BUREAU OF CONSUMER FINANCIAL PROTECTION PAPERWORK REDUCTION ACT SUBMISSION INFORMATION COLLECTION REQUEST

SUPPORTING STATEMENT PART A CONSUMER LEASING ACT (REGULATION M) 12 CFR 1013 (OMB CONTROL NUMBER: 3170

- 0006)

OMB TERMS OF CLEARANCE:

Not applicable. The Office of Management and Budget (OMB) did not provide Terms of Clearance when approved this information collection on July 6, 2012.

ABSTRACT:

Consumers rely upon the disclosures required by the Consumer Leasing Act, 15 U.S.C.

1667 et seq

. (CLA) and Regulation M

, 12 CFR 1013, for information to comparison shop among leases, as well as to ascertain the true costs and terms of lease offers. Federal and state enforcement and private litigants use the records to ascertain whether accurate and complete disclosures of the cost of leases have been provided to consumers prior to consummation of the lease. This information provides the primary evide nce of law violations in CLA enforcement actions brought by federal agencies. Without Regulation M's recordkeeping requirement, the agencies' ability to enforce the CLA would be signifi cantly impaired.

A. JUSTIFICATION

1. Circumstances Necessitating the Data Collection

The Consumer Leasing Act

, 15 U.S.C. 1667 et seq . (CLA), an amendmen t to the Truth in Lending Act (TILA ), 15 U.S.C. 1601 et seq ., was enacted to foster comparison shopping and informed decisi on making by requiring accurate disclosure of th e costs and terms of leases to consumers. Lessors are subject to disclosure requirements that apply to both open

- end leases ( i.e

. , with a residual due at lease end) and closed

- end leases ( i.e ., “walkaway” leases, with no substa ntial amount due at lease end).

Disclosure

Regulation M imposes disclosure requirements on all types of lessors, including automobile lessors (such as auto dealers, independent leasing companies, and manufacturers’ captive finance companies), computer lessors (such as computer de alers and other retailers), furniture lessors, various electronic commerce lessors, and diverse types of lease advertisers, and others. These requirements are intended to ensure that consumers are fully apprised of the terms of leases prior to consummatio n of the transaction. The written disclosures required by2 Regulation M are derived from statutory disclosures and directives mandated by the CLA. See 12 CFR 1013.4; 15 U.S.C. 1667a; 15 U.S.C. 1667f (written disclosures); 12 CFR 1013.7; 15 U.S.C. 1667c; 1 5 U.S.C. 1667f (advertising disclosures).

Regulation M includes model forms and clauses that can be used to comply with the written disclosure (non

- advertising) requirements of the CLA and Regulation M. See Appendices A

- 1, A

- 2, and A

- 3 to Regulation M

. Correct use of these model forms and clauses insulates lessors from liability under the CLA and Regulation M. See c omment I

- 1.

Recordkeeping

Section 10 13.8 of Regulation M requires lessors to retain evidence of compliance with its requirements (oth er than its advertising rules) but does not specify the particular records to be kept. Entities subject to R egulation M may choose the records they consider adequate to show compliance, and each entity may interpret the requirement differently. Records, however, must be r etained for twenty

- four months.

2. Use of the Information

As noted above, consumers rely upon the disclosures required by the CLA and Regulation M for information to comparison shop among leases, as well as to ascertain the true

co sts a nd terms of lease offers.

Federal and state enforcement and private litigants use the records to ascertain whether accurate and complete disclosures of the cost of leases have been provided to consumers prior to consummation of the lease. This informatio n provides the primary evidence of law violations in CLA enforc ement actions brought by federal agencies . Without Regulation M ’s recordkeeping requirement, the agencies’ ability to enforce the CLA w ould be significantly impaired.

3. Use of Information Te chnology

The disclosures required by Regulation M 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 Nati onal Commerce Act (E

- Sign Act), 15 U.S.C. 7001 et
seq

. Use of such electronic communications is consistent with the Government Paperwork Elimination Act (GPEA), Title XVII of Pub. L. 105

- 277, co dified at 44 U.S.C. 3504 note. The
E

- Sign Act and GPEA serve to reduce businesses’ compliance burden related to federal requirements, including Regulation M, by enabling lessors to utilize more efficient electronic media for disclosures and compliance.

Regulation M also permits lessor s to retain rec ords on any method that reproduces records accurately, including computer programs , microfilm, or microfiche . Lessors need only retain enough information to reconstruct the required disclosure or other records. See 12 CFR 1013.8 and comment 8

- 1

.3 M ost lessors use computer support to calculate the required information and generate the mandated disclosures, thereby limiting the burden on these entities.

4. Efforts to Identify Duplication

T he disclosures required by the CLA and Regulation M are not other wise available

. Although some lease cost information is contained in contractual documents, the in formation is not standardized, and a s a result, consumers cannot use them efficiently to comparison shop o r fully appreciate lease terms.

The recordkeeping requirement of Regulation M preserves the information provided by lessors to consumers considering the costs and terms of lease offers. The lessor is the only source of this information. No other federal law mandates retention of this information. No st ate law known to the CFPB imposes this requirement, although some states may have other rules applicable to consumer leases.

5. Efforts to Minimize Burdens on Small Entities

The CLA and Regulation M disclosure and recordkeeping requireme nts are imposed on all lessors. Most lessors today utilize some measure of computerization in their business, and Regulation M permits lessors to rely on computer support, among other alternatives, to meet their recordkeeping and disclosure requirements. This flexibility presumably yields reduced

reco rdkeeping and disclosure costs ( s ee #3 above.) Regulation M also provides model forms and clauses that may be used to c omply with its requirements , and c orrect use of these forms and clauses insulates a less or from liability for the re spective requirements

.

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

The disclosure requirements are needed to facilitate comparison cost shopping and to spur informed lease decision making. If these requirements were eliminated, consumers would not have access to this critical information. Their right to sue under the CLA would be undermined, and enforcement agencies could not fulfill their charge in enforcing CLA.

The current record retention period of two years supports the one

- year statute of limitations for private actions, and enforcement agencies’ need for sufficient time to bring enforcement actions regarding lease transactions. If the r etention period were s hortened, consumers who sue under the CLA, and the administrative agencies, might find that lessor records needed to prove violations of the CLA no longer exist

.

7. Circumstances Requiring Special Information Collection

The recordkeeping and disclosure requirements in Regulation M are consistent with the applicable gui delines contained in 5 CFR 1320.5(d)(2).4 8. Consultation Outside the Agency

We have consulted with industry experts and other federal regulators to gather information relating to the bur dens of CLA and Regulation M. In addition, i n accordance with 5 CFR §1320.8(d)(1), the Bureau has published a notice Federal Register allowing the public 60 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 days to comment on the submission of this information collection request to the Office of Management a nd Budget

.

9. Payments or Gifts to Respondents

No payments or gifts are provided to respondents.

10. Assurances of Confidentiality

The recor dkeeping and written disclosure requirements contain private financial information about consumers who apply for and/or obtain consumer leases. Such information is protected by the Right to Financial Privacy Act, 12 U.S.C. 3401 et seq

. Such records may also constitute confidential customer lists. However, t here is no part of the rule that mandates information collection by the CFPB.

To the extent that information covered by a recordkeeping requirement is collected by the CFPB for law enforcement purposes, the confidentiality provisions of CFPB’s ru les on Disclosure of Records and Information, 12 CFR Part 1070

, would apply.

11. Justification for Sensitive Questions

Regulation M only requires institutions to provide leasing information disclosures to consumers and keep records of those disclosures. N o questions of a sensitive nature are asked of respondents.5 12. Estimated Burden of Information Collection

Labor Hours : 5,500

Exhibit 1: Burden Hour Summary

The CFPB and Federal Trade Commission (FTC) share enforcement authority for those non

- depository institutions subject to the CFPB’s regulation M , with the CFPB assuming burden for half of all non

- depositor y institutions. Our estimate excludes burden for moto r vehicle dealers, which the FTC assumes burden for. The CFPB believes that depository institutions represent a negligible segment of the leasing market.

The CFPB estimate s t he total labor burden for ongoing recordkeeping and disclosure requirements u nder Regulation M to be 11,000 hours for non

- motor vehicle lessors

. T he CFPB

assumes 5,500 hours of this burden associated with regulation M . The CFPB estimates of respondent and market volumes are drawn from a number of public and proprietary sources. 1

Associated Labor Cost : $ 197,945

The CFPB calculated labor costs by estimating the burden hours associated with complying with the required disclosures, advertising disclosures, and recordkeeping activates

1 Market size sources include int ernal CFPB automobile markets data, Mintel ® auto advertising data, publicly available Census data on County Business Patterns (2013

- 2014), and previous FTC estimate under OMB 3084

- 0086 (2012). Regulation Description No. of Respondents Responses

per Respondent Average Response Time (hrs.) Total

Hours No. of Respondents Responses

per Respondent Average Response Time (hrs.) Total

Hours Combined
Total

1013.3 Requires Disclosures
described in 1013.4 376 1 4.39 1,652 13,718 12 0.01 1,235 2,887

1013.4(a) through (e), g(1), h(1)(2),(i) through (t) Content of disclosures required by 1013.3 for any "consumer lease" 376 1 4.39 1,652 13,718 12 0.01 1,235 2,887

1013.5 (a) through (c) Extends disclosure requirements of 1013.3 to lease renogetiation
and extension 376 1 4.39 1,652 13,718 12 0.01 1,235 2,887

1013.7(a) through (e) Advertising disclosures 0 0 N/A 0 0 0 N/A 0 0

1013.7(f) Advertising disclosures on TV/Radio
alternative requirements 0 0 N/A 0 0 0 N/A 0 0

1013.8 Recordkeeping 376 1 4.39 1,652 13,718 12 0.00 686 2,338

Other Lessors Total 6,610 4,390 11,000 CFPB portion 3,305 2,195 5,500 Non-Motor-Vehicle Lessors Labor Burden

One time Ongoing6 described in Exhibit 1

, 2 and applying appropriate hourly cost figures

. 3 With a composite wage of $35.99, the cost for these labor hours then works out to be 11,000 hours * $35.99 /hour = $395,890 labor cost overall, of which 5,500 hours * $35.99 /hour = $197,945 labor cost is attributed to the CFPB.

13. Estimated Total Annual Cost Burden to Respondents or Recordkeepers

Additional Material s Cost : $ 14,789

Exhibit 2 : Additional Materials Cost

The CFPB claims responsibility for an additional $ 14.789 in non

- motor

- vehicle lessor’s burden resulting from material costs directly related to the information collections in Exhibit 2. The material cost s of disclosures were estimated based on industry and supervisory estimates as well as previous FTC estimates of per

- transaction burden

. 4 The num ber of respondents and market sizes were estimated from proprietary and public data sources available to the CFPB. 5

2 These hourly estimates were based on previous PRA estimates compiled by the FTC; see OMB 3084

- 0086 (2012).

3 Wage burden was calculated as a composite wage, with weighting based on previous estimates and information provided by various industry profession als. Median values from the BLS Occupational Employment and Wages data were used to estimate a composite wage as 5% Compliance Officer (occupation code 13

- 1041) at $30.93/hour, 5% Sales Manager (occupation code 11

- 2022) at $52.18/hour), 45% Lawyer at $54.9 5/hour (occupation code 23

- 1011 ), and 45% admin istrative assistant (occupation code 43

- 6014) at $15.79/hour)

, for a composite wage of $35.99

. 4 See 2 above.

5 Market size sources include internal CFPB automobile markets data, Mintel ® auto advertising data, publicly available Census data on County Business Patterns (2013

- 2014), and previous FTC estimates (see 4 above). Regulation Type No. of Respondents Responses

per Respondent Cost per Response Total

1013.3 Requires Disclosures described in

1013.4 13,718 12 $0.06 9,136 $

1013.4(a) through (e), g(1), h(1)(2),(i) through (t) Content of disclosures required by 1013.3 for any "consumer lease" 13,718 12 $0.06 9,136 $

1013.5 (a) through (c) Extends disclosure requirements of 1013.3 to lease renogetiation and

extension 13,718 12 $0.06 9,136 $

1013.7(a) through (e) Advertising disclosures 0 0 $0.00

- $

1013.7(f) Advertising disclosures on TV/Radio alternative requirements 0 0 $0.00

- $

1013.8 Recordkeeping 13,718 12 $0.01 2,170 $

Other Lessors Total 29,578 $
CFPB portion 14,789 $ Non-Motor-Vehicle Materials Burden7 14. Estimated Cost to the Federal Government

As the CFPB does not collect any information, there are no additional costs to the Federal
Government.

15. Program Changes or Adjustments

Exhibit 3: Summary of Burden Changes

Total Respondents Annual Responses Burden
Hours Material s Cost

Total Annual Burden Requested 13,718 164

, 616 5,500 $ 14

, 789
Current OMB Inventory 67,858 67,858 100, 0 58 $ 0

Difference

- 54,140 96

, 758

- 94558 $ 14

, 789

Program Change 0 0 0 $ 0

Discretionary 0 0 0 $ 0

New Statue 0 0 0 $ 0

Violation 0 0 0 $ 0 Adjustment

- 54,140 96

, 758

- 9 4

, 558 $ 14

, 789

The new estimates calculated by the CFPB reflect a decrease of

- 9 4

, 5 58 burden hours and an increase of $ 1 4

, 7 89 of material cost burden . The estimate d burden hours are lower than CFPB and FTC ’ s previous estimates for several reasons. First and foremost, the decrease in burden hours represents a significant drop in the estimated number of non

- motor

- vehicle lessors in the past 3 years. Secondly, the CFPB estimate excludes one

- time costs that were associated with rule changes in previous estimates

, and also excludes previo usly reported burden associated with motor

- vehicle enforcement (the FTC assumes all burden related to motor vehicle leasing). The increase in m aterial cost arises because we provide an estimate for the small material burden associated with each lease transaction

. The decision to estimate per

- transaction costs as material burden reflects the CFPB’s belief that the process of providing disclosures and recordkeeping has become almost entirely automated , but that there is a small c ost of printing and technology costs associated with each additional lease.

16. Plans for Tabulation, Statistical Analysis, and Publication

There are no plans to provide any publications based on the information collection of this regulation.

17. Display of Expiration Date8 The only form s associated with the collection are non

- mandatory model forms, therefore display of the OMB control Number and expiration date on them would not be appropriate

. The
O MB number will be displayed in the Code of Federal Regulations. Further, the OMB cont rol number and expiration date will be displayed on the Federal government’s electronic PRA
docket at www.reginfo.gov

.

18. Exceptions to the Certification Requirement

The Bureau certifies that this collection of information is consistent with the requirements of 5 CFR 1320.9, and the related provisions of 5 CFR 1320.8(b)(3) and is not seeking an exemption to these certification requirements.