BUREAU O F CONSUMER FINANCIAL PROTECTION

PAPERWORK REDUCTION ACT SUBMISSION

I NFORMATION COLLECTION REQUEST

SUPPORTING STATEMENT PART A

INTERSTATE LAND SALES FULL DISCLOSURE ACT (REGULATIONS J, K & L) 12 CFR 1010, 1011, 1012 (OMB CONTROL NUMBER: 3170

- 0012 )

OMB TERMS OF CLEARANCE:

Not applicable. The Office of Management and Budget (OMB) provided no Terms of Clearance when they approved this information collection on June 10, 2012.

ABSTRACT:

The Interstate Land Sales Full Disclosure Act (ILSA) requires land developers to register non

- exempt subdivisions with the CFPB before selling any lots, and to provide

each lot purchaser with a disclosure document designated as a property report, 15 U.S.C.

1703

- 1704. ILSA was enacted in response to a nation

- wide proliferation of developers of unimproved subdivisions who made elaborate

, and often fraudulent, claims about their land to unsuspecting lot purchasers. Information is submitted to the Bureau of C onsumer Financial Protection (CFPB) to assure compliance with ILSA and the implementing regulations. The CFPB also investigates developers who are not in compliance with the regulations.

A. JUSTIFICATION

1. Circumstances Necessitating the Data Collect ion

The Interstate Land Sales Full Disclosure Act (ILSA) requires land developers to register subdivisions of 100 or more non

- exempt lots or units and to provide each purchaser with a disclosure document designated as a property report, 15 U.S.C. 1703

- 170 4. ILSA was enacted in response to a nation

- wide proliferation of developers of unimproved subdivisions who made elaborate and often fraudulent, claims about their land to unsuspecting lot purchasers. Information is submitted to the Bureau of Consumer

Fi nancial Protection (CFPB) to assure compliance with ILSA and the implementing regulations. The CFPB also investigates developers who are not in compliance with the regulations.

The following list provides the relevant section of each statute and regulati on requiring a collection of information:

• Registration of Projects

– 12 CFR 1010.100

- 1010.219 and 15 U.S.C. 1701• MSA Exemption Certificate/Affirmation

- 12 CFR 1010.13(a)(9) and 15 U.S.C.

1702

• Option to Cancel Notification

- 12 CFR 1010.15(b)(5)(i) an d 15 U.S.C. 1703

• Sample Registration Format/ Lot Information and Sample Receipt

- 12 CFR 1010.15(b)(11) and 15 U.S.C. 1705

• Advisory Opinion Affirmation

- 12 CFR 1010.17(b)(3) and 15 U.S.C. 1702

• Initial and Consolidated Fee Schedule

- 12 CFR 1010.35(b) and 15 U.S.C. 1704

• Property Reports Receipts for Lots Sold in Registered Projects

– 12 CFR 1010.118 and 15 U.S.C. 1707(a)

• Financial Statements (FS)

– 12 CFR 1010.212(d) & 12 CFR 1010.112 and 15

U.S.C. 1705

• Unconditional Guarantee

– 12 CFR 1010.212(g) and 15 U. S.C. 1705

• Annual Reports for Registered Projects (AR)

– 12 CFR 1010.310 and 15 U.S.C

1705

• Exemption Filing (including Multiple Site Exemption Projects)

– 12 CFR 1010.15 & 1010.16 and 15 U.S.C. 1702(c)

• Lot Information Statement and Property Report Receipts for Multiple Site Exemption Projects

– 12 CFR 1010.15 and 15 U.S.C. 1702(c)

• Annual Report for Exempted Projects

– 12 CFR 1010.15(d) and 15 U.S.C. 1701

• Advertising Disclaimers (AD)

– 12 CFR 1011.50(a) and 15 U.S.C. 1703, 1705

• Restrictive Covenants

– 12 CFR 1010.109(f)(1)(iii) and 15 U.S.C. 1705

• Voluntary Suspension Form

– 12 CFR 1010.22 and 15 U.S.C. 1702

• Disclosure Document Certification

- 12 CFR 1010.504(a)(2) and 15 U.S.C. 1708

• Property Report Cover Page Language

- 12 CFR 1010.558(a)(1) and 15 U.S.C.

170 3

• Revocation Rights Notification

- 12 CFR 1010.559(a)(1) and 15 U.S.C. 1703

In September 2014, President Obama signed into law H.R. 2600, which partially exempts sales and leases of condominium units from ILSA. The act will be effective six

months after being signed into law (March 2015). 1 Therefore, we restrict our burden estimates to collections related to land sales only.

2. Use of the Information

R espondents are developers (or attorneys or others who work for them). As respondents, developers must provide information to two parties: government (CFPB) and prospective lot purchasers.

1 This exemption for condominium units, along with other exempt ion s, is listed in the statute at 15 U.S.C. 1702.The developer must register a subdivision with CFPB and receive an effective date before any lots from that subdivision can be offered for sale or lease. The registration documents, also

called I nitial Statement of Record

, include the proposed property report and additional information and documents that support the developer's disclosures in the property report. The initial registration also includes a copy of financial statements and a receipt of paid registration fees. If after the initial registration there are any material changes, d evelopers must submit amendments to their registrations. In addition, if other lots are added to the ex isting sub

- division, a developer must submit a consolidated filing. The developer must also submit an annual financial statement and an annual report for subdivisions that sold at least 100 lots in the past

year, prepared in the format required by Section 1010.310 of the regulations.

De velopers must give purchasers a copy of an up to date property report before the purchaser signs the sales contract. The developer is responsible for ensuring that the registration

is accurate and does not omit information needed for a purchase r to make an informed decision. Developers are also required to make copies of financial statements readily available.

The CFPB conducts a facial review of the submissions. The developer may request an Advisory Opinion if a developer has questions about the applicability of one of the exemptions from registration. A CFPB determination is required only if a developer claims an exemption from registration under the multiple site or substantial compliance exemption. Other exemptions

are self

- determining. The CFPB may require additional information from developers in response to investigations of complaints. For the purposes of communication with developers, contact

information is collected.

3. Use of Information Technology

Today, the e lectronic method of submission is an accepted method, both by CFPB and by general public. However, the adoption of electronic form has been low. Only 10% of information collections submitted to CFPB take electronic form. Insufficient adoption of electronic form leads to substantial waste of paper: by our estimates, over 15,000 pages of paper are submitted to CFPB yearly. Assuming the same rate of technology adoption at the point of sale, we estimate that over 100,000 pages of paper are given out to lot purc hasers mostly as printouts of Property Report, if developers are fully complying with the requirement.

In the next year or two, CFPB is planning to launch an online document submission portal that is meant to eliminate the waste of paper and other ineffic iencies involved in the current process.

4. Efforts to Identify Duplication

The State Certification Program is an effort to eliminate duplication. Developers in States that have an equivalent and certified land sales program may file a certified copy o f the State filing to meet Federal requirements. In addition, 22 States accept a Federal registration as meeting State disclosure and consumer protection requirements.

5. Efforts to Minimize Burdens on Small EntitiesDevelopers who have subdivisions of fewer than 100 lots are exempt from registration.

6. Consequences of Less Frequent Collection and Obstacles to Burden Reduction

T he frequency of the information collection is determined by s tatute and/or regulation.

Less frequent collection of the information would result in a property report not having the current information and purchasers not having proper information on which to base their purchases.

7. Circumstances Requiring Special Information Collection

The collections of information in t hese interim final rules are consistent with the applicable guidelines contained in 5 CFR 1320.5(d)(2).

8. Consultation Outside the Agency

In accordance with 5 CFR §1320.8(d)(1), the Bureau has published a notice Federal Register allowing the public 6 0 days to comment on this proposed the extension (renewal) of this currently approved collection of information. Further and in accordance with 5 CFR §1320.5(a)(1)(iv), the Bureau will also publish a notice in the Federal Register allowing the public 30 da ys to comment on the submission of this information collection request to the Office of Management and Budget.

9. Payments or Gifts to Respondents

Not applicable.

10. Assurances of C onfidentiality

Whenever CFPB receives information obtained in association with ILSA, CFPB shall treat the information in accordance with applicable federal law, including but not limited to the Bureau’s confidentiality rules, 12 C.F.R. Part 1070, and the federal laws and regulations that apply to federal agencies for the protection of privacy, confidentiality, security and integrity.

In general, the information collected under this regulation is meant to be available to the public, and as such there are no assurances of confidentiality. To the extent that any potentially sensitive information is collected by the CFPB, such as the names, addresses, and financial statements of developers, this information is being used to help avoid fraud on the part of sales

and as such n ecessary for this charge.

The Bureau also evaluates the potential privacy risk and harm to individuals relative to the authorized purpose, and vets any research proposals on the data to ensure that they serve an authorized purpose. Disclosure conducted un der any studies using these data will be consistent with the Privacy Act and the E

- Government Act.11. Justification for Sensitive Questions

Developer financial statements are generally considered sensitive, especially for non

public companies. Howeve r, this information allows consumers transparency into developers’ financial history so they will be able to ascertain the financial condition of the company they are transacting with.

12. Estimated Burden of Information Collection

Information collectio n requirement No. of Respondent

s Frequenc

y Annual Response

s Average Respons

e Time Annua

l

Burde

n Hours Hourl y Rate Hourly

Costs

(Panel A) For land subdivisions in non

- certified states Initial Registration

Cover letter 6 1.0 6 0.25 1.5 $300 $450

Receipt of paid fees 6 1.0 6 0.5 3 $80 $240

Supplemental Material 6 1.8 11 20.0 220 $80 $17,600

§§1010.208 through 1010.219 6 1.0 6 160 960 $148 $141,78

5

Property Report 6 1.0 6 130 780 $148 $115,20

0

Consolidated Statement of Record

Consolidation 27 1.2 32 33 1067 $300 $320,00

0

Receipt of paid fees 27 1.2 32 0.5 16 $80 $1,280

Property Report 27 1.2 32 5.0 160 $148 $23,680

§§1010.208 through 1010.219 27 1.2 32 5.0 160 $148 $23,680

Amendment 27 3.0 80 10.0 800 $300 $240,00

0

Final Version of Property Report 82 1.3 107 5.0 535 $148 $79,180

Annual Submissions

Annual Report 134 1.0 134 1.5 201 $100 $20,100

Receipt of paid fees 53 1.0 53 0.5 27 $80 $2,120

Audited financial statements 64 1.0 64 1.0 64 $80 $5,120

Unaudited financial statements 83 1.0 83 1.0 83 $80 $6,640

Collections given to lot purchasers

Property Report 77 30.7 2,365 0.3 591 $30 $17,738

Lot Information Statement 8 36.6 293 0.3 73 $30 $2,198 Deficiency Response Amendatory

Material 1 1 1 1.0 1 $300 $300

Effective Date Suspension Request 3 1 3 1.0 3 $300 $900

(Panel B) For land subdivisions in certified states (California, Arizona, Minnesota)

Fact Sheet prepared for...

Initial Registration 2 1 2 1 2 $100 $200

Consolidation 4 1 4 1 4 $100 $400

Amendment 1 1 1 1 1 $100 $100

For all land subdivisions

Time to burn a CD 56 1.95 109 0.25 27.25 $80 $2,180

Time to print out documents 53 10.08 534 1 534 $80 $42,720

Time to assemble and mail the package 197 2.09 411 1 411 $80 $32,880Total hours: 6,724

Total labor cost: $1,096,690

In 2014, there were 197 land subdivisions that are potentially subject to ILSA information collection requirements. These 197 land subdivisions were maintained by 180 developers. Because the information collection requirements are specified per subdivision, not per developer, for the purposes of burden calculations, we use subdivision as a unit of analysis. As a result, the overall number of potential respondents f or 2014 is estimated to be 197.

The number of respondents varies by collection, because some collections must be submitted only under specified circumstances. For instance, only a subdivision that sold more than 100 lots in a given year is obliged to subm it the Annual Report (and we find that 134 out of the potential 197 did so in 2014).

The primary method of calculating the counts of collections

– with an exception of collections given out to lot purchasers

– is by utilizing the database of submissions maintained by CFPB. The advantages of this method are accuracy and consistency across periods of renewal. The average response times and appropriate hourly rates are obtained through interviews with industry experts.

In calculating burden hours, we make a distinction between subdivisions registered in states that participate in the state certification program

– California and Arizona, Panel B,

-- and subdivisions in other states (Panel A). Developers that sell lots in California and Arizona are already s ubject to state filing requirements that are substantially similar to those required by ILSA. The marginal burden of ILSA for such developers consists of fact sheets that they must file along with Initial Registration, Consolidation or Amendment. The costs associated with fact sheets are presented on Panel B.

On Panel A, we present costs associated with information collections by developers in other states. The major component of the cost is the Property Report. We distinguish between the cost of creating the first copy of the Property Report, which is substantial, and the cost of later submissions, which is smaller. The first copy of the Property Report is submitted together with other documents required by the Initial Registration. The subsequent copies of the Property Report received by CFPB are either exact copies of the initial Property Report, or its modifications (such as required by Consolidation or Amendment).

A special mention must be made regarding Financial Statements. ILSA requires audited

Fi nancial Statements, which are expensive as they require a Certified Public Accountant to produce them. However, we believe that in most cases developers have to produce them in the normal course of business: it is a typical requirement by a bank that exten ded credit to a developer. Therefore, we assume that the marginal burden of ILSA in this respect is zero. In lieu of audited Financial Statements, developers often submit unaudited ones. We believe that the production of unaudited Financial Statements is m ostly triggered by CFPB requirements, and therefore we attribute the cost of their production to ILSA.Information collections that are present in the statute but recorded zero instances during the period of study are not shown in the table.

13. Estima ted Total Annual Cost Burden to Respondents or Recordkeepers

Non

- labor costs related to information collections under ILSA have two components: registration fees and costs associated with submission of documents. The table provides detail on both compon ents. Consistent with our approach we count costs only associated with land

subdivisions.

Description of costs Unit Cost Units Total Cost

Mailing $30 411 $12,330

Printing, pages $.10 112,608 $11,261

Producing CD's $.50 109 $55

Fees paid for Initial Registration $800 6 $4800

Fees paid for Consolidation $800 32 $25600

Fees paid for Annual Report filing $800 53 $42400

Total cost burden $96,445

14. Estimated Cost to the Federal Government

There are two components of the ILSA cost for the CFPB. The first component is the service by a third party provider, which is to scan information collections and enter them into a database. The cost of this service is $600,000 per year. The second

compone nt is the cost of time of four full time CFPB employees, totaling $800,000 per year. Therefore, the estimated total annual cost to the Federal Government is $ 1,400,000

in 2014.

Annual cost, however, i s partially offset by registration fees. These fees totaled $ 149,600 in FY2014 (paid by both land and condos developers). Registration fee income should continue to trend lower over the next two years as a result of the H.R. 2600, eventually stabilizing at approximately $100,000 per year in FY2016.

15. Program Changes or Adjustments

Summary of Burden Changes:

Total Respondents Annual Responses Burden

Hours Cost Burden (O & M)

Total Annual Burden Requested 197 6,772 6,724 $ 96,445

Current OMB Inventory 985 88,874 17,329 $0
Difference (+/

- )

- 10,605 $96,445 Program Change 0 $0 Discretionary 0 $0

New Statute

- 788

- 82,102

- 10,605 $0

Violation 0 $0 Adjustment 0 $ 96,445The changes in the number of respondents and the number of annual responses are primarily a result of a new legislation partially exempting condominiums from ILSA. The changes in burden hours and cost burden are a result of an improved methodology of calculating costs, and therefore the new requests should be seen as a more accurate representation of the true

costs of this regulation going forward.

As discussed before in a non

- substantive change to the PRA documents, a new online document submission portal is likely to be available in the next year or two but is not yet active.

If a nd when it should go online, we will revise burden estimates at that time.

In addition, we have removed all additional supporting documents concerning standard forms, as none are currently used in the registration and reporting process. While certain sp ecific information is required, none of this fits on a standard form that is filled in at the time of submission, and therefore none is included with our supporting statement.

16. Plans for Tabulation, Statistical Analysis, and Publication

Not applicable.

17. Display of Expiration Date

The OMB control number and expiration date associated with this PRA submission will be displayed on the Federal government’s electronic PRA docket at www.reginfo.gov, as well as in the Federal Reg ister Not ice of the submission.

18. Exceptions to the Certification Requirement

The Bureau certifies that this collection of information is cons istent with the requirements

of 5 CFR 1320.9, and the related provisions of 5 CFR 1320.8(b)(3) and is not seeking an

e xemption to these certification requirements.

Note: The following paragraph applies to all of the collections of information in this submission:

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of

information unless the collection of information displays a valid OMB control number.