72 Fed. Reg. 63461 November 9, 2007,
effective December 10, 2007, the mandatory compliance date is October
1, 2008]
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§ 213.9 Relation to state laws.
(a) Inconsistent state law. A state law that is
inconsistent with the requirements of the act and this part is
preempted to the extent of the inconsistency. If a lessor cannot comply
with a state law without violating a provision of this part, the state
law is inconsistent within the meaning of section 186(a) of the act and
is preempted, unless the state law gives greater protection and benefit
to the consumer. A state, through an official having primary
enforcement or interpretative responsibilities for the state consumer
leasing law, may apply to the Board for a preemption determination.
(b) Exemptions.--(1) Application. A state
may apply to the Board for an exemption from the requirements of the
act and this part for any class of lease transactions within the state.
The Board will grant such an exemption if the Board determines that:
(i) The class of leasing transactions is subject to state law
requirements substantially similar to the act and this part or that
lessees are afforded greater protection under state law; and
(ii) There is adequate provision for state enforcement.
(2) Enforcement and liability. After an exemption has
been granted, the requirements of the applicable state law (except for
additional requirements not imposed by federal law) will constitute the
requirements of the act and this part. No exemption will extend to the
civil liability provisions of sections 130, 131, and 185 of the act.
[Codified to 12 C.F.R. § 213.9]
[Section 213.9 added at 61 Fed. Reg. 52261, October 7,
1996, effective October 31, 1996]
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Appendix A to Part 213Model
Forms
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Appendix A-2 Model Closed-End or Finance Vehicle
Lease Disclosures
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[Codified to 12 C.F.R. Part 213, Appendix
A]
[Appendix A amended at 61 Fed. Reg. 52263, October 7,
1996, effective October 31, 1996; 62 Fed. Reg. 15369, April 1, 1997,
effective April 1, 1997, but compliance is optional until October 1,
1997; 63 Fed. Reg. 52109, September 29, 1998, effective September 24,
1998]
{{10-31-96 p.6699}}
Appendix B to Part 213--Federal Enforcement Agencies
The following list indicates which federal agency enforces
Regulation M (12 CFR Part 213) for particular classes of business. Any
questions concerning compliance by a particular business should be
directed to the appropriate enforcement agency. Terms that are not
defined in the Federal Deposit Insurance Act
(12 U.S.C. 1813(s)) shall have
the meaning given to them in the International Banking Act of 1978
(12 U.S.C. 3101).
1. National banks and federal branches and federal agencies of
foreign banks
District office of the Office of the Comptroller of the Currency for
the district in which the institution is located.
2. State member banks, branches and agencies of foreign banks
(other than federal branches, federal agencies, and insured state
branches of foreign banks), commercial lending companies owned or
controlled by foreign banks, and organizations operating under section
25 or 25A of the Federal Reserves Act
Federal Reserve Bank serving the District in which the institution
is located.
3. Nonmember insured banks and insured state branches of
foreign banks
Federal Deposit Insurance Corporation Regional Director for the
region in which the institution is located.
4. Savings institutions insured under the Savings Association
Insurance Fund of the FDIC and federally chartered savings banks
insured under the Bank Insurance Fund of the FDIC (but not including
state-chartered savings banks insured under the Bank Insurance Fund)
Office of Thrift Supervision regional director for the region in
which the institution is located.
5. Federal credit unions
Regional office of the National Credit Union Administration serving
the area in which the federal credit union is located.
6. Air carriers
Assistant General Counsel for Aviation Enforcement and Proceedings,
Department of Transportation, 400 Seventh Street, S.W., Washington,
D.C. 20590.
7. Those subject to Packers and Stockyards Act
Nearest Packers and Stockyards Administration area supervisor.
8. Federal Land Banks, Federal Land Bank Associations,
Federal Intermediate Credit Banks, and Production Credit Associations
Farm Credit Administration, 490 L'Enfant Plaza, S.W., Washington,
D.C. 20578
9. All other lessors (lessors operating on a local or
regional basis should use the address of the FTC regional office in
which they operate
Division of Credit Practices, Bureau of Consumer Protection, Federal
Trade Commission, Washington, D.C. 20580.
[Codified to 12 C.F.R. Part 213, Appendix B]
[Appendix B amended at 61 Fed. Reg. 52269, October 1,
1996, effective October 31, 1996]
Appendix C to Part 213--Issuance of Staff Interpretations
Officials in the Board's Division of Consumer and Community Affairs
are authorized to issue official staff interpretations of this
Regulation M (12 CFR Part 213). These interpretations provide the
formal protection afforded under section 130(f) of the act. Except in
unusual circumstances, interpretations will not be issued separately
but will be incorporated in an official commentary to Regulation M
(Supplement I of this part), which will be amended periodically. No
staff interpretations will be issued approving lessor's forms,
statements, or calculation tools or methods.
[Codified to 12 C.F.R. Part 213, Appendix C]
[Appendix C amended at 61 Fed. Reg. 52269, October 7, 1996,
effectie October 31, 1996]
[The page following this is 6719.]
{{12-31-07 p.6719}}
SUPPLEMENT I TO PART 213OFFICIAL STAFF COMMENTARY TO REGULATION
M
CODIFICATION: Official Staff Commentary to Regulation M codified to
12 C.F.R. Part 213.
AUTHORITY: 15 U.S.C. 1604; 1667f.
SOURCE: The provisions of this Part 213 appear at 47 Fed. Reg.
20554, May 13, 1982, effective May 12, 1982; 62 Fed. Reg. 16058, April
4, 1997; effective April 1, 1997 but compliance is optional until
October 1, 1997; 72 Fed. Reg. 63461 and 63462, November 9, 2007,
effective December 10, 2007, the mandatory compliance date is October
1, 2008.
Introduction
1. Official status. The commentary in Supplement I is
the vehicle by which the Division of Consumer and Community Affairs of
the Federal Reserve Board issues official staff interpretations of
Regulation M (12 CFR part 213). Good faith compliance with this
commentary affords protection from liability under section 130(f) of
the Truth in Lending Act (15 U.S.C.
1640(f)). Section 130(f) protects lessors from civil liability
for any act done or omitted in good faith in conformity with any
interpretation issued by a duly authorized official or employee of the
Federal Reserve System.
2. Procedures for requesting interpretations. Under
appendix C of Regulation M, anyone may request an official staff
interpretation. Interpretations that are adopted will be incorporated
in this commentary following publication in the Federal Register.
No official staff interpretations are expected to be issued other
than by means of this commentary.
3. Comment designations. Each comment in the
commentary is identified by a number and the regulatory section or
paragraph that it interprets. The comments are designated with as much
specificity as possible according to the particular regulatory
provision addressed. For example, some of the comments to § 213.4(f)
are further divided by subparagraph, such as comment 4(f)(1)-1 and
comment 4(f)(2)-2. In other cases, comments have more general
application and are designated, for example, as comment 4(a)-1. This
introduction may be cited as comments I-1 through I-4. An appendix may
be cited as comment app. A-1.
4. Illustrations. Lists that appear in the commentary
may be exhaustive or illustrative; the appropriate construction should
be clear from the context. Illustrative lists are introduced by phrases
such as "including," "such as," "to illustrate," and
"for example."
Section
213.1--Authority, Scope, Purpose, and Enforcement
1. Foreign applicability. Regulation M applies to all
persons (including branches of foreign banks or leasing companies
located in the United States) that offer consumer leases to residents
of any state (including foreign nationals) as defined in § 213.2(p).
The regulation does not apply to a foreign branch of a U.S. bank or to
a leasing company leasing to a U.S. citizen residing or visiting abroad
or to a foreign national abroad.
Section
213.2--Definitions
2(b) Advertisement
1. Coverage. The term advertisement includes messages
inviting, offering, or otherwise generally announcing to prospective
customers the availability of consumer leases, whether in visual, oral,
print or electronic media. Examples include:
i. Messages in newspapers, magazines, leaflets, catalogs, and
fliers.
ii. Messages on radio, television, and public address systems.
iii. Direct mail literature.
iv. Printed material on any interior or exterior sign or display,
in any window display, in any point-of-transaction literature or price
tag that is delivered or made available to a lessee or prospective
lessee in any manner whatsoever.
v. Telephone solicitations.
vi. On-line messages, such as those on the Internet.
{{12-31-07 p.6720}}
2. Exclusions. The term does not apply to the
following:
i. Direct personal contacts, including follow-up letters, cost
estimates for individual lessees, or oral or written communications
relating to the negotiation of a specific transaction.
ii. Informational material distributed only to businesses.
iii. Notices required by federal or state law, if the law
mandates that specific information be displayed and only the mandated
information is included in the notice.
iv. News articles controlled by the news medium.
v. Market research or educational materials that do not solicit
business.
3. Persons covered. See the commentary to
§ 213.7(a).
2(d) Closed-End Lease
1. General. In closed-end leases, sometimes referred
to as "walk-away" leases, the lessee is not responsible for the
residual value of the leased property at the end of the lease term.
2(e) Consumer Lease
1. Primary purposes. A lessor must determine in each
case if the leased property will be used primarily for personal,
family, or household purposes. If a question exists as to the primary
purpose for a lease, the fact that a lessor gives disclosures is not
controlling on the question of whether the transaction is covered. The
primary purpose of a lease is determined before or at consummation and
a lessor need not provide Regulation M disclosures where there is a
subsequent change in the primary use.
2. Period of time. To be a consumer lease, the initial
term of the lease must be more than four months. Thus, a lease of
personal property for four months, three months or on a month-to-month
or week-to-week basis (even though the lease actually extends beyond
four months) is not a consumer lease and is not subject to the
disclosure requirements of the regulation. However, a lease that
imposes a penalty for not continuing the lease beyond four months is
considered to have a term of more than four months. To illustrate:
i. A three-month lease extended on a month-to-month basis and
terminated after one year is not subject to the regulation.
ii. A month-to-month lease with a penalty, such as the forfeiture
of a security deposit for terminating before one year, is subject to
the regulation.
3. Total contractual obligation. The total contractual
obligation is not necessarily the same as the total of payments
disclosed under § 213.4(e). The total contractual obligation includes
nonrefundable amounts a lessee is contractually obligated to pay to the
lessor, but excludes items such as:
i. Residual value amounts or purchase-option prices;
ii. Amounts collected by the lessor but paid to a third party,
such as taxes, licenses, and registration fees.
4. Credit sale. The regulation does not cover a lease
that meets the definition of a credit sale in Regulation Z,
12 CFR 226.1(a)(16), which is
defined, in part, as a bailment or lease (unless terminable without
penalty at any time by the consumer) under which the consumer:
i. Agrees to pay as compensation for use a sum substantially
equivalent to, or in excess of, the total value of the property and
services involved; and
ii. Will become (or has the option to become), for no additional
consideration or for nominal consideration, the owner of the property
upon compliance with the agreement.
5. Agricultural purpose. Agricultural purpose means a
purpose related to the production, harvest, exhibition, marketing,
transportation, processing, or manufacture of agricultural products by
a natural person who cultivates, plants, propagates, or nurtures those
agricultural products, including but not limited to the acquisition of
personal property and services used primarily in farming. Agricultural
products include horticultural, viticultural, and dairy products,
livestock, wildlife, poultry, bees, forest products, fish and
shellfish, and any products thereof, including processed and
manufactured products,
{{4-30-02 p.6721}}and any and all products raised or produced on
farms and any processed or manufactured products thereof.
6. Organization or other entity. A consumer lease does
not include a lease made to an organization such as a corporation or a
government agency or instrumentality. Such a lease is not covered by
the regulation even if the leased property is used (by an employee, for
example) primarily for personal, family or household purposes, or is
guaranteed by or subsequently assigned to a natural person.
7. Leases of personal property incidental to a service.
The following leases of personal property are deemed incidental to
a service and thus are not subject to the regulation:
i. Home entertainment systems requiring the consumer to lease
equipment that enables a television to receive the transmitted
programming.
ii. Security alarm systems requiring the installation of leased
equipment intended to monitor unlawful entries into a home and in some
cases to provide fire protection.
iii. Propane gas service where the consumer must lease a propane
tank to receive the service.
8. Safe deposit boxes. The lease of a safe deposit box
is not a consumer lease under § 213.2(e).
2(g) Leases
1. Guarantors. Guarantors are not lessees for purposes
of the regulation.
2(h) Lessor.
1. Arranger of a lease. To "arrange" for the
lease of personal property means to provide or offer to provide a lease
that is or will be extended by another person under a business or other
relationship pursuant to which the person arranging the lease (a)
receives or will receive a fee, compensation, or other consideration
for the service or (b) has knowledge of the lease terms and
participates in the preparation of the contract documents required in
connection with the lease. To illustrate:
i. An automobile dealer who, pursuant to a business relationship,
completes the necessary lease agreement before forwarding it for
execution to the leasing company (to whom the obligation is payable on
its face) is "arranging" for the lease.
ii. An automobile dealer who, without receiving a fee for the
service, refers a customer to a leasing company that will prepare all
relevant contract documents is not "arranging" for the lease.
2. Consideration. The term "other consideration"
as used in comment 2(h)-1 refers to an actual payment corresponding to
a fee or similar compensation and not to intangible benefits, such as
the advantage of increased business, which may flow from the
relationship between the parties.
3. Assignees. An assignee may be a lessor for purposes
of the regulation in circumstances where the assignee has substantial
involvement in the lease transaction. See cf. Ford Motor Credit
Co. v. Cenance, 452 U.S. 155 (1981) (held that an assignee was a
creditor for purposes of the pre-1980 Truth in Lending Act and
Regulation Z because of its substantial involvement in the credit
transaction).
4. Multiple lessors. See the commentary to
§ 213.3(c).
2(j) Organization
1. Coverage. The term "organization" includes
joint ventures and persons operating under a business name.
2(l) Personal Property
1. Coverage. Whether property is personal property
depends on state or other applicable law. For example, a mobile home or
houseboat may be considered personal property in one state but real
property in another.
{{4-30-02 p.6722}}
2(m) Realized Value
1. General. Realized value refers to either the retail
or wholesale value of the leased property at early termination or at
the end of the lease term. It is not a required disclosure. Realized
value is relevant only to leases in which the lessee's liability at
early termination or at the end of the lease term typically is based on
the difference between the residual value (or the adjusted lease
balance) of the leased property and its realized value.
2. Options. Subject to the contract and to state or
other applicable law, the lessor may calculate the realized value in
determining the lessee's liability at the end of the lease term or at
early termination in one of the three ways stated in § 213.2(m). If
the lessor sells the property prior to making the determination about
liability, the price received for the property (or the fair market
value) is the realized value. If the lessor does not sell the property
prior to making that determination, the highest offer or the fair
market value is the realized value.
3. Determination of realized value. Disposition
charges are not subtracted in determining the realized value but
amounts attributable to taxes may be subtracted.
4. Offers. In determining the highest offer for
disposition, the lessor may disregard offers that an offeror has
withdrawn or is unable or unwilling to perform.
5. Lessor's appraisal. See commentary to § 213.4(l).
2(o) Security Interest and Security
1. Disclosable interests. For purposes of disclosure,
a security interest is an interest taken by the lessor to secure
performance of the lessee's obligation. For example, if a bank that is
not a lessor makes a loan to a leasing company and takes assignments of
consumer leases generated by that company to secure the loan, the
bank's security interest in the lessor's receivables is not a security
interest for purposes of this regulation.
2. General coverage. An interest the lessor may have
in leased property must be disclosed only if it is considered a
security interest under state or other applicable law. The term
includes, but is not limited to, security interests under the Uniform
Commercial Code; real property mortgages, deeds of trust, and other
consensual or confessed liens whether or not recorded; mechanic's,
materialman's, artisan's, and other similar liens; vendor's liens in
both real and personal property; liens on property arising by operation
of law; and any interest in a lease when used to secure payment or
performance of an obligation.
3. Insurance exception. The lessor's right to
insurance proceeds or unearned insurance premiums is not a security
interest for purposes of this regulation.
Section
213.3--General Disclosure Requirements
3(a) General Requirements
1. Basis of disclosures. Disclosures must reflect the
terms of the legal obligation between the parties. For example:
i. In a three-year lease with no penalty for termination after a
one-year minimum term, disclosures are based on the full three-year
term of the lease. The one-year minimum term is only relevant to the
early termination provisions of §§ 213.4(g)(1), (k) and
(l).
2. Clear and conspicuous standard. The clear and
conspicuous standard requires that disclosures be reasonably
understandable. For example, the disclosures must be presented in a way
that does not obscure the relationship of the terms to each other;
appendix A of this part contains model forms that meet this standard.
In addition, although no minimum typesize is required, the disclosures
must be legible, whether typewritten, handwritten, or printed by
computer.
3. Multipurpose disclosure forms. A lessor may use a
multipurpose disclosure form provided the lessor is able to designate
the specific disclosures applicable to a given transaction, consistent
with the requirement that disclosures be clearly and conspicuously
provided.
{{4-30-02 p.6723}}
4. Number of transactions. Lessors have flexibility in
handling lease transactions that may be viewed as multiple
transactions. For example:
i. When a lessor leases two items to the same lessee on the same
day, the lessor may disclose the leases as either one or two lease
transactions.
ii. When a lessor sells insurance or other incidental services in
connection with a lease, the lessor may disclose in one of two ways: as
a single lease transaction (in which case Regulation M, not Regulation
Z, disclosures are required) or as a lease transaction and a credit
transaction.
iii. When a lessor includes an outstanding lease or credit
balance in a lease transaction, the lessor may disclose the outstanding
balance as part of a single lease transaction (in which case Regulation
M, not Regulation Z, disclosures are required) or as a lease
transaction and a credit transaction.
3(a)(1) Form of Disclosures
1. Cross-references. Lessors may include in the
nonsegregated disclosures a cross-reference to items in the segregated
disclosures rather than repeat those items. A lessor may include in the
segregated disclosures numeric or alphabetic designations as
cross-references to related information so long as such references do
not obscure or detract from the segregated disclosures.
2. Identification of parties. While disclosures must
be made clearly and conspicuously, lessors are not required to use the
word "lessor" and "lessee" to identify the parties to the
lease transaction.
3. Lessor's address. The lessor must be identified by
name; an address (and telephone number) may be provided.
4. Multiple lessors and lessees. In transactions
involving multiple lessors and multiple lessees, a single lessor may
make all the disclosures to a single lessee as long as the disclosure
statement identifies all the lessors and lessees.
5. Lessee's signature. The regulation does not require
that the lessee sign the disclosure statement, whether disclosures are
separately provided or are part of the lease contract. Nevertheless, to
provide evidence that disclosures are given before a lessee becomes
obligated on the lease transaction, the lessor may, for example, ask
the lessee to sign the disclosure statement or an acknowledgement of
receipt, may place disclosures that are included in the lease documents
above the lessee's signature, or include instructions alerting a lessee
to read the disclosures prior to signing the lease.
3(a)(2) Segregation of Certain Disclosures
1. Location. The segregated disclosures referred to in
§ 213.3(a)(2) may be provided on a separate document and the other
required disclosures may be provided in the lease contract, so long as
all disclosures are given at the same time. Alternatively, all
disclosures may be provided in a separate document or in the lease
contract.
2. Additional information among segregated disclosures.
The disclosures required to be segregated may contain only the
information required or permitted to be included among the segregated
disclosures.
3. Substantially similar. See commentary to appendix A
of this part.
3(a)(3) Timing of Disclosures
1. Consummation. When a contractual relationship is
created between the lessor and the lessee is a matter to be determined
under state or other applicable law.
3(b) Additional Information; Nonsegregated Disclosures
1. State law disclosures. A lessor may include in the
nonsegregated disclosures any state law disclosures that are not
inconsistent with the act and regulation under § 213.9 as long as, in
accordance with the standard set forth in § 213.3(b) for additional
information, the state law disclosures are not used or placed to
mislead or confuse or detract from any disclosure required by the
regulation.
{{4-30-02 p.6724}}
3(c) Multiple Lessors or Lessees
1. Multiple lessors. If a single lessor provides
disclosures to a lessee on behalf of several lessors, all disclosures
for the transaction must be given, even if the lessor making the
disclosures would not otherwise have been obligated to make a
particular disclosure.
3(d) Use of Estimates
3(d)(1) Standard
1. Time of estimated disclosure. The lessor may, after
making a reasonable effort to obtain information, use estimates to make
disclosures if necessary information is unknown or unavailable at the
time the disclosures are made.
2. Basis of estimates. Estimates must be made on the
basis of the best information reasonably available at the time
disclosures are made. The "reasonably available" standard
requires that the lessor, acting in good faith, exercise due diligence
in obtaining information. The lessor may rely on the representations of
other parties. For example, the lessor might look to the consumer to
determine the purpose for which leased property will be used, to
insurance companies for the cost of insurance, or to an automobile
manufacturer or dealer for the date of delivery. See commentary
§ 213.4(n) for estimating official fees and taxes.
3. Residual value of leased property at termination.
In an open-end lease where the lessee's liability at the end of
the lease term is based on the residual value of the leased property as
determined at consummation, the estimate of the residual value must be
reasonable and based on the best information reasonably available to
the lessor (see § 213.4(m)). A lessor should generally use an
accepted trade publication listing estimated current or future market
prices for the leased property unless other information or a reasonable
belief based on its experience provides the better information. For
example:
i. An automobile lessor offering a three year open-end lease
assigns a wholesale value to the vehicle at the end of the lease term.
The lessor may disclose as an estimate a wholesale value derived from a
generally accepted trade publication listing current wholesale values.
ii. Same facts as above, except that the lessor discloses an
estimated value derived by adjusting the residual value quoted in the
trade publication because, in its experience, the trade publication
values either understate or overstate the prices actually received in
local used-vehicle markets. The lessor may adjust estimated values
quoted in trade publications if the lessor reasonably believes based on
its experience that the values are understated or overstated.
4. Retail or wholesale value. The lessor may choose
either a retail or a wholesale value in estimating the value of leased
property at termination of an open-end lease provided the choice is
consistent with the lessor's general practice when determining the
value of the property at the end of the lease term. The lessor should
indicate whether the value disclosed is a retail or wholesale value.
5. Labelling estimates. Generally, only the disclosure
for which the exact information is unknown is labelled as an estimate.
Nevertheless, when several disclosures are affected because of the
unknown information, the lessor has the option of labelling as an
estimate every affected disclosure or only the disclosure primarily
affected.
3(e) Effect of Subsequent Occurrence
1. Subsequent occurrences. Examples of subsequent
occurrences include:
i. An agreement between the lessee and lessor to change from a
monthly to a weekly payment schedule.
ii. An increase in official fees or taxes.
{{4-30-02 p.6725}}
iii. An increase in insurance premiums or coverage caused by a
change in the law.
iv. Late delivery of an automobile caused by a strike.
2. Redisclosure. When a disclosure becomes inaccurate
because of a subsequent occurrence, the lessor need not make new
disclosures unless new disclosures are required under § 213.5.
3. Lessee's failure to perform. The lessor does not
violate the regulation if a previously given disclosure becomes
inaccurate when a lessee fails to perform obligations under the
contract and a lessor takes actions that are necessary and proper in
such circumstances to protect its interest. For example, the addition
of insurance or a security interest by the lessor because the lessee
has not performed obligations contracted for in the lease is not a
violation of the regulation.
Section
213.4--Content of Disclosures
4(a) Description of Property
1. Placement of description. Although the description
of leased property may not be included among the segregated
disclosures, a lessor may choose to place the description directly
above the segregated disclosures.
4(b) Amount Due at Lease Signing or Delivery
1. Consummation. See commentary to § 213.3(a)(3).
2. Capitalized cost reduction. A capitalized cost
reduction is a payment in the nature of a downpayment on the leased
property that reduces the amount to be capitalized over the term of the
lease. This amount does not include any amounts included in a periodic
payment paid at lease signing or delivery.
3. "Negative" equity trade-in allowance. If an
amount owed on a prior lease or credit balance exceeds the agreed upon
value of a trade-in, the difference is not reflected as a negative
trade-in allowance under § 213.4(b). The lessor may disclose the
trade-in allowance as zero or not applicable, or may leave a blank
line.
4. Rebates. Only rebates applied toward an amount due
at lease signing or delivery are required to be disclosed under
§ 213.4(b).
5. Balance sheet approach. In motor-vehicle leases,
the total for the column labeled "total amount due at lease signing
or delivery" must equal the total for the column labeled "how the
amount due at lease signing or delivery will be paid."
6. Amounts to be paid in cash. The term cash is
intended to include payments by check or other payment methods in
addition to currency; however, a lessor may add a line item under the
column "how the amount due at lease signing or delivery will be
paid" for non-currency payments such as credit cards.
4(c) Payment Schedule and Total Amount of Periodic Payments
1. Periodic payments. The phrase "number, amount,
and due dates or periods of payments" requires the disclosure of all
payments that are made at regular or irregular intervals and generally
derived from rent, capitalized or amortized amounts such as
depreciation, and other amounts that are collected by the lessor at the
same interval(s), including for example, taxes, maintenance, and
insurance charges. Other periodic payments may, but need not, be
disclosed under § 213.4(c).
4(d) Other Charges
1. Coverage. Section 213.4(d) requires the disclosure
of charges that are anticipated by the parties incident to the normal
operation of the lease agreement. If a lessor is unsure whether a
particular fee is an "other charge," the lessor may disclose the
fee as such without violating § 213.4(d) or the segregation rule
under § 213.3(a)(2).
2. Excluded charges. This section does not require
disclosure of charges that are imposed when the lessee terminates
early, fails to abide by, or modifies the terms of the existing lease
agreement, such as charges for:
{{4-30-02 p.6726}}
i. Late payment.
ii. Default.
iii. Early termination.
iv. Deferral of payments.
v. Extension of the lease.
3. Third-party fees and charges. Third-party fees or
charges collected by the lessor on behalf of third parties, such as
taxes, are not disclosed under § 213.4(d).
4. Relationship to other provisions. The other charges
mentioned in this paragraph are charges that are not required to be
disclosed under some other provision of § 213.4. To illustrate:
i. The price of a mechanical breakdown protection (MBP) contract
is sometimes disclosed as an "other charge." Nevertheless, the
price of MBP is sometimes reflected in the periodic payment disclosure
under § 213.4(c) or in states where MBP is regarded as insurance, the
cost is to be disclosed in accordance with § 213.4(o).
5. Lessee's liabilities at the end of the lease term.
Liabilities that the lessor imposes upon the lessee at the end of
the scheduled lease term and that must be disclosed under § 213.4(d)
include disposition and ""pick-up'' charges.
6. Optional "disposition" charges. Disposition
and similar charges that are anticipated by the parties as an incident
to the normal operation of the lease agreement must be disclosed under
§ 213.4(d). If, under a lease agreement, a lessee may return leased
property to various locations, and the lessor charges a disposition fee
depending upon the location chosen, under § 213.4(d), the lessor must
disclose the highest amount charged. In such circumstances, the lessor
may also include a brief explanation of the fee structure in the
segregated disclosure. For example, if no fee or a lower fee is imposed
for returning a leased vehicle to the originating dealer as opposed to
another location, that fact may be disclosed. By contrast, if the terms
of the lease treat the return of the leased property to a location
outside the lessor's service area as a default, the fee imposed is not
disclosed as an "other charge," although it may be required to be
disclosed under § 213.4(q).
4(e) Total of Payments
1. Open-end lease. The additional statement is
required under § 213.4(e) for open-end leases because, with some
limitations, a lessee is liable at the end of the lease term for the
difference between the residual and realized values of the leased
property.
4(f) Payment Calculation
1. Motor-vehicle lease. Whether leased property is a
motor vehicle is determined by state or other applicable law.
2. Multiple-items. If a lease transaction involves
multiple items of leased property, one of which is not a motor vehicle
under state law, at their option, lessors may include all items in the
disclosures required under § 213.4(f). See comment 3(a)--4 regarding
disclosure of multiple transactions.
4(f)(1) Gross Capitalized Cost
1. Agreed upon value of the vehicle. The agreed upon
value of a motor vehicle includes the amount of capitalized items such
as charges for vehicle accessories and options, and delivery or
destination charges. The lessor may also include taxes and fees for
title, licenses, and registration that are capitalized. Charges for
service or maintenance contracts, insurance products, guaranteed
automobile protection, or an outstanding balance on a prior lease or
credit transaction are not included in the agreed upon value.
2. Itemization of the gross capitalized cost. The
lessor may choose to provide the itemization of the gross capitalized
cost only on request or may provide the itemization as a matter of
course. In the latter case, the lessor need not provide a statement of
the lessee's option to receive an itemization. The gross capitalized
cost must be itemized by type and amount. The lessor may include in the
itemization an identification of the items and amounts of some or all
of the items contained in the agreed upon value of the vehicle. The
itemization must be provided at the same time as the other disclosures
required by § 213.4, but it may not be included among the segregated
disclosures.
{{4-30-02 p.6726.01}}
4(f)(7) Total of Base Periodic Payment
1. Accuracy of disclosure. If the periodic payment
calculation under § 213.4(f) has been calculated correctly, the
amount disclosed under § 213.4(f)(7)--the total of base periodic
payments--is correct for disclosure purposes even if that amount
differs from the base periodic payment disclosed under § 213.4(f)(9)
multiplied by the number of lease payments disclosed under
§ 213.4(f)(8), when the difference is due to rounding.
4(f)(8)
1. Lease Term. The lease term may be disclosed among the
segregated disclosures.
{{4-30-02 p.6727}}
4(g) Early Termination
4(g)(1) Conditions and Disclosure of Charges
1. Reasonableness of charges. See the commentary to
§ 213.4(q).
2. Description of the method. Section 213.4(g)(1)
requires a full description of the method of determining an early
termination charge. The lessor should attempt to provide consumers with
clear and understandable descriptions of its early termination charges.
Descriptions that are full, accurate, and not intended to be misleading
will comply with § 213.4(g)(1), even if the descriptions are complex.
In providing a full description of an early termination method, a
lessor may use the name of a generally accepted method of computing the
unamortized cost portion (also known as the "adjusted lease
balance") of its early termination charges. For example, a lessor
may state that the "constant yield" method will be utilized in
obtaining the adjusted lease balance, but must specify how that figure,
and any other term or figure, is used in computing the total early
termination charge imposed upon the consumer. Additionally, if a lessor
refers to a named method in this manner, the lessor must provide a
written explanation of that method if requested by the consumer. The
lessor has the option of providing the explanation as a matter of
course in the lease documents or on a separate document.
3. Timing of written explanation of a named method.
While a lessor may provide an address or telephone number for the
consumer to request a written explanation of the named method used to
calculate the adjusted leased balance, if at consummation a consumer
requests such an explanation, the lessor must provide a written
explanation at that time. If a consumer requests an explanation after
consummation, the lessor must provide a written explanation within a
reasonable time after the request is made.
4. Default. When default is a condition for early
termination of a lease, default charges must be disclosed under
§ 213.4(g)(1). See the commentary to § 213.4(q).
5. Lessee's liability at early termination. When the
lessee is liable for the difference between the unamortized cost and
the realized value at early termination, the method of determining the
amount of the difference must be disclosed under § 213.4(g)(1).
4(h) Maintenance Responsibilities
1. Standards for wear and use. No disclosure is
required if a lessor does not set standards or impose charges for wear
and use (such as excess mileage).
4(i) Purchase Option
1. Mandatory disclosure of no purchase option.
Generally the lessor need only make the specific required
disclosures that apply to a transaction. In the case of a purchase
option disclosure, however, a lessor must disclose affirmatively that
the lessee has no option to purchase the leased property if the
purchase option is inapplicable.
2. Existence of purchase option. Whether a purchase
option exists under the lease is determined by state or other
applicable law. The lessee's right to submit a bid to purchase property
at termination of the lease is not an option to purchase under
§ 213.4(i) if the lessor is not required to accept the lessee's bid
and the lessee does not receive preferential treatment.
3. Purchase-option fee. A purchase-option fee is
disclosed under § 213.4(i), not § 213.4(d). The fee may be
separately itemized or disclosed as part of the purchase-option price.
4. Official fees and taxes. Official fees such as
those for taxes, licenses, and registration charged in connection with
the exercise of a purchase option may be disclosed under § 213.4(i)
as part of the purchase-option price (with or without a reference to
their inclusion in that price) or may be separately disclosed and
itemized by category. Alternatively, a lessor may provide a statement
indicating that the purchase-option price does not include fees for
tags, taxes, and registration.
5. Purchase-option price. Lessors must disclose the
purchase-option price as a sum certain or as a sum certain to be
determined at a future date by reference to a readily
{{4-30-02 p.6728}}available independent source. The reference should
provide sufficient information so that the lessee will be able to
determine the actual price when the option becomes available.
Statements of a purchase price as the "negotiated price" or the
"fair market value" do not comply with the requirements of
§ 213.4(i)
4(j) Statement Referencing Nonsegregated Disclosures
1. Content. A lessor may delete inapplicable items
from the disclosure. For example, if a lease contract does not include
a security interest, the reference to a security interest may be
omitted.
4(l) Right of Appraisal
1. Disclosure inapplicable. The lessee does not have
the right to an independent appraisal merely because the lessee is
liable at the end of the lease term or at early termination for
unreasonable wear or use. Thus, the disclosure under § 213.4(l) does
not apply. For example:
i. The automobile lessor might expect a lessee to return an
undented car with four good tires at the end of the lease term. Even
though it may hold the lessee liable for the difference between a
dented car with bald tires and the value of a car in reasonably good
repair, the disclosure under § 213.4(l) is not required.
2. Lessor's appraisal. If the lessor obtains an
appraisal of the leased property to determine its realized value, that
appraisal does not suffice for purposes of section 183(c) of the act;
the lessor must disclose the lessee's right to an independent appraisal
under § 213.4(l).
3. Retail or wholesale. In providing the disclosures
in § 213.4(l), a lessor must indicate whether the wholesale or retail
appraisal value will be used.
4. Time restriction on appraisal. The regulation does
not specify a time period in which the lessee must exercise the
appraisal right. The lessor may require a lessee to obtain the
appraisal within a reasonable time after termination of the lease.
4(m) Liability at end of Lease Term Based on Residual Value
1. Open-end leases. Section 213.4(m) applies only to
open-end leases.
2. Lessor's payment of attorney's fees. Section 183(a)
of the act requires that the lessor pay the lessee's attorney's fees in
all actions under § 213.4(m), whether successful or not.
4(m)(1) Rent and other charges
1. General. This disclosure is intended to represent
the cost of financing an open-end lease based on charges and fees that
the lessor requires the lessee to pay. Examples of disclosable charges,
in addition to the rent charge, include acquisition, disposition, or
assignment fees. Charges imposed by a third party whose services are
not required by the lessor (such as official fees and voluntary
insurance) are not included in the § 213.4(m)(1) disclosure.
4(m)(2) Excess liability
1. Coverage. The disclosure limiting the lessee's
liability for the value of the leased property does not apply in the
case of early termination.
2. Leases with a minimum term. If a lease has an
alternative minimum term, the disclosures governing the liability
limitation are not applicable for the minimum term.
3. Charges not subject to rebuttable presumption. The
limitation on liability applies only to liability at the end of the
lease term that is based on the difference between the residual value
of the leased property and its realized value. The regulation does not
preclude a lessor from recovering other charges from the lessee at the
end of the lease term. Examples of such charges include:
i. Disposition charges.
ii. Excess mileage charges.
iii. Late payment and default charges.
{{4-30-02 p.6729}}
iv. In simple-interest accounting leases, amount by which the
unamortized cost exceeds the residual value because the lessee has not
made timely payments.
4(n) Fees and Taxes
1. Treatment of certain taxes. Taxes paid in
connection with the lease are generally disclosed under § 213.4(n),
but there are exceptions. To illustrate:
i. Taxes paid by lease signing or delivery are disclosed under
§ 213.4(b) and § 213.4(n).
ii. Taxes that are part of a regularly scheduled payments are
reflected in the disclosure under § 213.4(c), (f), and (n).
iii. A tax payable by the lessor that is passed on to the
consumer and is reflected in the lease documentation must be disclosed
under § 213.4(n). A tax payable by the lessor and absorbed as a cost
of doing business need not be disclosed.
iv. Taxes charged in connection with the exercise of a purchase
option are disclosed under § 213.4(i), not § 213.4(n).
2. Estimates. In disclosing the total amount of fees
and taxes under § 213.4(n), lessors may need to base the disclosure
on estimated tax rates or amounts and are afforded great flexibility in
doing so. Where a rate is applied to the future value of leased
property, lessors have flexibility in estimating that value, including,
but not limited to, using the mathematical average of the agreed upon
value and the residual value or published valuation guides; or a lessor
could prepare estimates using the agreed upon value and disclose a
reasonable estimate of the total fees and taxes. Lessors may include a
statement that the actual total of fees and taxes may be higher or
lower depending on the tax rates in effect or the value of the leased
property at the time a fee or tax is assessed.
4(o) Insurance
1. Coverage. If insurance is obtained through the
lessor, information on the type and amount of insurance coverage
(whether voluntary or required) as well as the cost, must be disclosed.
2. Lessor's insurance. Insurance purchased by the
lessor primarily for its own benefit, and absorbed as a business
expense and not separately charged to the lessee, need not be disclosed
under § 213.4(o) even if it provides an incidental benefit to the
lessee.
3. Mechanical breakdown protection and other products.
Whether products purchased in conjunction with a lease, such as
mechanical breakdown protection (MBP) or guaranteed automobile
protection (GAP), should be treated as insurance is determined by state
or other applicable law. In states that do not treat MBP or GAP as
insurance, § 213.4(o) disclosures are not required. In such cases the
lessor may, however, disclose this information in accordance with the
additional information provision in § 213.3(b). For MBP insurance
contracts not capped by a dollar amount, lessors may describe coverage
by referring to a limitation by mileage or time period, for example, by
indicating that the mechanical breakdown contract insures parts of the
automobile for up to 100,000 miles.
4(p) Warranties or Guarantees
1. Brief identification. The statement identifying
warranties may be brief and need not describe or list all warranties
applicable to specific parts such as for air conditioning, radio, or
tires in an automobile. For example, manufacturer's warranties may be
identified simply by a reference to the standard manufacturer's
warranty. If a lessor provides a comprehensive list of warranties that
may not all apply, to comply with § 213.4(p) the lessor must indicate
which warranties apply or, alternatively, which warranties do not
apply.
2. Warranty disclaimers. Although a disclaimer of
warranties is not required by the regulation, the lessor may give a
disclaimer as additional information in accordance with § 213.3(b).
3. State law. Whether an express warranty or guaranty
exists is determined by state or other law.
{{4-30-02 p.6730}}
4(q) Penalties and Other Charges for Delinquency
1. Collection costs. The automatic imposition of
collection costs or attorney fees upon default must be disclosed under
§ 213.4(q). Collection costs or attorney fees that are not imposed
automatically, but are contingent upon expenditures in conjunction with
a collection proceeding or upon the employment of an attorney to effect
collection, need not be disclosed.
2. Charges for early termination. When default is a
condition for early termination of a lease, default charges must also
be disclosed under § 213.4(g)(1). The § 213.4(q) and (g)(1)
disclosures may, but need not, be combined. Examples of combined
disclosures are provided in the model lease disclosure forms in
appendix A.
3. Simple-interest leases. In a simple-interest
accounting lease, the additional rent charge that accrues on the lease
balance when a periodic payment is made after the due date does not
constitute a penalty or other charge for late payment. Similarly,
continued accrual of the rent charge after termination of the lease
because the lessee fails to return the leased property does not
constitute a default charge. But in either case, if the additional
charge accrues at a rate higher than the normal rent charge, the lessor
must disclose the amount of or the method of determining the additional
charge under § 213.4(q).
4. Extension charges. Extension charges that exceed
the rent charge in a simple-interest accounting lease or that are added
separately are disclosed under § 213.4(q).
5. Reasonableness of charges. Pursuant to section
183(b) of the act, penalties or other charges for delinquency, default,
or early termination may be specified in the lease but only in an
amount that is reasonable in light of the anticipated or actual harm
caused by the delinquency, default, or early termination, the
difficulties of proof of loss, and the inconvenience or nonfeasibility
of otherwise obtaining an adequate remedy.
4(r) Security Interest
1. Disclosable security interests. See
§ 213.2(o) and accompanying
commentary to determine what security interests must be disclosed.
4(s) Limitations on Rate Information
1. Segregated disclosures. A lease rate may not be
included among the segregated disclosures referenced in
§ 213.3(a)(2).
Section
213.5--Renegotiations, Extensions and Assumptions
5(a) Renegotiations
1. Basis of disclosures. Lessors have flexibility in
making disclosures so long as they reflect the legal obligation under
the renegotiated lease. For example, assume that a 24-month lease is
replaced by a 36-month lease. The initial lease began on January 1,
1998, and was renegotiated and replaced on July 1, 1998, so that the
new lease term ends on January 1, 2001.
i. If the renegotiated lease covers the 36-month period beginning
January 1, 1998, the new disclosures would reflect all payments made by
the lessee on the initial lease and all payments on the renegotiated
lease. In this example, since the renegotiated lease covers a 36-month
period beginning January 1, 1998, the disclosures must reflect payments
made since that date. On the model form, the "total of base periodic
payments" disclosed under § 213.4(f)(7) should reflect periodic
payments to be made over the entire 36-month term. Payments received
since January 1, 1998, are added as a new line item disclosed as
"total of payments received" and are subtracted from the
"total of base periodic payments" in calculating a new item
disclosed as the "total of base periodic payments remaining." For
example, if 6 monthly payments of $300 were received since January 1,
1998, the disclosure form should include a "total of base periodic
payments" line from which $1,800 is subtracted to arrive at the
"total of base periodic payments remaining." The remainder of the
disclosures would not change.
ii. If the renegotiated lease covers only the remaining 30
months, from July 1, 1998, to January 1, 2001, the disclosures would
reflect only the charges incurred in connection with the renegotiation
and the payments for the remaining period.
{{12-31-07 p.6731}}
5(b) Extensions
1. Time of extension disclosures. If a consumer lease
is extended for a specified term greater than six months, new
disclosures are required at the time the extension is agreed upon. If
the lease is extended on a month-to-month basis and the cumulative
extensions exceed six months, new disclosures are required at the
commencement of the seventh month and at the commencement of each
seventh month thereafter for as long as the extensions continue. If a
consumer lease is extended for terms of varying durations, one of which
will exceed six months beyond the originally scheduled termination date
of the lease, new disclosures are required at the commencement of the
term that will exceed six months beyond the originally scheduled
termination date.
2. Content of disclosures for month-to-month extensions.
The disclosures for a lease extended on a month-to-month basis for
more than six months should reflect the month-to-month nature of the
transaction.
3. Basis of disclosures. The disclosures should be
based on the extension period, including any upfront costs paid in
connection with the extension. For example, assume that initially a
lease ends on March 1, 1999. In January 1999, agreement is reached to
extend the lease until October 1, 1999. The disclosure would include
any extension fee paid in January and the periodic payments for the
seven-month extension period beginning in
March.
Section 213.6
[Reserved]
Section
213.7--Advertising
7(a) General Rule
1. Persons covered. All "persons" must comply
with the advertising provisions in this section, not just those that
meet the definition of a lessor in § 213.2(h). Thus, automobile
dealers, merchants, and others who are not themselves lessors must
comply with the advertising provisions of the regulation if they
advertise consumer lease transactions. Pursuant to section 184(b) of
the act, however, owners and personnel of the media in which an
advertisement appears or through which it is disseminated are not
subject to civil liability for violations under section 185(b) of the
act.
2. "Usually and customarily." Section 213.7(a)
does not prohibit the advertising of a single item or the promotion of
a new leasing program, but prohibits the advertising of terms that are
not and will not be available. Thus, an advertisement may state terms
that will be offered for only a limited period or terms that will
become available at a future date.
7(b) Clear and Conspicuous Standard
1. Standard. The disclosures in an advertisement in
any media must be reasonably understandable. For example, very fine
print in a television advertisement or detailed and very rapidly stated
information in a radio advertisement does not meet the clear and
conspicuous standard if consumers cannot see and read or hear, and
cannot comprehend, the information required to be disclosed.
7(b)(1) Amount Due at Lease Signing or Delivery
1. Itemization not required. Only a total of amounts
due at lease signing or delivery is required to be disclosed, not an
itemization of its component parts. Such an itemization is provided in
any transaction-specific disclosures provided under § 213.4.
2. Prominence rule. Except for a periodic payment,
oral or written references to components of the total due at lease
signing or delivery (for example, a reference to a capitalized cost
reduction, where permitted) may not be more prominent than the
disclosure of the total amount due at lease signing or
delivery.
{{12-31-07 p.6732}}
7(b)(2) Advertisement of a Lease Rate
1. Location of statement. The notice required to
accompany a percentage rate stated in an advertisement must be placed
in close proximity to the rate without any other intervening language
or symbols. For example, a lessor may not place an asterisk next to the
rate and place the notice elsewhere in the advertisement. In addition,
with the exception of the notice required by § 213.4(s), the rate
cannot be more prominent than any other § 213.4 disclosure stated in
the advertisement.
7(c) Catalogs or Other Multi Page Advertisements; Electronic
Advertisements
1. General rule. The multiple-page advertisements
referred to in § 213.7(c) are advertisements consisting of a series
of numbered pages---for example, a supplement to a newspaper. A mailing
comprising several separate flyers or pieces of promotional material in
a single envelope is not a single multiple-page advertisement.
2. Cross-references. A catalog or other multiple-page
advertisement or an electronic advertisement (such as an advertisement
appearing on an Internet Web site) is a single advertisement (requiring
only one set of lease disclosures) if it contains a table, chart, or
schedule with the disclosures required under § 213.7(d)(2)(i) through
(v). If one of the triggering terms listed in § 213.7(d)(1) appears
in a catalog, or in a multiple-page or electronic advertisement, it
must clearly direct the consumer to the page or location where the
table, chart, or schedule begins. For example, in an electronic
advertisement, a term triggering additional disclosures may be
accompanied by a link that directly connects the consumer to the
additional information.
7(d)(1) Triggering Terms
1. Typical example. When any triggering term appears
in a lease advertisement, the additional terms enumerated in
§ 213.7(d)(2) (i) through (v) must also appear. In a multi-lease
advertisement, an example of one or more typical leases with a
statement of all the terms applicable to each may be used. The examples
must be labeled as such and must reflect representative lease terms
that are made available by the lessor to consumers.
7(d)(2) Additional Terms
1. Third-party fees that vary by state or locality.
The disclosure of a periodic payment or total amount due at lease
signing or delivery may:
i. Exclude third-party fees, such as taxes, licenses, and
registration fees and disclose that fact; or
ii. Provide a periodic payment or total that includes third-party
fees based on a particular state or locality as long as that fact and
the fact that fees may vary by state or locality are disclosed.
7(e) Alternative DisclosuresMerchandise Tags
1. Multiple-item leases. Multiple-item leases that
utilize merchandise tags requiring additional disclosures may use the
alternate disclosure rule.
7(f) Alternative DisclosuresTelevision or Radio
Advertisements
7(f)(1) Toll-Free Number or Print Advertisement
1. Publication in general circulation. A reference to
a written advertisement appearing in a newspaper circulated nationally,
for example, USA Today or the Wall Street Journal, may satisfy the
general circulation requirement in § 213.7(f)(1)(ii).
2. Toll-free number, local or collect calls. In
complying with the disclosure requirements of § 213.7(f)(1)(i), a
lessor must provide a toll-free number for nonlocal calls
made
{{12-31-07 p.6733}}from an area code other than the one used in the
lessor's dialing area. Alternatively, a lessor may provide any
telephone number that allows a consumer to reverse the phone charges
when calling for information.
3. Multi-purpose number. When an advertised toll-free
number responds with a recording, lease disclosures must be provided
early in the sequence to ensure that the consumer receives the required
disclosures. For example, in providing several dialing options--such as
providing directions to the lessor's place of business--the option
allowing the consumer to request lease disclosures should be provided
early in the telephone message to ensure that the option to request
disclosures is not obscured by other information.
4. Statement accompanying toll free number. Language
must accompany a telephone and television number indicating that
disclosures are available by calling the toll-free number, such as
"call 1-800-000-0000 for details about costs and
terms."
Section
213.8--Record Retention
1. Manner of retaining evidence. A lessor must retain
evidence of having performed required actions and of having made
required disclosures. Such records may be retained in paper form, on
microfilm, microfiche, or computer, or by any other method designed to
reproduce records accurately. The lessor need retain only enough
information to reconstruct the required disclosures or other
records.
Section
213.9--Relation to State Laws
1. Exemptions granted. Effective October 1, 1982, the
Board granted the following exemptions from portions of the Consumer
Leasing Act:
i. Maine. Lease transactions subject to the Maine
Consumer Credit Code and its implementing regulations are exempt from
chapters 2, 4, and 5 of the federal act. (The exemption does not apply
to transactions in which a federally chartered institution is a
lessor.)
ii. Oklahoma. Lease transactions subject to the
Oklahoma Consumer Credit Code are exempt from chapters 2 and 5 of the
federal act. (The exemption does not apply to sections 132 through 135
of the federal act, nor does it apply to transactions in which a
federally chartered institution is a
lessor.)
Appendix
A--Model Forms
1. Permissible changes. Although use of the model
forms is not required, lessors using them properly will be deemed to be
in compliance with the regulation. Generally, lessors may make certain
changes in the format or content of the forms and may delete any
disclosures that are inapplicable to a transaction without losing the
act's protection from liability. For example, the model form based on
monthly periodic payments may be modified for single-payment lease
transactions or for quarterly or other regular or irregular periodic
payments. The model form may also be modified to reflect that a
transaction is an extension. The content, format, and headings for the
segregated disclosures must be substantially similar to those contained
in the model forms; therefore, any changes should be minimal. The
changes to the model forms should not be so extensive as to affect the
substance and the clarity of the disclosures.
2. Examples of acceptable changes.
i. Using the first person, instead of the second person, in
referring to the lessee.
ii. Using "lessee," "lessor," or names instead of
pronouns.
iii. Rearranging the sequence of the nonsegregated disclosures.
iv. Incorporating certain state "plain English"
requirements.
v. Deleting or blocking out inapplicable disclosures, filling in
"N/A" (not applicable) or "0," crossing out, leaving
blanks, checking a box for applicable items, or circling applicable
items (this should facilitate use of multi-purpose standard forms).
vi. Adding language or symbols to indicate estimates.
vii. Adding numeric or alphabetic designations.
{{12-31-07 p.6734}}
viii. Rearranging the disclosures into vertical columns, except
for § 213.4(b) through (e) disclosures.
ix. Using icons and other graphics.
3. Model closed-end or net vehicle lease disclosure.
Model A-2 is designed for a closed-end or net vehicle lease. Under
the "Early Termination and Default" provision a reference to the
lessee's right to an independent appraisal of the leased vehicle under
§ 213.4(l) is included for those closed-end leases in which the
lessee's liability at early termination is based on the vehicle's
realized value.
4. Model furniture lease disclosures. Model A--3 is a
closed-end lease disclosure statement designed for a typical furniture
lease. It does not include a disclosure of the appraisal right at early
termination required under
§ 213.4(l) because few
closed-end furniture leases base the lessee's liability at early
termination on the realized value of the leased property. The
disclosure should be added if it is applicable.
[The page following this is 6871.]
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