Federal Register / Vol. 72, No. 82 / Monday, April 30, 2007 / Proposed Rules 21135 

The EFTA and Regulation E are 

designed to ensure adequate disclosure 

of basic terms, costs, and rights relating 

to electronic fund transfer (EFT) 

services provided to consumers. 

Institutions offering EFT services must 

disclose to consumers certain 

information, including: initial and 

updated EFT terms, transaction 

information, periodic statements of 

activity, the consumer’s potential 

liability for unauthorized transfers, and 

error resolution rights and procedures. 

These disclosures are triggered by 

certain events specified in the EFTA 

and Regulation E. Institutions are 

required to retain evidence of 

compliance for not less than two years 

from the date that disclosures are 

required to be made or action is 

required to be taken; however, the 

regulation does not specify the types of 

records that must be retained. To ease 

institutions’ burden and cost of 

complying with the disclosure 

requirements of Regulation E 

(particularly for small entities), the 

Federal Reserve publishes model forms 

and disclosure clauses. Regulation E 

applies to all financial institutions and 

merchants and payees that engage in 

ECK transactions. The Board has 

determined that no new requirements or 

revisions to existing requirements are 

contained in this proposed rule. 

Comments are invited on: a. Whether 

the collection of information is 

necessary for the proper performance of 

the Federal Reserve’s functions; 

including whether the information has 

practical utility; b. the accuracy of the 

Federal Reserve’s estimate of the burden 

of the information collection, including 

the cost of compliance; c. ways to 

enhance the quality, utility, and clarity 

of the information to be collected; and 

d. ways to minimize the burden of 

information collection on respondents, 

including through the use of automated 

collection techniques or other forms of 

information technology. Comments on 

the collections of information should be 

sent to Secretary, Board of Governors of 

the Federal Reserve System, 

Washington, DC 20551, with copies of 

such comments to be sent to the Office 

of Management and Budget, Paperwork 

Reduction Project (7100–0202), 

Washington, DC 20503. 

List of Subjects in 12 CFR Part 205 

Consumer protection, Electronic fund 

transfers, Federal Reserve System, 

Reporting and recordkeeping 

requirements. 

Text of Proposed Revisions 

Certain conventions have been used 

to highlight the proposed changes to 

Regulation E. New language is shown 

inside bold-faced arrows, while 

language that would be removed is set 

off with bold-faced brackets. 

For the reasons set forth in the 

preamble, the Board proposes to amend 

Regulation E, 12 CFR part 205, as set 

forth below: 

PART 205—ELECTRONIC FUND 

TRANSFERS (REGULATION E) 

1. The authority citation for part 205 

continues to read as follows: 

Authority: 15 U.S.C. 1693b. 

2. Section 205.4 would be amended 

by revising paragraph (a)(1), removing 

paragraph (c), and redesignating 

paragraph (d) as paragraph (c), and 

paragraph (e) as paragraph (d), 

respectively, as follows: 

§ 205.4 General disclosure requirements; 

jointly offered services. 

(a)(1) Form of disclosures. Disclosures 

required under this part shall be clear 

and readily understandable, in writing, 

and in a form the consumer may keep. 

flThe disclosures required by this part 

may be provided to the consumer 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.).fi A financial institution 

may use commonly accepted or readily 

understandable abbreviations in 

complying with the disclosure 

requirements of this part. 

* * * * * 

ø(c) Electronic communication. For 

rules governing the electronic delivery 

of disclosures, including the definition 

of electronic communication, see 

§ 205.17.¿ 

ø(d)¿ fl(c)fi Multiple accounts and 

account holders—(1) Multiple accounts. 

A financial institution may combine the 

required disclosures into a single 

statement for a consumer who holds 

more than one account at the 

institution. 

(2) Multiple account holders. For joint 

accounts held by two or more 

consumers, a financial institution need 

provide only one set of required 

disclosures and may provide them to 

any of the account holders. 

ø(e)¿ fl(d)fi Services offered jointly. 

Financial institutions that provide 

electronic fund transfer services jointly 

may contract among themselves to 

comply with the requirements that this 

part imposes on any or all of them. An 

institution need make only the 

disclosures required by §§ 205.7 and 

205.8 that are within its knowledge and 

within the purview of its relationship 

with the consumer for whom it holds an 

account. 

§ 205.17 [Removed and Reserved] 

3. Section 205.17 would be removed 

and reserved. 

4. In Supplement I to Part 205, 

Section 205.17 would be removed and 

reserved. 

By order of the Board of Governors of the 

Federal Reserve System, April 20, 2007. 

Jennifer J. Johnson, 

Secretary of the Board 

[FR Doc. E7–7876 Filed 4–27–07; 8:45 am] 

BILLING CODE 6210–01–P 

FEDERAL RESERVE SYSTEM 

12 CFR Part 213 

[Regulation M; Docket No. R–1283] 

Consumer Leasing 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Proposed rule; request for 

comments. 

SUMMARY: The Board is proposing to 

amend Regulation M, which 

implements the Consumer Leasing Act, 

to withdraw portions of the interim final 

rules for the electronic delivery of 

disclosures issued March 30, 2001. The 

interim final rules address the timing 

and delivery of electronic disclosures, 

consistent with the requirements of the 

Electronic Signatures in Global and 

National Commerce Act (E-Sign Act). 

Compliance with the 2001 interim final 

rules is not mandatory. Thus, removing 

the interim rules from the Code of 

Federal Regulations would reduce 

confusion about the status of the 

provisions and simplify the regulation. 

The Board is also proposing to amend 

Regulation M to provide that when an 

advertisement is accessed by a 

consumer in electronic form, certain 

disclosures must be provided to the 

consumer in electronic form on or with 

the advertisement, and that in these 

circumstances the consumer consent 

and other provisions of the E-Sign Act 

do not apply. Similar rules are being 

proposed under other consumer fair 

lending and financial services 

regulations administered by the Board. 

DATES: Comments must be received on 

or before June 29, 2007. 

ADDRESSES: You may submit comments, 

identified by Docket No. R–1283, by any 

of the following methods: 

• Agency Web site: http:// 

www.federalreserve.gov. Follow the 

instructions for submitting comments at 

http://www.federalreserve.gov/ 

generalinfo/foia/ProposedRegs.cfm. 


jlentini on PROD1PC65 with PROPOSAL
21136 Federal Register / Vol. 72, No. 82 / Monday, April 30, 2007 / Proposed Rules 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: 

regs.comments@federalreserve.gov. 

Include the docket number in the 

subject line of the message. 

• FAX: (202) 452–3819 or (202) 452–

3102. 

• Mail: Jennifer J. Johnson, Secretary, 

Board of Governors of the Federal 

Reserve System, 20th Street and 

Constitution Avenue, NW., Washington, 

DC 20551. 

All public comments are available 

from the Board’s Web site at http:// 

www.federalreserve.gov/generalinfo/ 

foia/ProposedRegs.cfm as submitted, 

unless modified for technical reasons. 

Accordingly, your comments will not be 

edited to remove any identifying or 

contact information. Public comments 

may also be viewed electronically or in 

paper form in Room MP–500 of the 

Board’s Martin Building (20th and C 

Streets, NW.) between 9 a.m. and 5 p.m. 

on weekdays. 

FOR FURTHER INFORMATION CONTACT: John 

C. Wood or David A. Stein, Counsels, 

Division of Consumer and Community 

Affairs, at (202) 452–2412 or (202) 452–

3667. For users of Telecommunications 

Device for the Deaf (TDD) only, contact 

(202) 263–4869. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Consumer Leasing Act (CLA), 15 

U.S.C. 1667–1667e, was enacted into 

law in 1976 as an amendment to the 

Truth in Lending Act (TILA), 15 U.S.C. 

1601 et seq. The CLA requires lessors to 

provide lessees with uniform cost and 

other disclosures about consumer lease 

transactions. The act generally applies 

to consumer leases of personal property 

in which the contractual obligation does 

not exceed $25,000 and has a term of 

more than four months. An automobile 

lease is the most common type of 

consumer lease covered by the act. The 

Board’s Regulation M (12 CFR part 213) 

implements the act. The CLA and 

Regulation M require disclosures to be 

provided in writing. 

Board Proposals Regarding Electronic 

Disclosures 

On May 2, 1996, the Board proposed 

to amend Regulation E (Electronic Fund 

Transfers) to permit financial 

institutions to provide disclosures by 

sending them electronically (61 FR 

19696). Based on comments received, in 

1998 the Board published an interim 

rule permitting the electronic delivery 

of disclosures under Regulation E (63 

FR 14528, March 25, 1998) and 

proposals under Regulations B (Equal 

Credit Opportunity), M (Consumer 

Leasing), Z (Truth in Lending), and DD 

(Truth in Savings) (63 FR 14552, 14538, 

14548, and 14533, respectively, March 

25, 1998). 

Based on comments received on the 

1998 proposals, in September 1999 the 

Board published revised proposals 

under Regulations B, E, M, Z, and DD 

(64 FR 49688, 49699, 49713, 49722 and 

49740, respectively, September 14, 

1999). At the same time, the Board 

published an interim rule under 

Regulation DD allowing depository 

institutions to deliver disclosures on 

periodic statements in electronic form if 

the consumer agreed (64 FR 49846, 

September 14, 1999). While these 

rulemakings were pending, federal 

legislation was enacted addressing the 

use of electronic documents and 

records, including consumer 

disclosures. 

Federal Legislation Addressing 

Electronic Commerce 

On June 30, 2000, the President 

signed into law the Electronic 

Signatures in Global and National 

Commerce Act (the E-Sign Act) (15 

U.S.C. 7001 et seq.). The E-Sign Act 

provides that electronic documents and 

electronic signatures have the same 

validity as paper documents and 

handwritten signatures. The E-Sign Act 

contains special rules for the use of 

electronic disclosures in consumer 

transactions. Under the E-Sign Act, 

consumer disclosures required by other 

laws or regulations to be provided or 

made available in writing may be 

provided or made available, as 

applicable, in electronic form if the 

consumer affirmatively consents after 

receiving a notice that contains certain 

information specified in the statute, and 

if certain other conditions are met. 

The E-Sign Act, including the special 

consumer notice provisions, became 

effective October 1, 2000, and did not 

require implementing regulations. Thus, 

financial institutions are currently 

permitted to provide in electronic form 

any disclosures that are required to be 

provided or made available to the 

consumer in writing under Regulations 

B, E, M, Z, and DD if the consumer 

affirmatively consents to receipt of 

electronic disclosures in the manner 

required by section 101(c) of the E-Sign 

Act. 

The Interim Final Rules 

On March 30, 2001, the Board 

published for comment interim final 

rules to establish uniform standards for 

the electronic delivery of disclosures 

required under Regulation M (66 FR 

17322). Similar interim final rules for 

Regulations B, E, Z, and DD were 

published on March 30, 2001 (66 FR 

17329 (Z)) and April 4, 2001 (66 FR 

17779 (B), 66 FR 17786 (E), and 66 FR 

17795 (DD)). The interim final rules 

incorporated most of the provisions that 

were part of the 1999 proposals. 

Each of the interim final rules 

incorporated, but did not interpret, the 

requirements of the E-Sign Act. Lessors, 

financial institutions, creditors, and 

other persons, as applicable, generally 

were required to obtain consumers’

affirmative consent to provide 

disclosures electronically, consistent 

with the requirements of the E-Sign Act. 

The 2001 interim final rule for 

Regulation M established uniform 

requirements for the timing and delivery 

of electronic disclosures. Under the 

interim rule, disclosures could be sent 

to an e-mail address designated by the 

lessee, or could be made available at 

another location, such as an Internet 

Web site. If the disclosures were not 

sent by e-mail, lessors would have to 

provide a notice to lessees alerting them 

to the availability of the disclosures. 

Disclosures posted on a Web site would 

have to be available for at least 90 days 

to allow lessees adequate time to access 

and retain the information. Lessors also 

would be required to make a good faith 

attempt to redeliver electronic 

disclosures that were returned 

undelivered, using the address 

information available in their files. 

Similar provisions were included in the 

interim final rules adopted under 

Regulations B, E, Z, and DD. 

Commenters on the interim final rules 

identified significant operational and 

information security concerns with 

respect to the requirement to send the 

disclosure or an alert notice to an e-mail 

address designated by the consumer. 

For example, commenters stated that 

some consumers do not have e-mail 

addresses or may not want personal 

financial information sent to them by email. Commenters also noted that e-mail 

is not a secure medium for delivering 

confidential information and that 

consumers’ e-mail addresses frequently 

change. The commenters also opposed 

the requirement for redelivery in the 

event a disclosure was returned 

undelivered. In addition, many 

commenters asserted that making the 

disclosures available for at least 90 days, 

as required by the interim final rule, 

would increase costs and would not be 

necessary for consumer protection. 

In August 2001, in response to 

comments received, the Board lifted the 

previously established October 1, 2001 

mandatory compliance date for all of the 

interim final rules. (66 FR 41439, 


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1Section 187 of CLA provides that regulations 

prescribed by the Board under CLA ‘‘may provide 

for adjustments and exceptions * * * as the Board 

considers appropriate.’’ Section 104(d) of the E-Sign 

Act authorizes federal agencies to adopt exemptions 

for specified categories of disclosures from the ESign notice and consent requirements, ‘‘if such 

exemption is necessary to eliminate a substantial 

burden on electronic commerce and will not 

increase the material risk of harm to consumers.’’

For the reasons stated in this Federal Register 

notice, the Board believes that these criteria are met 

in the case of the advertising disclosures. In 

addition, the Board believes CLA section 187 

authorizes the Board to permit institutions to 

provide disclosures electronically, rather than in 

paper form, independent of the E-Sign Act. 

August 8, 2001.) Thus, institutions are 

not required to comply with the interim 

final rules. Since that time, the Board 

has not taken further action with respect 

to the interim final rules on electronic 

disclosures in order to allow electronic 

commerce, including electronic 

disclosure practices, to continue to 

develop without regulatory intervention 

and to allow the Board to gather further 

information about such practices. 

II. The Proposed Rules 

The Board is proposing to amend 

Regulation M and the official staff 

commentary by (1) withdrawing 

portions of the 2001 interim final rule 

on electronic disclosures that restate or 

cross-reference provisions of the E-Sign 

Act and accordingly are unnecessary; (2) 

withdrawing other portions of the 

interim final rule that the Board now 

believes may impose undue burdens on 

electronic banking and commerce and 

may be unnecessary for consumer 

protection; and (3) retaining the 

substance of certain provisions of the 

interim final rule that provide 

regulatory relief or guidance regarding 

electronic disclosures. (Similar 

amendments are also being proposed by 

the Board, in today’s issue of the 

Federal Register, under Regulations B, 

E, Z, and DD.) 

Because compliance with the 2001 

interim final rules is not mandatory, 

removing most portions of the interim 

rules from the Code of Federal 

Regulations, while finalizing other 

provisions, would reduce confusion 

about the status of the electronic 

disclosure provisions and simplify the 

regulation. The Board is proposing to 

adopt certain provisions that are 

identical or similar to provisions in the 

2001 interim final rules in order to 

enhance the ability of consumers to 

shop for leases online, minimize the 

information-gathering burdens on 

consumers, and provide guidance or 

eliminate a substantial burden on the 

use of electronic disclosures, as 

discussed further below. 

Since 2001, industry and consumers 

have gained considerable experience 

with electronic disclosures. During that 

period, the Board has received no 

indication that consumers have been 

harmed by the fact that compliance with 

the interim final rules is not mandatory. 

The Board also has reconsidered certain 

aspects of the interim final rules, such 

as sending disclosures by e-mail, in 

light of concerns about data security, 

identity theft, and ‘‘phishing’’ (i.e., 

prompting consumers to reveal 

confidential personal or financial 

information through fraudulent e-mail 

requests that appear to originate from a 

financial institution, government 

agency, or other trusted entity) that have 

become more pronounced since 2001. 

Finally, the Board is proposing to 

eliminate certain aspects of the 2001 

interim final rule, such as provisions 

regarding the availability and retention 

of electronic disclosures, as unnecessary 

in light of current industry practices. 

The 2001 interim final rule allowed 

lessors to provide certain disclosures to 

lessees electronically, without regard to 

the consumer consent or other 

provisions of the E-Sign Act, for 

disclosures provided on or with an 

electronic advertisement. The Board 

reasoned that these disclosures, which 

would be available to the general public 

while shopping for a lease, did not 

‘‘relate to a transaction,’’ which is a 

prerequisite for triggering the E-Sign 

consumer consent provisions, and thus 

were not subject to those provisions. 

Some commenters on the interim final 

rules did not agree with the Board’s 

rationale. Upon further consideration, 

the Board does not believe it is 

necessary to determine whether or not 

these disclosures are related to a 

transaction. This proposal does not 

make such determinations. 

Instead, pursuant to the Board’s 

authority under section 187 of the CLA, 

as well as under section 104(d) of the ESign Act,1 the Board is proposing to 

specify the circumstances under which 

certain disclosures may be provided to 

a lessee in electronic form, rather than 

in writing as generally required by 

Regulation M, without obtaining the 

lessee’s consent under section 101(c) of 

the E-Sign Act. The proposed rule 

would also amend Regulation M, as 

discussed in detail below, to provide 

that certain disclosures must be 

provided to a consumer in electronic 

form on or with an advertisement that 

is accessed by the consumer in 

electronic form. 

The Board continues to believe that 

lessors should not be required to obtain 

the consumer’s consent in order to 

provide advertising disclosures to the 

consumer in electronic form if the 

consumer accesses the advertisement 

containing those disclosures in 

electronic form, such as at an Internet 

Web site. The Board believes consumers 

would not be harmed, and in fact would 

benefit, by having timely access to 

advertising disclosures in electronic 

form when they are viewing online lease 

advertising. The Board also believes that 

consumers’ ability to shop for leases 

online and compare the terms of various 

lease offers could be substantially 

diminished if consumers had to consent 

in accordance with the E-Sign Act in 

order to access advertisements that must 

be accompanied by disclosures. 

Applying the consumer consent 

provisions of the E-Sign Act to these 

disclosures could impose substantial 

burdens on electronic commerce and 

make it more difficult for consumers to 

gather information and shop for leases. 

At the same time, the Board 

recognizes that consumers who shop or 

apply for leases online may not want to 

receive other disclosures electronically. 

Therefore, with respect to the 

disclosures required prior to the 

consummation of a lease, lessors would 

be required to provide written 

disclosures or obtain the lessee’s 

consent in accordance with the E-Sign 

Act to provide the disclosures in 

electronic form. 

Finally, the Board is proposing to 

delete, as unnecessary, certain 

provisions that restate or cross-reference 

the E-Sign Act’s general rules regarding 

electronic disclosures (including the 

consumer consent provisions) and 

electronic signatures because the E-Sign 

Act is a self-effectuating statute. The 

proposed revisions to Regulation M and 

the official staff commentary are 

described more fully below in the 

Section-by-Section Analysis. 

The Board solicits comment on all 

aspects of this proposal. Specifically, 

the Board seeks comment on the 

appropriateness of eliminating certain 

provisions and retaining other 

provisions contained in the 2001 

interim final rule. 

III. Section-by-Section Analysis 

12 CFR Part 213 (Regulation M) 

Section 213.3 General Disclosure 

Requirements 

Section 213.3(a) generally requires 

lessors to provide disclosures in writing 

and in a form that the lessee may keep. 

The Board proposes to revise § 213.3(a) 

to clarify that lessors may provide 

disclosures to lessees in electronic form, 

subject to compliance with the 

consumer consent and other applicable 

provisions of the E-Sign Act. Some 

lessors may provide disclosures to 


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lessees both in paper and electronic 

form and rely on the paper form of the 

disclosures to satisfy their compliance 

obligations. For those lessors, the 

duplicate electronic form of the 

disclosures may be provided to lessees 

without regard to the consumer consent 

or other provisions of the E-Sign Act 

because the electronic form of the 

disclosure is not used to satisfy the 

regulation’s disclosure requirements. 

Section 213.3(a) would also be revised 

to provide that the advertising 

disclosures required by § 213.7 must be 

provided to the consumer in electronic 

form if the consumer accesses the 

advertisement electronically. Under 

those circumstances, those disclosures 

may be provided in electronic form 

without regard to the consumer consent 

or other provisions of the E-Sign Act. 

The Board believes that, for an 

advertisement accessed by the consumer 

in electronic form, permitting lessors to 

provide lease advertising disclosures in 

electronic form without regard to the 

consumer consent and other provisions 

of the E-Sign Act will eliminate a 

potential significant burden on 

electronic commerce without increasing 

the risk of harm to consumers. This 

approach will facilitate shopping for 

leases by enabling consumers to receive 

important disclosures at the same time 

they access an advertisement without 

first having to provide consent in 

accordance with the requirements of the 

E-Sign Act. Requiring consumers to 

follow the consent procedures set forth 

in the E-Sign Act in order to access an 

online advertisement is potentially 

burdensome and could discourage 

consumers from shopping for leases 

online. Moreover, because these 

consumers are viewing the 

advertisement online, there appears to 

be little, if any, risk that the consumer 

will be unable to view the disclosures 

online as well. 

Section 213.3(a)(5) in the 2001 

interim final rule refers to § 213.6, the 

section of the interim final rule setting 

forth general rules for electronic 

disclosures. Because the Board is 

proposing to delete § 213.6, as discussed 

further below, the Board also proposes 

to delete § 213.3(a)(5). 

Section 213.6 Electronic 

Communication 

Section 213.6 was added by the 2001 

interim final rule to address the general 

requirements for electronic 

communications. The Board proposes to 

delete § 213.6 from Regulation M and 

the accompanying sections of the staff 

commentary, reserving that section for 

future use. 

In the interim rule, § 213.6(a) defines 

the term ‘‘electronic communication’’ to 

mean a message transmitted 

electronically that can be displayed on 

equipment as visual text, such as a 

message displayed on a personal 

computer monitor screen. The deletion 

of § 213.6(a) would not change 

applicable legal requirements under the 

E-Sign Act. 

Sections 213.6(b) and (c) incorporate 

by reference provisions of the E-Sign 

Act, such as the provision allowing 

disclosures to be provided in electronic 

form and the requirement to obtain the 

lessee’s affirmative consent before 

providing such disclosures. The 

deletion of these provisions will have 

no impact on the general applicability of 

the E-Sign Act to Regulation M 

disclosures. 

Sections 213.6(d) and (e) address 

specific timing and delivery 

requirements for electronic disclosures 

under Regulation M, such as the 

requirement to send disclosures to a 

lessee’s e-mail address (or post the 

disclosures on a Web site and send a 

notice alerting the lessee to the 

disclosures). The Board no longer 

believes that these additional provisions 

are necessary or appropriate. Electronic 

disclosures have evolved since 2001, as 

industry and consumers have gained 

experience with them. Although many 

institutions offer e-mail alert notices to 

consumers, some consumers may 

choose not to receive notifications by email and the Board sees no reason to 

require e-mail alert notices. In addition, 

the Board has reconsidered certain 

aspects of the interim final rules, such 

as sending disclosures by e-mail, in 

light of concerns about data security, 

identity theft, and phishing that have 

become more pronounced since 2001. 

With regard to the requirement to 

attempt to redeliver returned electronic 

disclosures, as the commenters noted, 

lessors would be required to search their 

files for an additional e-mail address to 

use, and might be required to use a 

postal mail address for redelivery if no 

additional e-mail address was available. 

The Board believes that both 

requirements would likely be unduly 

burdensome. In addition, the concerns 

that have been raised about the 

requirement to use e-mail for the initial 

delivery of a disclosure or notice apply 

equally to the use of e-mail for an 

attempted redelivery. 

Under the proposed rule, the Board 

would not require lessors to maintain 

disclosures posted on a Web site for at 

least 90 days as provided in the 2001 

interim final rule. While the Board is 

not proposing to require disclosures to 

be maintained on an Internet Web site 

for any specific time period, the general 

requirements of Regulation M continue 

to apply to electronic disclosures, such 

as the requirement to provide 

disclosures to lessees at a specified time 

and in a form that the lessee may keep. 

Although these general requirements 

apply to electronic disclosures, the 

Board does not believe that the 90-day 

time period set out in § 213.6(d) of the 

2001 interim final rule is needed to 

ensure that lessors satisfy these 

requirements when they provide 

electronic disclosures. The Board, 

however, will monitor lessors’

electronic disclosure practices with 

regard to the ability of lessees to retain 

Regulation M disclosures and will 

consider further regulatory action if it 

appears necessary. 

The official staff commentary to 

§ 213.6 of the interim final rule provides 

guidance on the provisions set forth in 

§ 213.6 such as delivery of disclosures 

or alert notices by e-mail, redelivery if 

disclosures or a notice is returned 

undelivered, and retention of 

disclosures on a Web site for 90 days. 

As noted above, because the Board is 

proposing to delete § 213.6 of the 

regulation, the Board also proposes to 

delete the accompanying provisions of 

the official staff commentary. 

Section 213.7 Advertising 

Section 213.7 contains requirements 

for lease advertisements and requires 

that if an advertisement includes certain 

‘‘trigger terms’’ (such as the payment 

amount), the advertisement must also 

include certain required disclosures 

(such as the total amount due prior to 

or at consummation and a statement 

that an extra charge may be imposed at 

the end of the lease term). 

Section 213.7(c) relates to catalogs 

and other multipage advertisements and 

(under this proposal) to electronic 

advertisements. The Board is proposing 

to add a new comment 7(c)–3 to clarify 

that if a consumer accesses a lease 

advertisement in electronic form, the 

disclosures required on or with the 

advertisement must be provided to the 

consumer in electronic form on or with 

the advertisement. A consumer accesses 

an advertisement in electronic form 

when, for example, the consumer views 

the advertisement on his or her home 

computer. On the other hand, if a 

consumer receives a written 

advertisement in the mail, the lessor 

would not satisfy its obligation to 

provide the disclosures at that time by 

including a reference in the 

advertisement to the Web site where the 

disclosures are located. 

Section 213.7(c) provides that in a 

catalog or other multipage 


jlentini on PROD1PC65 with PROPOSAL
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advertisement, the required disclosures 

need not be shown on each page where 

a ‘‘trigger term’’ appears, as long as each 

such page includes a cross-reference to 

the page where the required disclosures 

appear. The 2001 interim final rule 

clarified, in comment 7(c)–2, that the 

multipage rule for lease advertising also 

applies to advertisements in electronic 

form. For example, if a ‘‘trigger term’’

appears on a particular web page, the 

additional disclosures may appear in a 

table or schedule on another web page 

and still be considered part of a single 

advertisement if there is a clear 

reference to the page or location where 

the table or schedule begins (which may 

be accomplished, for example, by 

including a link). The Board proposes to 

retain the rule allowing the use of links 

or other cross-references in electronic 

credit advertisements to provide 

guidance on how the advertising rules 

apply to Web sites, by amending 

§ 213.7(c), as well as by retaining 

comment 7(c)–2 with minor wording 

changes. 

Section 213.7(b)(1) requires that any 

affirmative or negative reference to a 

charge that constitutes part of the total 

amount due prior to or at consummation 

of the lease not be more prominent in 

the advertisement than the disclosure of 

the total amount due. In the 2001 

interim final rule, comment 7(b)(1)–3 

was added to state that in an 

advertisement using electronic 

communication, both the reference to 

the charge and the disclosure of the total 

amount due must appear in the same 

location so that they can be viewed 

simultaneously. Section 213.7(b)(2) 

requires that a percentage rate in an 

advertisement not be more prominent 

than any of the required disclosures, 

except for a notice required to 

accompany the rate under § 213.4(s). 

The interim final rule revised comment 

7(b)(2)–1 to state that in an 

advertisement using electronic 

communication, both the rate and the 

accompanying notice must appear in the 

same location so that they can be 

viewed simultaneously, and that this 

requirement is not satisfied by the use 

of a link that connects the consumer to 

information appearing at another 

location. 

The Board proposes to delete 

comment 7(b)(1)–3, and to delete the 

language added to comment 7(b)(2)–1 by 

the interim final rule, as unnecessary. 

The prominence requirements of 

§ 213.7(b) continue to apply to 

electronic advertisements no less than 

to advertisements in other media. 

Requiring the consumer to scroll to 

another part of the page, or access a 

link, in order to view the required 

disclosures would likely not satisfy this 

requirement. 

IV. Solicitation of Comments Regarding 

the Use of ‘‘Plain Language’’

Section 722 of the Gramm-LeachBliley Act of 1999 requires the Board to 

use ‘‘plain language’’ in all proposed 

and final rules published after January 

1, 2000. The Board invites comments on 

whether the proposed rules are clearly 

stated and effectively organized, and 

how the Board might make the proposed 

text easier to understand. 

V. Initial Regulatory Flexibility 

Analysis 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) (RFA) generally 

requires an agency to perform an 

assessment of 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 analysis and for 

the reasons stated below, the Board 

believes that this proposed rule will not 

have a significant economic impact on 

a substantial number of small entities. A 

final regulatory flexibility analysis will 

be conducted after consideration of 

comments received during the public 

comment period. 

1. Statement of the objectives of the 

proposal. The Board is proposing 

revisions to Regulation M to withdraw 

the 2001 interim final rule on electronic 

communication and to allow lessors to 

provide certain disclosures to lessees in 

electronic form on or with an 

advertisement that is accessed by the 

lessee in electronic form without regard 

to the consumer consent and other 

provisions of the E-Sign Act. The Board 

is also proposing to clarify that other 

Regulation M disclosures may be 

provided to lessees in electronic form in 

accordance with the consumer consent 

and other applicable provisions of the ESign Act. 

The purpose of CLA is to assure a 

meaningful disclosure of the terms of 

consumer leases, so that the lessee can 

compare more readily the various lease 

terms available, limit balloon payments 

in consumer leasing, enable comparison 

of lease terms with credit terms where 

appropriate, and assure meaningful and 

accurate disclosures of lease terms in 

advertisements. 15 U.S.C. 1601. CLA 

authorizes the Board to prescribe 

regulations to carry out the purposes of 

the statute. 15 U.S.C. 1604(a), 1667f. 

The Act expressly states that the Board’s 

regulations may contain ‘‘such 

classifications, differentiations, or other 

provisions, * * *, as in the judgment of 

the Board are necessary or proper to 

effectuate the purposes of [the Act], to 

prevent circumvention or evasion of 

[the Act], or to facilitate compliance 

with [the Act].’’ 15 U.S.C. 1604(a). The 

Board believes that the revisions to 

Regulation M discussed above are 

within Congress’s broad grant of 

authority to the Board to adopt 

provisions that carry out the purposes of 

the statute. These revisions facilitate the 

informed use of leases by consumers in 

circumstances where a consumer 

accesses a lease advertisement in 

electronic form. 

2. Small entities affected by the 

proposal. The ability to provide 

advertising disclosures in electronic 

form on or with an advertisement that 

is accessed by the consumer in 

electronic form applies to all lessors, 

regardless of their size. Accordingly, the 

proposed revisions would reduce 

burden and compliance costs for small 

entities by providing relief, to the extent 

the E-Sign Act applies in these 

circumstances. The number of small 

entities affected by this proposal is 

unknown. 

3. Other federal rules. The Board 

believes no federal rules duplicate, 

overlap, or conflict with the proposed 

revisions to Regulation M. 

4. Significant alternatives to the 

proposed revisions. The Board solicits 

comment on any significant alternatives 

that may provide additional ways to 

reduce regulatory burden associated 

with this proposed rule. 

VI. Paperwork Reduction Act 

In accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3506; 

5 CFR part 1320 Appendix A.1), the 

Board reviewed the rule under the 

authority delegated to the Board by the 

Office of Management and Budget 

(OMB). The collection of information 

that is required by this proposed rule is 

found in 12 CFR part 213. The Federal 

Reserve 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. 

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 Consumer Leasing 

Act (CLA). The CLA and Regulation M 

are intended to provide consumers with 

meaningful disclosures about the costs 

and terms of leases for personal 


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21140 Federal Register / Vol. 72, No. 82 / Monday, April 30, 2007 / Proposed Rules 

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 and limit 

the size of balloon payments in 

consumer lease transactions. 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 Federal Reserve does not 

collect any information, no issue of 

confidentiality normally arises. 

However, in the event the Board were to 

retain records regarding consumer 

leases during the course of an 

examination, the information regarding 

the consumer and the lease would 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 

Federal Reserve accounts for the 

paperwork burden associated with the 

regulation only for Federal Reservesupervised institutions. Appendix B of 

Regulation M defines the Federal 

Reserve-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 

twenty-four months, but the regulation 

does not specify types of records that 

must be retained. 

The estimated annual burden for the 

entities supervised by the Federal 

Reserve is approximately 3,534 hours 

for the 270 State member banks that 

engage in consumer leasing. As 

mentioned in the Preamble, § 213.3 

would be revised to clarify the 

disclosure requirements in §§ 213.4 and 

213.7. The Federal Reserve estimates 

that 270 respondents would take 

approximately 6.5minutes per 

transaction to comply with the existing 

disclosure requirements in § 213.4 and 

estimates the annual burden to be 3,509 

hours. The Federal Reserve estimates 

that 15 respondents would take 

approximately 2.5 minutes per 

transaction to comply with the existing 

disclosure requirements in § 213.7 and 

estimates the annual burden to be 25 

hours. The Federal Reserve requests 

specific comment on whether the 

revisions in this proposed rule would 

change the burden on respondents. 

Comments are invited on: a. Whether 

the collection of information is 

necessary for the proper performance of 

the Federal Reserve’s functions; 

including whether the information has 

practical utility; b. the accuracy of the 

Federal Reserve’s estimate of the burden 

of the information collection, including 

the cost of compliance; c. ways to 

enhance the quality, utility, and clarity 

of the information to be collected; and 

d. ways to minimize the burden of 

information collection on respondents, 

including through the use of automated 

collection techniques or other forms of 

information technology. Comments on 

the collections of information should be 

sent to Secretary, Board of Governors of 

the Federal Reserve System, 

Washington, DC 20551, with copies of 

such comments to be 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 Proposed Revisions 

Certain conventions have been used 

to highlight the proposed changes to 

Regulation M. New language is shown 

inside bold-faced arrows, while 

language that would be removed is set 

off with bold-faced brackets. 

For the reasons set forth in the 

preamble, the Board proposes to amend 

Regulation M, 12 CFR part 213, as set 

forth below: 

PART 213—CONSUMER LEASING 

(REGULATION M) 

1. The authority citation for part 213 

continues to read as follows: 

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

2. Section 213.3 would be amended 

by revising paragraph (a) introductory 

text and removing paragraph (a)(5), to 

read as follows: 

§ 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. 

flThe 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 the consumer in electronic 

form, the disclosures required by § 213.7 

must be provided to the consumer in 

electronic form on or with the 

advertisement. The § 213.7 disclosures 

may be made in electronic form without 

regard to the consumer consent or other 

provisions of the E-Sign Act.fi 

* * * * * 

ø(5) Electronic communication. For 

rules governing the electronic delivery 

of disclosures, including a definition of 

electronic communication, see § 213.6.¿ 

§ 213.6 [Removed and Reserved] 

3. Section 213.6 would be removed 

and reserved. 

4. Section 213.7 would be amended 

by revising paragraph (c), to read as 

follows: 

§ 213.7 Advertising. 

* * * * * 

(c) Catalogs or other multipage 

advertisements fl; electronic 

advertisementsfi. A catalog or other 

multipage advertisement fl, or an 

electronic advertisement (such as an 

advertisement appearing on an Internet 

Web site),fi 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. 

5. In Supplement I to Part 213, the 

following amendments would be made: 

a. Section 213.6 would be removed 

and reserved. 

b. In Section 213.7—Advertising, 

under 7(b)(1) Amount Due at Lease 

Signing or Delivery, paragraph 3. would 

be removed. 

c. In Section 213.7—Advertising, 

under 7(b)(2) Advertisement of a Lease 

Rate, paragraph 1., the last two 

sentences would be removed. 

d. In Section 213.7—Advertising, 

under 7(c) Catalogs or Other Multipage 

Advertisements; Electronic 

Advertisements, paragraph 2. would be 

revised and new paragraph 3. would be 

added. 

The amendments read as follows: 

Supplement I to Part 213—Official Staff 

Commentary to Regulation M 

* * * * * 


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Federal Register / Vol. 72, No. 82 / Monday, April 30, 2007 / Proposed Rules 21141 

Section 226.7—Advertising 

* * * * * 

7(b)(1) Amount Due at Lease Signing or 

Delivery 

* * * * * 

ø3. Electronic advertisements. For 

advertisements using electronic 

communication, to satisfy the prominence 

rule in § 213.7(b)(1), both the triggering terms 

and the required disclosures must appear in 

the same location so that they can be viewed 

simultaneously.¿ 

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. øFor advertisements using 

electronic communication, to comply with 

proximity rule in, both the rate and the 

accompanying notice must appear in the 

same location so that they can be viewed 

simultaneously. The prominent rule in 

§ 213.7(b)(2) is not met if the disclosures can 

be viewed only by use of a link that connects 

the consumer to the information appearing at 

another location.¿ 

7(c) Catalogs or Other Multipage 

Advertisements; Electronic Advertisements 

* * * * * 

2. Cross references. A catalog or other 

multiple-page advertisement or an electronic 

advertisement fl(such as an advertisement 

appearing on an Internet web site)fi 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 ø(but see 

comments under § 213.7(b) about rules 

regarding the prominence of disclosures)¿. 

fl3. Electronic form of disclosures. For an 

advertisement that is accessed by the 

consumer in electronic form (such as an 

advertisement appearing on an Internet web 

site), the disclosures required under this 

section must be provided to the consumer in 

electronic form on or with the advertisement. 

Providing the disclosures at a different time 

or place, or in paper form, would not comply. 

Conversely, if a consumer views a paper 

advertisement, the required disclosures must 

be provided in paper form on or with the 

advertisement. For example, if a consumer 

receives an advertisement in the mail, the 

creditor would not satisfy its obligation to 

provide the disclosures at that time by 

including a reference in the advertisement to 

the web site where the disclosures are 

located.fi 

By order of the Board of Governors of the 

Federal Reserve System, April 20, 2007. 

Jennifer J. Johnson, 

Secretary of the Board. 

[FR Doc. E7–7877 Filed 4–27–07; 8:45 am] 

BILLING CODE 6210–01–P 

FEDERAL RESERVE SYSTEM 

12 CFR Part 226 

[Regulation Z; Docket No. R–1284] 

Truth in Lending 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Proposed rule; request for 

comments. 

SUMMARY: The Board is proposing to 

amend Regulation Z, which implements 

the Truth in Lending Act, to withdraw 

portions of the interim final rules for the 

electronic delivery of disclosures issued 

March 30, 2001. The interim final rules 

address the timing and delivery of 

electronic disclosures, consistent with 

the requirements of the Electronic 

Signatures in Global and National 

Commerce Act (E-Sign Act). Compliance 

with the 2001 interim final rules is not 

mandatory. Thus, removing the interim 

rules from the Code of Federal 

Regulations would reduce confusion 

about the status of the provisions and 

simplify the regulation. The Board is 

also proposing to amend Regulation Z to 

provide that when an application, 

solicitation, or advertisement is 

accessed by a consumer in electronic 

form, certain disclosures must be 

provided to the consumer in electronic 

form on or with the application, 

solicitation, or advertisement, and that 

in these circumstances the consumer 

consent and other provisions of the ESign Act do not apply. The proposal 

would also implement certain 

provisions of the Bankruptcy Abuse 

Prevention and Consumer Protection 

Act of 2005. Similar rules are being 

proposed under other consumer fair 

lending and financial services 

regulations administered by the Board. 

DATES: Comments must be received on 

or before June 29, 2007. 

ADDRESSES: You may submit comments, 

identified by Docket No. R–1284, by any 

of the following methods: 

• Agency Web site: http:// 

www.federalreserve.gov. Follow the 

instructions for submitting comments at 

http://www.federalreserve.gov/ 

generalinfo/foia/ProposedRegs.cfm. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: 

regs.comments@federalreserve.gov. 

Include the docket number in the 

subject line of the message. 

• FAX: (202) 452–3819 or (202) 452–

3102. 

• Mail: Jennifer J. Johnson, Secretary, 

Board of Governors of the Federal 

Reserve System, 20th Street and 

Constitution Avenue, NW., Washington, 

DC 20551. 

All public comments are available 

from the Board’s Web site at 

www.federalreserve.gov/generalinfo/ 

foia/ProposedRegs.cfm as submitted, 

unless modified for technical reasons. 

Accordingly, your comments will not be 

edited to remove any identifying or 

contact information. Public comments 

may also be viewed electronically or in 

paper form in Room MP–500 of the 

Board’s Martin Building (20th and C 

Streets, NW.) between 9 a.m. and 5 p.m. 

on weekdays. 

FOR FURTHER INFORMATION CONTACT: John 

C. Wood or David A. Stein, Counsels, 

Division of Consumer and Community 

Affairs, at (202) 452–2412 or (202) 452–

3667. For users of Telecommunications 

Device for the Deaf (TDD) only, contact 

(202) 263–4869. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The purpose of the Truth in Lending 

Act (TILA), 15 U.S.C. 1601 et seq., is to 

promote the informed use of consumer 

credit by requiring disclosures about its 

terms and cost. The Board’s Regulation 

Z (12 CFR part 226) implements the act. 

The act requires creditors to disclose the 

cost of credit as a dollar amount (the 

finance charge) and as an annual 

percentage rate (the APR). Uniformity in 

creditors’ disclosures is intended to 

promote the informed use of credit and 

assist in shopping for credit. TILA 

requires additional disclosures for loans 

secured by consumers’ homes and 

permits consumers to rescind certain 

transactions that involve their principal 

dwellings. TILA and Regulation Z 

require a number of disclosures to be 

provided in writing. 

Board Proposals Regarding Electronic 

Disclosures 

On May 2, 1996, the Board proposed 

to amend Regulation E (Electronic Fund 

Transfers) to permit financial 

institutions to provide disclosures by 

sending them electronically (61 FR 

19,696). Based on comments received, 

in 1998 the Board published an interim 

rule permitting the electronic delivery 

of disclosures under Regulation E (63 

FR 14,528, March 25, 1998) and 

proposals under Regulations B (Equal 


jlentini on PROD1PC65 with PROPOSAL