Federal Register / Vol. 76, No. 64 / Monday, April 4, 2011 / Rules and Regulations 18349 

1Specifically, the CLA currently defines a 

consumer lease as ‘‘a contract in the form of a lease 

or bailment for the use of personal property by a 

natural person for a period of time exceeding four 

months, and for a total contractual obligation not 

exceeding $25,000, primarily for personal, family, 

or household purposes, whether or not the lessee 

has the option to purchase or otherwise become the 

owner of the property at expiration of the lease. 

***’’ 15 U.S.C. 1667(1) (emphasis added). 

Regulation M implements this definition in 

§ 213.2(e). 

DATES: Effective on April 4, 2011. 

FOR FURTHER INFORMATION CONTACT: 

S. Brett Offutt, Director, Policy and 

Litigation Division, P&SP, GIPSA, 1400 

Independence Ave., SW., Washington, 

DC 20250, (202) 720–7363, 

s.brett.offutt@usda.gov. 

SUPPLEMENTARY INFORMATION: 

List of Subjects in 9 CFR Part 201 

Reporting and recordkeeping 

requirements, Measurement standards, 

Trade practices. 

Accordingly, 9 CFR part 201 is 

corrected by making the following 

correcting amendment: 

PART 201—REGULATIONS UNDER 

THE PACKERS AND STOCKYARDS 

ACT 

■ 1. The authority citation for part 201 

continues to read as follows: 

Authority: 7 U.S.C. 181–229c. 

■ 2. In § 201.72, revise the last sentence 

of paragraph (a) to read as follows: 

§ 201.72 Scales; testing of. 

(a) * * * Except that if scales are 

used on a limited seasonal basis (during 

any continuous 6-month period) for 

purposes of purchase, sale, acquisition, 

payment or settlement, the stockyard 

owner, swine contractor, market agency, 

dealer, live poultry dealer, or packer 

using such scales may use the scales 

within a 6-month period following each 

test. 

* * * * * 

Alan R. Christian, 

Acting Administrator, Grain Inspection, 

Packers and Stockyards Administration. 

[FR Doc. 2011–7831 Filed 4–1–11; 8:45 am] 

BILLING CODE 3410–KD–P 

FEDERAL RESERVE SYSTEM 

12 CFR Part 213 

[Regulation M; Docket No. R–1400] 

RIN No. 7100–AD60 

Consumer Leasing 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Final rule. 

SUMMARY: Effective July 21, 2011, the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank 

Act) amends the Consumer Leasing Act 

(CLA) by increasing the threshold for 

exempt consumer leases from $25,000 to 

$50,000. In addition, the Dodd-Frank 

Act provides that, on or after December 

31, 2011, this threshold must be 

adjusted annually by any annual 

percentage increase in the Consumer 

Price Index for Urban Wage Earners and 

Clerical Workers. Accordingly, the 

Board is making corresponding 

amendments to Regulation M, which 

implements the CLA, and to the 

accompanying staff commentary. 

Because the Dodd-Frank Act also 

increases the Truth in Lending Act’s 

threshold for exempt consumer credit 

transactions from $25,000 to $50,000, 

the Board is making similar 

amendments to Regulation Z elsewhere 

in today’s Federal Register. 

DATES: Consistent with Sections 1062 

and 1100H of the Dodd-Frank Act, this 

final rule is effective on the transfer date 

designated by the Secretary of the 

Treasury, which is July 21, 2011. 

FOR FURTHER INFORMATION CONTACT: 

Stephen Shin, Attorney, or Benjamin K. 

Olson, Counsel, Division of Consumer 

and Community Affairs, Board of 

Governors of the Federal Reserve 

System, at (202) 452–3667 or 452–2412; 

for users of Telecommunications Device 

for the Deaf (TDD) only, contact (202) 

263–4869. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Consumer Leasing Act 

The Consumer Leasing Act (CLA), 15 

U.S.C. 1667–1667e, was enacted in 1976 

as an amendment to the Truth in 

Lending Act (TILA), 15 U.S.C. 1601 et 

seq. The purpose of the CLA is to ensure 

meaningful and accurate disclosure of 

the terms of personal property leases for 

personal, family, or household use. The 

CLA is implemented by the Board’s 

Regulation M (12 CFR part 213). 

The CLA and Regulation M require 

lessors to provide consumers with 

uniform cost and other disclosures 

about consumer lease transactions. The 

statute and the regulation generally 

apply to consumer leases for the use of 

personal property in which the 

contractual obligation has a term of 

more than four months. An automobile 

lease is the most common type of 

consumer lease covered by the CLA and 

Regulation M. Currently, however, if the 

lessee’s total contractual obligation 

under the lease exceeds $25,000, the 

CLA and Regulation M do not apply. 

See 15 U.S.C. 1667(1); 12 CFR 213.2(e).1

The Dodd-Frank Wall Street Reform and 

Consumer Protection Act 

This final rule implements Section 

1100E of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act of 

2010 (Dodd-Frank Act), which was 

signed into law on July 21, 2010. Public 

Law 111–203 § 1100E, 124 Stat. 1376 

(2010). The Dodd-Frank Act raises the 

CLA’s $25,000 exemption threshold to 

$50,000. In addition, the Dodd-Frank 

Act requires that, on or after December 

31, 2011, the threshold shall be adjusted 

annually for inflation by the annual 

percentage increase in the Consumer 

Price Index for Urban Wage Earners and 

Clerical Workers (CPI–W), as published 

by the Bureau of Labor Statistics. 

Therefore, from July 21, 2011 to 

December 31, 2011, the threshold dollar 

amount will be $50,000. Effective 

January 1, 2012, the $50,000 threshold 

will be adjusted annually based on any 

annual percentage increase in the 

CPI–W. 

In December 2010, the Board 

proposed to amend § 213.2(e), the 

accompanying commentary, and the 

commentary to § 213.7(a) for 

consistency with the amendments to the 

CLA’s exemption threshold. See 75 FR 

78632 (Dec. 16, 2010) (December 2010 

Proposed Regulation M Rule). In 

addition, because the Dodd-Frank Act 

makes similar amendments to TILA’s 

exemption threshold for consumer 

credit transactions, the Board 

simultaneously proposed to amend 

Regulation Z, which implements the 

provisions of TILA that do not address 

consumer leases. See 75 FR 78636 (Dec. 

16, 2010) (December 2010 Regulation Z 

Proposed Rule). 

The Board received only two 

comments on the December 2010 

Regulation M Proposed Rule. As 

discussed below, the Board is generally 

adopting the rule as proposed. 

Elsewhere in today’s Federal Register, 

the Board is also adopting a final rule 

amending Regulation Z in order to 

implement the amendments to TILA’s 

exemption threshold for consumer 

credit transactions. 

II. Summary of Final Rule 

Revisions to § 213.2 

Consistent with the Dodd-Frank Act, 

the Board’s final rule revises § 213.2 and 

the accompanying staff commentary to 

provide that, effective July 21, 2011, a 

consumer lease is exempt from the 

requirements of Regulation M if the 

consumer’s total contractual obligation 


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18350 Federal Register / Vol. 76, No. 64 / Monday, April 4, 2011 / Rules and Regulations 

under the lease exceeds $50,000 when 

the lease is consummated. This final 

rule further provides that, beginning on 

January 1, 2012, the $50,000 threshold 

will be adjusted annually by any annual 

percentage increase in the CPI–W. 

Effective Date 

Section 1100H of the Dodd-Frank Act 

provides that Section 1100E will 

become effective on the designated 

transfer date, as defined by Section 1062 

of that Act. Section 1062 of the DoddFrank Act requires, in relevant part, the 

Secretary of the Treasury to designate a 

single calendar date for the transfer of 

certain functions from other agencies to 

the Bureau of Consumer Financial 

Protection. Pursuant to Section 1062(a) 

of the Dodd-Frank Act, the Secretary of 

the Treasury has determined that the 

designated transfer date shall be July 21, 

2011. See 75 FR 57252 (Sept. 20, 2010). 

Accordingly, because Section 1100E 

will become effective on July 21, 2011, 

this final rule will be effective on that 

date. However, if the Secretary of the 

Treasury designates a later transfer date 

pursuant to Section 1062, this final rule 

will instead be effective on that date. 

One industry commenter requested 

that the Board delay the statutory 

effective date by one year (i.e., until July 

21, 2012). This commenter asserted 

that—in light of the extensive regulatory 

changes required by the Dodd-Frank Act 

and other statutes—it would be 

burdensome for small institutions to 

comply with Regulation M for consumer 

leases of $50,000 or less by July 21, 

2011. However, the Board understands 

that, as a general matter, institutions 

that engage in consumer leasing already 

have the systems in place to comply 

with Regulation M. Thus, it should not 

be unduly burdensome for these 

institutions to comply with Regulation 

M with respect to a larger population of 

leases. Accordingly, in these 

circumstances, it would not be 

appropriate to deviate from the effective 

date established by Congress. 

III. Statutory Authority 

The CLA authorizes the Board to 

prescribe regulations to update and 

clarify the requirements and definitions 

applicable to lease disclosures and 

contracts, and any other issues 

specifically related to consumer leasing, 

to the extent that the Board determines 

such action to be necessary to carry out 

the CLA, to prevent circumvention, or to 

facilitate compliance. 15 U.S.C. 

1667f(a). The CLA also provides that 

any regulations prescribed by the Board 

may contain classifications and 

differentiations, and may provide for 

adjustments and exceptions for any 

class of transactions, as the Board 

considers appropriate. Id. In addition, 

the CLA is a part of TILA, which grants 

similar authority to the Board. See 15 

U.S.C. 1604(a) and (f). For the reasons 

discussed below, the Board believes it is 

necessary and appropriate to implement 

Section 1100E of the Dodd-Frank Act by 

revising Regulation M to effectuate the 

purposes of the CLA and TILA, to 

prevent circumvention, and to facilitate 

compliance. 

IV. Section-by-Section Analysis 

Section 213.2—Definitions 

2(e) Consumer Lease 

Section 213.2(e) implements the 

CLA’s definition of consumer lease. 

Currently, § 213(e)(1) defines ‘‘consumer 

lease’’ as ‘‘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.’’ As discussed in existing 

comment 2(e)–3, the total contractual 

obligation under a lease includes the 

total of payments as well as nonrefundable amounts the lessee is 

contractually obligated to pay to the 

lessor. However, comment 2(e)–3 also 

clarifies that residual value amounts, 

purchase-option prices, and amounts 

collected by the lessor but paid to a 

third party (such as taxes, licenses, and 

registration fees) are excluded from the 

total contractual amount. 

In addition to increasing the threshold 

for an exemption from $25,000 to 

$50,000 effective July 21, 2011, Section 

1100E of the Dodd-Frank Act provides 

that, beginning in 2012, the $50,000 

threshold will be further increased 

annually to reflect any increases in the 

CPI–W. Accordingly, whether the total 

contractual obligation under a consumer 

lease is sufficient to exempt that lease 

from the CLA will depend on the 

threshold amount in effect when the 

lease is consummated. For that reason, 

the Board proposed to amend 

§ 213.2(e)(1) to provide that a consumer 

lease is exempt if the total contractual 

obligation exceeds ‘‘the applicable 

threshold amount,’’ which would be 

listed in the official staff commentary. 

The Board further proposed to amend 

§ 213.2(e)(1) to provide that the 

threshold amount will be adjusted 

annually to reflect increases in the CPI– 

W (as applicable). The Board did not 

receive any comment on these revisions, 

which are adopted as proposed. 

The Board also proposed to adopt a 

new comment 2(e)–9 in order to clarify 

the method for determining the 

applicable threshold amount with 

respect to a particular lease. 

Specifically, this comment clarified that 

a consumer lease is exempt from the 

requirements of Regulation M if the total 

contractual obligation exceeds the 

threshold amount in effect at the time of 

consummation. 

Proposed comment 2(e)–9 further 

clarified that the threshold amount in 

effect during a particular period of time 

is the amount stated in the comment for 

that period. The proposed comment also 

noted that the threshold amount would 

be adjusted effective January 1 of each 

year by any annual percentage increase 

in the CPI–W that was in effect on the 

preceding June 1. Once the annual 

percentage increase in the CPI–W in 

effect on June 1 becomes available, this 

comment will be amended to provide 

the threshold amount for the upcoming 

year. The Board noted that this 

approach is consistent with that 

adopted by the Board in other 

regulations that provide for annual 

adjustments based on a consumer price 

index. See, e.g., 12 CFR 226.32(a)(1)(ii) 

and its accompanying commentary. The 

Board believes this approach will 

facilitate compliance by permitting the 

publication of an increased threshold 

amount sufficiently in advance of the 

January 1 effective date. 

In addition, proposed comment 2(e)– 

9 clarified that any increase in the 

threshold amount would be rounded to 

the nearest $100 increment. For 

example, if the annual percentage 

increase in the CPI–W would result in 

a $950 increase in the threshold 

amount, the threshold amount will be 

increased by $1,000. However, if the 

annual percentage increase in the CPI– 

W would result in a $949 increase in the 

threshold amount, the threshold amount 

will be increased by $900. This 

approach is consistent with Section 

1100E(b) of the Dodd-Frank Act, which 

provides that annual CPI–W 

adjustments should be ‘‘rounded to the 

nearest multiple of $100, or $1,000, as 

applicable.’’ The Board believes that 

Congress did not intend for an annual 

CPI–W adjustment to be rounded to the 

nearest $100 in some circumstances but 

to the nearest $1,000 in others, which 

could lead to anomalous results. 

Because $1,000 is itself a multiple of 

$100, the Board believes that this 

commentary clarifies the statutory 

language in a manner consistent with 

the intent of Section 1100E. 

Finally, the proposed comment 

clarified that, if a consumer lease is 

exempt from the requirements of 


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Federal Register / Vol. 76, No. 64 / Monday, April 4, 2011 / Rules and Regulations 18351 

Regulation M because the total 

contractual obligation exceeds the 

threshold amount in effect at the time of 

consummation, the lease remains 

exempt regardless of a subsequent 

increase in the threshold amount. Thus, 

for example, if a lease with a total 

contractual obligation of $30,000 was 

consummated in June 2011, that lease is 

exempt based on the $25,000 threshold 

in effect at that time and would remain 

exempt after July 21, 2011, 

notwithstanding the increase in the 

threshold to $50,000. Similarly, if a 

lease with a total contractual obligation 

of $55,000 is consummated in August 

2011, that lease would be exempt based 

on the $50,000 threshold in effect at that 

time and would remain exempt even if 

the threshold were subsequently 

increased to $56,000 based on an 

increase in the CPI–W. This approach is 

consistent with § 213.3(e), which 

provides that events that occur after 

consummation of a consumer lease 

generally do not require the lessor to 

provide additional Regulation M 

disclosures. See comment 3(e)–2. 

The Board received only one 

comment regarding this proposed 

guidance. A Member of Congress 

suggested that consumer leases with 

total contractual obligations above the 

applicable threshold amount at 

consummation should not be 

permanently exempt from Regulation M. 

Instead, this commenter suggested that, 

if, at any point during the term of the 

lease, the total amount of the 

consumer’s remaining obligation is less 

than the applicable threshold amount, 

the lessor should begin to comply with 

the regulation. However, the provisions 

of the CLA and Regulation M generally 

govern disclosures made at or prior to 

consummation of a lease. Thus, it does 

not appear that requiring lessors to 

comply with Regulation M after 

consummation would provide benefits 

to consumers that would outweigh the 

burden on lessors of continually 

monitoring each lease to determine 

when the remaining obligation falls 

below the applicable threshold amount. 

Accordingly, comment 2(e)–9 is adopted 

as proposed. 

Section 213.7—Advertising 

7(a) General Rule 

Section 213.7 imposes certain 

requirements on advertisements for 

consumer leases. In order to provide 

guidance regarding the interaction 

between § 213.7 and the definition of 

‘‘consumer lease’’ in § 213.2(e), the 

Board proposed to adopt a new 

comment 7(a)–3. This comment clarified 

that § 213.7 applies to advertisements 

for consumer leases, as defined in 

§ 213.2(e). As discussed above, a lease is 

exempt from the requirements of 

Regulation M (including § 213.7) if the 

total contractual obligation exceeds the 

threshold amount in effect at the time of 

consummation. Accordingly, proposed 

comment 7(a)–3 clarified that § 213.7 

does not apply to an advertisement for 

a specific consumer lease if the total 

contractual obligation for that lease 

exceeds the threshold amount in effect 

when the advertisement is made. If a 

lessor promotes multiple consumer 

leases in a single advertisement, the 

entire advertisement must comply with 

§ 213.7 unless all of the advertised 

leases are exempt under § 213.2(e). The 

comment also provided illustrative 

examples. The Board did not receive 

any comment on this guidance, which is 

adopted as proposed. 

V. Regulatory Flexibility Act Analysis 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) (RFA) requires an 

agency to perform an initial and a final 

regulatory flexibility analysis on the 

impact a rule is expected to have on 

small entities. However, under section 

605(b) of the RFA, 5 U.S.C. 605(b), the 

regulatory flexibility analysis otherwise 

required under section 604 of the RFA 

is not required if an agency certifies, 

along with a statement providing the 

factual basis for such certification, that 

the rule will not have a significant 

economic impact on a substantial 

number of small entities. Based on its 

initial and final analyses and for the 

reasons stated below, the Board believes 

that this final rule will not have a 

significant economic impact on a 

substantial number of small entities. 

1. Statement of the need for, and 

objectives of, the final rule. The final 

rule implements Section 1100E of the 

Dodd-Frank Act, which increases the 

total contractual obligation necessary to 

exempt a consumer lease from the 

Consumer Leasing Act (CLA) from more 

than $25,000 to more than $50,000, 

effective July 21, 2010. Section 1100E 

also provides that, beginning in 2012, 

this amount shall be adjusted annually 

to reflect any annual percentage 

increase in the Consumer Price Index 

for Urban Wage Earners and Clerical 

Workers (CPI–W). The supplementary 

information above describes in detail 

the reasons, objectives, and legal basis 

for the final rule. 

2. Summary of the significant issues 

raised by public comment on Board’s 

initial analysis, the Board’s assessment 

of such issues, and a statement of any 

changes made as a result of such 

comments. An industry group 

representing credit unions requested 

that, in order to reduce regulatory 

burden, the Board provide additional 

guidance regarding the types of records 

that institutions are required to retain in 

order to demonstrate compliance with 

Regulation M. Section 213.8 states that 

lessors must retain ‘‘evidence of 

compliance with the requirements 

imposed by [Regulation M], other than 

the advertising requirements under 

section 213.7, for a period of not less 

than two years after the disclosures are 

required to be made or an action is 

required to be taken.’’ Comment 8–1 

clarifies that these records may be 

retained ‘‘in paper form, on microfilm, 

microfiche, or computer, or by any other 

method designed to reproduce records 

accurately’’ and that ‘‘[t]he lessor need 

retain only enough information to 

reconstruct the required disclosures or 

other records.’’ 

Because the current regulation and 

commentary provide lessors with 

considerable flexibility regarding the 

retention of records, the Board is 

concerned that adopting a more specific 

set of requirements (such as a list of 

documents that lessors must retain) 

could increase regulatory burden, rather 

than reducing it. Furthermore, because 

the Board did not propose any 

amendments to the record retention 

requirements in § 213.8, any revisions to 

those requirements would not have the 

benefit of input from the public, 

including small institutions. Although 

the commenter suggested that the Board 

work with a focus group of institutions 

to revise the record retention 

requirements, it would not be possible 

for the Board to do so and still issue a 

final rule sufficiently in advance of the 

July 21, 2010 statutory effective date. 

Accordingly, the final rule does not alter 

the requirements of § 213.8. 

3. Small entities affected by the final 

rule. Currently, Regulation M applies to 

any person who regularly leases, offers 

to lease, or arranges for the lease of 

personal property primarily for 

personal, family, or household 

purposes, for a period exceeding four 

months, and for a total contractual 

obligation of $25,000 or less. 12 CFR 

213.2(e) and (h). Consistent with 

Section 1100E of the Dodd-Frank Act, 

the final rule applies Regulation M, 

beginning on July 21, 2011, to any 

person who provides consumer leases 

for a total contractual obligation of 

$50,000 or less, adjusted annually to 

reflect increases in the CPI–W. 

Based on 2010 call report data, there 

are no banks with assets of $175 million 

or less that engage in consumer leasing. 

There are, however, 306 thrifts and 92 

credit unions with assets of $175 

million or less that engage in consumer 


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2Federal Financial Institutions Examination 

Council Consolidated Reports of Condition and 

Income (Call Reports) (FFIEC 031 & 041; OMB No. 

7100–0036), Schedule RC–C, data item 10.a—Leases 

to individuals for household, family, and other 

personal expenditures. 

leasing. In addition, the Board’s 2005 

Finance Company Survey indicates that 

fewer than ten small finance companies 

engage in consumer leasing. 

Commenters did not provide any 

information on the number of small 

entities affected by the proposed rule. 

Nevertheless, the Board acknowledges 

that the total number of small entities 

likely to be affected by the final rule is 

unknown, in part because it is unclear 

how many of the small entities currently 

engaged in consumer leasing offer leases 

with total contractual obligations of 

more than $25,000 but not more than 

$50,000. 

4. Recordkeeping, reporting, and 

compliance requirements. The final rule 

does not impose any new reporting 

requirements. However, the final rule 

does impose new recordkeeping 

requirements for small entities that offer 

consumer leases with total contractual 

obligations of more than $25,000 but not 

more than $50,000. As noted above, 

§ 213.8 requires lessors to retain 

evidence of compliance with its 

provisions (except the advertising 

requirements in § 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. Thus, 

beginning on July 21, 2011, the final 

rule requires lessors to retain records for 

new consumer leases with total 

contractual obligations not exceeding 

$50,000, adjusted annually to reflect 

increases in the CPI–W. 

The final rule also imposes new 

compliance requirements for consumer 

leases with total contractual obligations 

of more than $25,000 but not more than 

$50,000. Specifically, for consumer 

leases subject to Regulation M, the 

lessor must provide certain disclosures 

regarding payments, liability, and other 

terms of the lease prior to 

consummation (§§ 213.3 and 213.4) and 

when the availability of consumer leases 

on particular terms is advertised 

(§ 213.7). 

The Board understands that small 

entities that offer consumer leases 

generally have systems in place to 

provide the disclosures required by 

Regulation M and retain records of those 

disclosures, even if some of their leases 

are currently exempt. Thus, while the 

precise costs to small entities to provide 

disclosures and retain records for a 

larger population of leases are difficult 

to predict, the Board does not believe 

that the final rule would have a 

significant economic impact on a 

substantial number of small entities. 

Except as already discussed above, the 

Board did not receive any comments to 

the contrary. 

5. Significant alternatives to the final 

rule. The final rule implements Section 

1100E of the Dodd-Frank Act, which 

goes into effect on July 21, 2011. As 

discussed in the supplementary 

information, the final rule clarifies that, 

if a consumer lease with a total 

contractual obligation exceeding 

$25,000 is consummated prior to July 

21, 2011, that lease remains exempt, 

notwithstanding subsequent increases 

in the threshold amount. Except as 

already discussed above, the Board did 

not receive any comments suggesting 

alternatives that would minimize the 

impact of the rule on small entities and 

would be consistent with Section 1100E 

of the Dodd-Frank Act. 

VI. Paperwork Reduction Act Analysis 

In accordance with the Paperwork 

Reduction Act (PRA) of 1995 (44 U.S.C. 

3506; 5 CFR part 1320 Appendix A.1), 

the Board reviewed the final rule under 

the authority delegated to the Board by 

the Office of Management and Budget 

(OMB). In addition, as permitted by the 

PRA, the Board is extending for three 

years the current recordkeeping and 

disclosure requirements in connection 

with Regulation M. The collection of 

information that is required by this rule 

is found in 12 CFR Part 213. The Board 

may not conduct or sponsor, and an 

organization is not required to respond 

to, this information collection unless it 

displays a currently valid OMB control 

number. The OMB control number is 

7100–0202. 

This information collection is 

required to provide benefits for 

consumers and is mandatory (15 U.S.C. 

1601 et seq.). The respondents/ 

recordkeepers are lessors subject to 

Regulation M, including for-profit 

financial institutions and small 

businesses. Sections 105(a) and 187 of 

TILA (15 U.S.C. 1604(a) and 1667f) 

authorize the Board to issue regulations 

to carry out the provisions of the CLA. 

The CLA and Regulation M are intended 

to provide consumers with meaningful 

disclosures about the costs and terms of 

leases for personal property. The 

disclosures enable consumers to 

compare the terms for a particular lease 

with those for other leases and, when 

appropriate, to compare lease terms 

with those for credit transactions. The 

act and regulation also contain rules 

about advertising consumer leases. The 

information collection pursuant to 

Regulation M is triggered by specific 

events. All disclosures must be 

provided to the lessee prior to the 

consummation of the lease and when 

the availability of consumer leases on 

particular terms is advertised. This 

information collection is mandatory. 

Since the Board does not collect any 

information, no issue of confidentiality 

normally arises. However, in the event 

the Board were to retain records during 

the course of an examination, the 

information may be kept confidential 

pursuant to section (b)(8) of the 

Freedom of Information Act (5 U.S.C. 

522(b)(8)). 

Regulation M applies to all types of 

lessors of personal property. The Board 

accounts for the paperwork burden 

associated with the regulation only for 

Board-supervised institutions. 

Appendix B of Regulation M defines the 

Board-supervised institutions as: 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 Reserve Act. 

Other federal agencies account for the 

paperwork burden on other lessors for 

which they have administrative 

enforcement authority. 

To ease the compliance cost 

(particularly for small entities) model 

forms are appended to the regulation. 

Lessors are required to retain evidence 

of compliance for 24 months, but the 

regulation does not specify types of 

records that must be retained. 

The current annual burden to comply 

with the provisions of Regulation M is 

estimated to be 2 hours for each of the 

4 State member banks 2 that engage in 

consumer leasing. Thus, the current 

total annual burden for all respondents 

is 8 hours. 

The Board estimates that the final rule 

will impose a one-time increase in the 

total annual burden under Regulation 

M. The 4 respondents will take, on 

average, 40 hours (one business week) to 

update their systems to comply with the 

requirements of the final rule. This onetime revision will increase the total 

burden for all 4 respondents by 160 

hours. On a continuing basis, the Board 

estimates that the 4 respondents will 

each take, on average, an additional 8 

hours (one business day) annually to 

comply with the requirements, which 

will increase the ongoing total annual 

burden for all 4 respondents by 32 

hours. Therefore, the total annual 

burden for all respondents is estimated 

to increase by 192 hours (from 8 to 200 

hours) during the first year after this 

rule takes effect. Thereafter, the 


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3Appendix B—Federal Enforcement Agencies— 

of Regulation M lists those federal agencies that 

enforce the regulation for particular classes of 

business. The Federal financial agencies other than 

the Federal Reserve include: The Office of the 

Comptroller of the Currency (OCC), the Federal 

Deposit Insurance Corporation (FDIC), the Office of 

Thrift Supervision (OTS), and the National Credit 

Union Administration (NCUA). The Federal nonfinancial agencies include: The Department of 

Transportation, the Grain Inspection, Packers, and 

Stockyards Administration (Department of 

Agriculture), the Farm Credit Administration, and 

the Federal Trade Commission. 

4Estimate is based on September 30, 2010, 

consumer lease data filed by depository institutions 

in their reports of condition and income: The 

commercial bank Call Report; (FFIEC 031 & 041) 

(Federal Reserve OMB No. 7100–0036), (OCC OMB 

No. 1557–0081), and (FDIC OMB No. 3064–0052); 

the thrift institution Thrift Financial Report (TFR; 

form 1313) (OTS OMB No. 1500–0023); and the 

credit union NCUA Call Reports (form 5300) 

(NCUA OMB No. 3133–0004). 

estimated ongoing total annual burden 

will be 40 hours. 

The total burden increase represents 

averages for all respondents regulated 

by the Board. The Board expects that the 

amount of time required to implement 

each of the changes for a given financial 

institution or entity may vary based on 

the size and complexity of the 

respondent. Furthermore, the Board 

understands that many lessors 

voluntarily comply with Regulation M 

for leases that are currently exempt. 

Thus, the estimated burden increase 

likely overstates the actual increase in 

burden for those lessors. 

The other Federal financial agencies 

are responsible for estimating and 

reporting to OMB the total paperwork 

burden for the institutions for which 

they have administrative enforcement 

authority.3 They may, but are not 

required to, use the Board’s burden 

estimates. There are approximately 

16,200 depository institutions of which 

the Board estimates that 58 depository 

institutions 4 will be affected by this 

collection of information and 

considered respondents for purposes of 

the PRA. Using the Board’s method, the 

total estimated annual burden for all 

financial institutions subject to 

Regulation M is currently approximately 

116 hours. The final rule will impose a 

one-time increase in the estimated 

annual burden for the estimated 58 

institutions thought to engage in 

consumer leasing by a total of 2,320 

hours. On a continuing basis, the final 

rule will impose an increase in the 

estimated annual burden by a total of 

464 hours. Thus, the total annual 

burden for the 58 institutions is 

estimated to increase by 2,784 hours 

(from 116 to 2,900 hours) during the 

first year after this rule takes effect. 

Thereafter, the estimated ongoing total 

annual burden will be 580 hours. The 

above estimates represent an average 

across all respondents and reflect 

variations between institutions based on 

their size, complexity, and practices. In 

addition, other institutions covered by 

Regulation M, such as retailers and 

finance companies potentially are 

affected by this collection of 

information, and thus are also 

respondents for purposes of the PRA. As 

noted above, the estimated burden 

increase likely overstates the actual 

increase in burden because many lessors 

voluntarily comply with Regulation M 

for exempt leases. 

The Board did not receive any 

comments specifically addressing the 

foregoing estimates, which were 

provided in the December 2010 

Regulation M Proposed Rule. The Board 

did receive one comment generally 

addressing the burdens associated with 

retaining records pursuant to § 213.8, 

which is discussed above in the Board’s 

final RFA analysis. 

The Board has a continuing interest in 

the public’s opinion on the collection of 

information. Comments on the 

collection of information should be sent 

to Cynthia Ayouch, Acting Federal 

Reserve Clearance Officer, Division of 

Research and Statistics, Mail Stop 95–A, 

Board of Governors of the Federal 

Reserve System, Washington, DC 20551, 

with copies of such comments sent to 

the Office of Management and Budget, 

Paperwork Reduction Project (7100– 

0202), Washington, DC 20503. 

List of Subjects in 12 CFR Part 213 

Advertising, Federal Reserve System, 

Reporting and recordkeeping 

requirements, Truth in lending. 

Text of Final Revisions 

For the reasons set forth in the 

preamble, the Board amends Regulation 

M, 12 CFR part 213, as set forth below: 

PART 213—CONSUMER LEASING 

(REGULATION M) 

■ 1. The authority citation for part 213 

is amended to read as follows: 

Authority: 15 U.S.C. 1604 and 1667f; Pub. 

L. 111–203 § 1100E, 124 Stat. 1376. 

■ 2. Section 213.2(e)(1) is revised to 

read as follows: 

§ 213.2 Definitions. 

* * * * * 

(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 the applicable threshold 

amount, whether or not the lessee has 

the option to purchase or otherwise 

become the owner of the property at the 

expiration of the lease. The threshold 

amount is adjusted annually to reflect 

increases in the Consumer Price Index 

for Urban Wage Earners and Clerical 

Workers, as applicable. See the official 

staff commentary to this paragraph (e) 

for the threshold amount applicable to 

a specific consumer lease. Unless the 

context indicates otherwise, in this part 

‘‘lease’’ means ‘‘consumer lease.’’ 

* * * * * 

■ 3. In Supplement I to Part 213: 

■ A. Under Section 213.2—Definitions, 

under 2(e) Consumer Lease, paragraph 

9. is added; and 

■ B. Under Section 213.7—Advertising, 

under 7(a) General Rule, paragraph 3. is 

added to read as follows: 

Supplement I to Part 213—Official Staff 

Commentary to Regulation M 

* * * * * 

Section 213.2—Definitions 

* * * * * 

2(e) Consumer Lease. 

* * * * * 

9. Threshold amount. A consumer lease is 

exempt from the requirements of this Part if 

the total contractual obligation exceeds the 

threshold amount in effect at the time of 

consummation. The threshold amount in 

effect during a particular time period is the 

amount stated below for that period. The 

threshold amount is adjusted effective 

January 1 of each year by any annual 

percentage increase in the Consumer Price 

Index for Urban Wage Earners and Clerical 

Workers (CPI–W) that was in effect on the 

preceding June 1. This comment will be 

amended to provide the threshold amount for 

the upcoming year after the annual 

percentage change in the CPI–W that was in 

effect on June 1 becomes available. Any 

increase in the threshold amount will be 

rounded to the nearest $100 increment. For 

example, if the annual percentage increase in 

the CPI–W would result in a $950 increase 

in the threshold amount, the threshold 

amount will be increased by $1,000. 

However, if the annual percentage increase in 

the CPI–W would result in a $949 increase 

in the threshold amount, the threshold 

amount will be increased by $900. If a 

consumer lease is exempt from the 

requirements of this Part because the total 

contractual obligation exceeds the threshold 

amount in effect at the time of 

consummation, the lease remains exempt 

regardless of a subsequent increase in the 

threshold amount. 

i. Prior to July 21, 2011, the threshold 

amount is $25,000. 

ii. From July 21, 2011 through December 

31, 2011, the threshold amount is $50,000. 

* * * * * 

Section 213.7—Advertising 

7(a) General Rule. 

* * * * * 


sroberts on DSK69SOYB1PROD with RULES
18354 Federal Register / Vol. 76, No. 64 / Monday, April 4, 2011 / Rules and Regulations 

3. Total contractual obligation of 

advertised lease. Section 213.7 applies to 

advertisements for consumer leases, as 

defined in § 213.2(e). Under § 213.2(e), a 

consumer lease is exempt from the 

requirements of this Part if the total 

contractual obligation exceeds the threshold 

amount in effect at the time of 

consummation. See comment 2(e)–9. 

Accordingly, § 213.7 does not apply to an 

advertisement for a specific consumer lease 

if the total contractual obligation for that 

lease exceeds the threshold amount in effect 

when the advertisement is made. If a lessor 

promotes multiple consumer leases in a 

single advertisement, the entire 

advertisement must comply with § 213.7 

unless all of the advertised leases are exempt 

under § 213.2(e). For example: 

A. Assume that, in an advertisement, a 

lessor states that certain terms apply to a 

consumer lease for a specific automobile. The 

total contractual obligation of the advertised 

lease exceeds the threshold amount in effect 

when the advertisement is made. Although 

the advertisement does not refer to any other 

lease, some or all of the advertised terms for 

the exempt lease also apply to other leases 

offered by the lessor with total contractual 

obligations that do not exceed the applicable 

threshold amount. The advertisement is not 

required to comply with § 213.7 because it 

refers only to an exempt lease. 

B. Assume that, in an advertisement, a 

lessor states certain terms (such as the 

amount due at lease signing) that will apply 

to consumer leases for automobiles of a 

particular brand. However, the advertisement 

does not refer to a specific lease. The total 

contractual obligations of the leases for some 

of the automobiles will exceed the threshold 

amount in effect when the advertisement is 

made, but the total contractual obligations of 

the leases for other automobiles will not 

exceed the threshold. The entire 

advertisement must comply with § 213.7 

because it refers to terms for consumer leases 

that are not exempt. 

C. Assume that, in a single advertisement, 

a lessor states that certain terms apply to 

consumer leases for two different 

automobiles. The total contractual obligation 

of the lease for the first automobile exceeds 

the threshold amount in effect when the 

advertisement is made, but the total 

contractual obligation of the lease for the 

second automobile does not exceed the 

threshold. The entire advertisement must 

comply with § 213.7 because it refers to a 

consumer lease that is not exempt. 

* * * * * 

By order of the Board of Governors of the 

Federal Reserve System, March 24, 2011. 

Jennifer J. Johnson, 

Secretary of the Board. 

[FR Doc. 2011–7377 Filed 4–1–11; 8:45 am] 

BILLING CODE 6210–01–P 

FEDERAL RESERVE SYSTEM 

12 CFR Part 226 

[Regulation Z; Docket No. R–1399] 

RIN No. 7100–AD59 

Truth in Lending 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Final rule. 

SUMMARY: Effective July 21, 2011, the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank 

Act) amends the Truth in Lending Act 

(TILA) by increasing the threshold for 

exempt consumer credit transactions 

from $25,000 to $50,000. In addition, 

the Dodd-Frank Act provides that, on or 

after December 31, 2011, this threshold 

must be adjusted annually by any 

annual percentage increase in the 

Consumer Price Index for Urban Wage 

Earners and Clerical Workers. 

Accordingly, the Board is making 

corresponding amendments to 

Regulation Z, which implements TILA, 

and to the accompanying staff 

commentary. Because the Dodd-Frank 

Act also increases the Consumer Leasing 

Act’s threshold for exempt consumer 

leases from $25,000 to $50,000, the 

Board is making similar amendments to 

Regulation M elsewhere in today’s 

Federal Register. 

DATES: Consistent with Sections 1062 

and 1100H of the Dodd-Frank Act, this 

final rule is effective on the transfer date 

designated by the Secretary of the 

Treasury, which is July 21, 2011. 

FOR FURTHER INFORMATION CONTACT: 

Stephen Shin, Attorney, or Benjamin K. 

Olson, Counsel, Division of Consumer 

and Community Affairs, Board of 

Governors of the Federal Reserve 

System, at (202) 452–3667 or 452–2412; 

for users of Telecommunications Device 

for the Deaf (TDD) only, contact (202) 

263–4869. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Dodd-Frank Wall Street Reform and 

Consumer Protection Act 

This final rule implements Section 

1100E of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act of 

2010 (Dodd-Frank Act), which was 

signed into law on July 21, 2010. Public 

Law 111–203 § 1100E, 124 Stat. 1376 

(2010). Section 1100E amends Section 

104(3) of the Truth in Lending Act 

(TILA) by establishing a new threshold 

for exempt consumer credit 

transactions. Currently, TILA Section 

104(3) exempts ‘‘[c]redit transactions, 

other than those in which a security 

interest is or will be acquired in real 

property, or in personal property used 

or expected to be used as the principal 

dwelling of the consumer, and other 

than private education loans (as that 

term is defined in section 140(a)), in 

which the total amount financed 

exceeds $25,000.’’ 15 U.S.C. 1603(3). 

Regulation Z implements this 

exemption in § 226.3(b). 

Effective July 21, 2011, the DoddFrank Act raises TILA’s $25,000 

exemption threshold to $50,000. In 

addition, the Dodd-Frank Act provides 

that, on or after December 31, 2011, this 

threshold shall be adjusted annually for 

inflation by the annual percentage 

increase in the Consumer Price Index 

for Urban Wage Earners and Clerical 

Workers (CPI–W), as published by the 

Bureau of Labor Statistics. Therefore, 

from July 21, 2011 to December 31, 

2011, the threshold dollar amount will 

be $50,000. Effective January 1, 2012, 

the $50,000 threshold will be adjusted 

annually based on any annual 

percentage increase in the CPI–W. 

In December 2010, the Board 

proposed to amend § 226.3(b) and the 

accompanying commentary for 

consistency with the amendments made 

by the Dodd-Frank Act. See 75 FR 78636 

(Dec. 16, 2010) (December 2010 

Proposed Regulation Z Rule). In 

addition, because the Dodd-Frank Act 

makes similar amendments to the 

exemption threshold in the Consumer 

Leasing Act (which is part of TILA), the 

Board simultaneously proposed to 

amend Regulation M, which 

implements the Consumer Leasing Act 

(CLA). See 75 FR 78632 (Dec. 16, 2010) 

(December 2010 Proposed Regulation M 

Rule). 

The Board received 10 comments on 

the December 2010 Regulation Z 

Proposed Rule. As discussed below, the 

Board is adopting the rule largely as 

proposed with some modifications to 

facilitate compliance. Elsewhere in 

today’s Federal Register, the Board is 

also adopting a final rule amending 

Regulation M in order to implement the 

amendments to CLA’s exemption 

threshold for consumer leases. 

II. Summary of Final Rule 

Revisions to § 226.3(b) 

Consistent with the Dodd-Frank Act, 

the Board’s final rule revises § 226.3(b) 

and the accompanying staff commentary 

to provide that, effective July 21, 2011, 

a consumer credit account is exempt 

from the requirements of Regulation Z 

if: (1) The initial extension of credit on 

the account exceeds $50,000; or (2) the 

creditor makes a firm commitment at 


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