78500 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 

1Public Law 111–203, 124 Stat. 1376 (2010). 

2Section 1029 of the Dodd-Frank Act generally 

excludes from this transfer of authority, subject to 

certain exceptions, any rulemaking authority over a 

motor vehicle dealer that is predominantly engaged 

in the sale and servicing of motor vehicles, the 

leasing and servicing of motor vehicles, or both. 3See 76 FR 35721 (June 20, 2011). 

BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

12 CFR Part 1013 

[Docket No. CFPB–2011–0026] 

RIN 3170–AA06 

Consumer Leasing (Regulation M) 

AGENCY: Bureau of Consumer Financial 

Protection. 

ACTION: Interim final rule with request 

for public comment. 

SUMMARY: Title X of the Dodd-Frank 

Wall Street Reform and Consumer 

Protection Act (Dodd-Frank Act) 

transferred rulemaking authority for a 

number of consumer financial 

protection laws from seven Federal 

agencies to the Bureau of Consumer 

Financial Protection (Bureau) as of July 

21, 2011. The Bureau is in the process 

of republishing the regulations 

implementing those laws with technical 

and conforming changes to reflect the 

transfer of authority and certain other 

changes made by the Dodd-Frank Act. 

In light of the transfer of the Board of 

Governors of the Federal Reserve 

System’s (Board’s) rulemaking authority 

for the Consumer Leasing Act of 1976 

(CLA) to the Bureau, the Bureau is 

publishing for public comment an 

interim final rule establishing a new 

Regulation M (Consumer Leasing). This 

interim final rule does not impose any 

new substantive obligations on persons 

subject to the existing Regulation M, 

previously published by the Board. 

DATES: This interim final rule is 

effective December 30, 2011. Comments 

must be received on or before February 

17, 2012. 

ADDRESSES: You may submit comments, 

identified by Docket No. CFPB–2011– 

0026 or RIN 3170–AA06, by any of the 

following methods: 

• Electronic: http://www.regulations.

gov. Follow the instructions for 

submitting comments. 

• Mail: Monica Jackson, Office of the 

Executive Secretary, Bureau of 

Consumer Financial Protection, 1500 

Pennsylvania Avenue NW., (Attn: 1801 

L Street), Washington, DC 20220. 

• Hand Delivery/Courier in Lieu of 

Mail: Monica Jackson, Office of the 

Executive Secretary, Bureau of 

Consumer Financial Protection, 1700 G 

Street NW., Washington, DC 20006. 

All submissions must include the 

agency name and docket number or 

Regulatory Information Number (RIN) 

for this rulemaking. In general, all 

comments received will be posted 

without change to http://www.

regulations.gov. In addition, comments 

will be available for public inspection 

and copying at 1700 G Street NW., 

Washington, DC 20006, on official 

business days between the hours of 10 

a.m. and 5 p.m. Eastern Time. You can 

make an appointment to inspect the 

documents by telephoning (202) 435– 

7275. 

All comments, including attachments 

and other supporting materials, will 

become part of the public record and 

subject to public disclosure. Sensitive 

personal information, such as account 

numbers or social security numbers, 

should not be included. Comments will 

not be edited to remove any identifying 

or contact information. 

FOR FURTHER INFORMATION CONTACT: 

Courtney Jean or Priscilla Walton-Fein, 

Office of Regulations, at (202) 435–7700. 

SUPPLEMENTARY INFORMATION: 

I. Background 

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 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 and the 

lessee’s total contractual obligation 

under the lease exceeds a specified 

dollar threshold. Historically, the CLA 

has been implemented in Regulation M 

of the Board of Governors of the Federal 

Reserve System (Board), 12 CFR Part 

213. The Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

(Dodd-Frank Act) 1 amended a number 

of consumer financial protection laws, 

including the CLA. In addition to 

various substantive amendments, the 

Dodd-Frank Act transferred rulemaking 

authority for the CLA to the Bureau of 

Consumer Financial Protection 

(Bureau), effective July 21, 2011.2See 

sections 1061, 1100A, and 1100E of the 

Dodd-Frank Act. Pursuant to the DoddFrank Act and the CLA, as amended, the 

Bureau is publishing for public 

comment an interim final rule 

establishing a new Regulation M 

(Consumer Leasing), 12 CFR Part 1013, 

implementing the CLA (except with 

respect to persons excluded from the 

Bureau’s rulemaking authority by 

section 1029 of the Dodd-Frank Act). 

II. Summary of the Interim Final Rule 

A. General 

The interim final rule substantially 

duplicates the Board’s Regulation M as 

the Bureau’s new Regulation M, 12 CFR 

Part 1013, making only certain nonsubstantive, technical, formatting, and 

stylistic changes. To minimize any 

potential confusion, the Bureau is 

preserving the numbering of the Board’s 

Regulation M, other than the new part 

number. While this interim final rule 

generally incorporates the Board’s 

existing regulatory text, appendices 

(including model forms and clauses), 

and supplements, as amended,3 the rule 

has been edited as necessary to reflect 

nomenclature and other technical 

amendments required by the DoddFrank Act. Notably, this interim final 

rule does not impose any new 

substantive obligations on regulated 

entities. 

B. Specific Changes 

The Bureau has made certain 

nomenclature and other non-substantive 

changes consistently throughout 

Regulation M. References to the Board 

and its administrative structure have 

been replaced with references to the 

Bureau. Conforming edits have been 

made to internal cross-references and to 

reflect the scope of the Bureau’s 

authority pursuant to the CLA, as 

amended by the Dodd-Frank Act. 

Appendix B, entitled ‘‘Federal 

Enforcement Agencies,’’ has been 

eliminated, because it was designed to 

be informational only and is 

unnecessary for purposes of 

implementing the CLA, as amended. 

Historical references that are no longer 

applicable, and references to effective 

dates that have passed, have been 

removed as appropriate. 

III. Legal Authority 

A. Rulemaking Authority 

The Bureau is issuing this interim 

final rule pursuant to its authority under 

the CLA and the Dodd-Frank Act. 

Effective July 21, 2011, section 1061 of 

the Dodd-Frank Act transferred to the 

Bureau the ‘‘consumer financial 

protection functions’’ previously vested 

in certain other Federal agencies. The 

term ‘‘consumer financial protection 

function’’ is defined to include ‘‘all 

authority to prescribe rules or issue 

orders or guidelines pursuant to any 


srobinson on DSK4SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 78501 

4Public Law 111–203, section 1061(a)(1). 

Effective on the designated transfer date, July 21, 

2011, the Bureau was also granted ‘‘all powers and 

duties’’ vested in each of the Federal agencies, 

relating to the consumer financial protection 

functions, on the day before the designated transfer 

date. Until this and other interim final rules take 

effect, existing regulations for which rulemaking 

authority transferred to the Bureau continue to 

govern persons covered by this rule. See 76 FR 

43569 (July 21, 2011). 

5Public Law 111–203, section 1002(14) (defining 

‘‘Federal consumer financial law’’ to include the 

‘‘enumerated consumer laws’’); id. Section 1002(12) 

(defining ‘‘enumerated consumer laws’’ to include 

the Consumer Leasing Act of 1976). 

6Section 1066 of the Dodd-Frank Act grants the 

Secretary of the Treasury interim authority to 

perform certain functions of the Bureau. Pursuant 

to that authority, Treasury is publishing this interim 

final rule on behalf of the Bureau. 

7 Id. Section 1100A(10); 15 U.S.C. 1667f(a). 

8 Id. 

9 Id. 

10Public Law 111–203, section 1100E. 

11See Regulation M, 12 CFR Part 213. 

12 5 U.S.C. 551 et seq. 

13 5 U.S.C. 553(b), (c). 

14 5 U.S.C. 553(b)(3)(A), (B). 

15This interim final rule is one of 14 companion 

rulemakings that together restate and recodify the 

implementing regulations under 14 existing 

consumer financial laws (part III.C, below, lists the 

14 laws involved). In the interest of proper 

coordination of this overall regulatory framework, 

which includes numerous cross-references among 

some of the regulations, the Bureau is establishing 

the same effective date of December 30, 2011 for 

those rules published on or before that date and 

making those published thereafter (if any) effective 

immediately. 

16Section 1022(b)(2)(A) of the Dodd-Frank Act 

addresses the consideration of the potential benefits 

and costs of regulation to consumers and covered 

persons, including the potential reduction of access 

by consumers to consumer financial products or 

services; the impact on depository institutions and 

credit unions with $10 billion or less in total assets 

as described in section 1026 of the Dodd-Frank Act; 

and the impact on consumers in rural areas. Section 

1022(b)(2)(B) requires that the Bureau ‘‘consult with 

the appropriate prudential regulators or other 

Federal agencies prior to proposing a rule and 

during the comment process regarding consistency 

with prudential, market, or systemic objectives 

administered by such agencies.’’ The manner and 

extent to which these provisions apply to interim 

final rules and to benefits, costs, and impacts that 

are compelled by statutory changes rather than 

discretionary Bureau action is unclear. 

Nevertheless, to inform this rulemaking more fully, 

the Bureau performed the described analyses and 

consultations. 

Federal consumer financial law, 

including performing appropriate 

functions to promulgate and review 

such rules, orders, and guidelines.’’ 4

The CLA is a Federal consumer 

financial law.5 Accordingly, effective 

July 21, 2011, except with respect to 

persons excluded from the Bureau’s 

rulemaking authority by section 1029 of 

the Dodd-Frank Act, the authority of the 

Board to issue regulations pursuant to 

the CLA transferred to the Bureau.6

The CLA, as amended, authorizes the 

Bureau 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 the Bureau 

determines such action necessary to 

carry out the purposes, prevent the 

circumvention, or facilitate compliance 

with the requirements of the CLA.7

These regulations may contain such 

classifications and differentiations, or 

provide for such adjustments and 

exceptions for any class of transactions, 

that the Bureau considers appropriate.8

The CLA also directs the Bureau to 

establish and publish model forms to 

facilitate compliance with the 

disclosure requirements of the CLA and 

to aid consumers in understanding the 

transactions to which the disclosure 

forms relate.9 Section 1100E of the 

Dodd-Frank Act directs the Bureau to 

adjust the dollar threshold for covered 

consumer lease transactions 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.10 In its 

existing regulation, the Board used its 

CLA authority to establish rules to 

promote meaningful and accurate 

disclosure in consumer lease 

transactions.11

B. Authority To Issue an Interim Final 

Rule Without Prior Notice and Comment 

The Administrative Procedure Act 

(APA) 12 generally requires public 

notice and an opportunity to comment 

before promulgation of regulations.13

The APA provides exceptions to noticeand-comment procedures, however, 

where an agency for good cause finds 

that such procedures are impracticable, 

unnecessary, or contrary to the public 

interest or when a rulemaking relates to 

agency organization, procedure, and 

practice.14 The Bureau finds that there 

is good cause to conclude that providing 

notice and opportunity for comment 

would be unnecessary and contrary to 

the public interest under these 

circumstances. In addition, substantially 

all the changes made by this interim 

final rule, which were necessitated by 

the Dodd-Frank Act’s transfer of CLA 

authority from the Board to the Bureau, 

relate to agency organization, procedure, 

and practice and are thus exempt from 

the APA’s notice-and-comment 

requirements. 

The Bureau’s good cause findings are 

based on the following considerations. 

As an initial matter, the Board’s existing 

regulation was a result of notice-andcomment rulemaking to the extent 

required. Moreover, the interim final 

rule published today does not impose 

any new, substantive obligations on 

regulated entities. Rather, the interim 

final rule makes only non-substantive, 

technical changes to the existing text of 

the regulation, such as renumbering, 

changing internal cross-references, and 

replacing appropriate nomenclature to 

reflect the transfer of authority to the 

Bureau. Given the technical nature of 

these changes, and the fact that the 

interim final rule does not impose any 

additional substantive requirements on 

covered entities, an opportunity for 

prior public comment is unnecessary. In 

addition, recodifying the Board’s 

regulation to reflect the transfer of 

authority to the Bureau will help 

facilitate compliance with the CLA and 

its implementing regulation, and will 

help reduce uncertainty regarding the 

applicable regulatory framework. Using 

notice-and-comment procedures would 

delay this process and thus be contrary 

to the public interest. 

The APA generally requires that rules 

be published not less than 30 days 

before their effective dates. See 5 U.S.C. 

553(d). As with the notice and comment 

requirement, however, the APA allows 

an exception when ‘‘otherwise provided 

by the agency for good cause found and 

published with the rule.’’ 5 U.S.C. 

553(d)(3). The Bureau finds that there is 

good cause for providing less than 30 

days notice here. A delayed effective 

date would harm consumers and 

regulated entities by needlessly 

perpetuating discrepancies between the 

amended statutory text and the 

implementing regulation, thereby 

hindering compliance and prolonging 

uncertainty regarding the applicable 

regulatory framework.15

In addition, delaying the effective 

date of the interim final rule for 30 days 

would provide no practical benefit to 

regulated entities in this context and in 

fact could operate to their detriment. As 

discussed above, the interim final rule 

published today does not impose any 

new, substantive obligations on 

regulated entities. Instead, the rule 

makes only non-substantive, technical 

changes to the existing text of the 

regulation. Thus, regulated entities that 

are already in compliance with the 

existing rules will not need to modify 

business practices as a result of this 

rule. 

C. Section 1022(b)(2) of the Dodd-Frank 

Act 

In developing the interim final rule, 

the Bureau has conducted an analysis of 

potential benefits, costs, and impacts.16

The Bureau believes that the interim 

final rule will benefit consumers and 


srobinson on DSK4SPTVN1PROD with RULES
78502 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 

17The fourteen laws implemented by this and its 

companion rulemakings are: the Consumer Leasing 

Act, the Electronic Fund Transfer Act (except with 

respect to section 920 of that Act), the Equal Credit 

Opportunity Act, the Fair Credit Reporting Act 

(except with respect to sections 615(e) and 628 of 

that act), the Fair Debt Collection Practices Act, 

Subsections (b) through (f) of section 43 of the 

Federal Deposit Insurance Act, sections 502 through 

509 of the Gramm-Leach-Bliley Act (except for 

section 505 as it applies to section 501(b)), the 

Home Mortgage Disclosure Act, the Real Estate 

Settlement Procedures Act, the S.A.F.E. Mortgage 

Licensing Act, the Truth in Lending Act, the Truth 

in Savings Act, section 626 of the Omnibus 

Appropriations Act, 2009, and the Interstate Land 

Sales Full Disclosure Act. 

18 In light of the technical but voluminous nature 

of this recodification project, the Bureau focused 

the consultation process on a representative sample 

of the recodified regulations, while making 

information on the other regulations available. The 

Bureau expects to conduct differently its future 

consultations regarding substantive rulemakings. 

19 5 U.S.C. 601 et seq. 

20 5 U.S.C. 603, 604. 

21 5 U.S.C. 609. 

22 5 U.S.C. 603(a), 604(a); 5 U.S.C. 553(b)(B). 23 5 U.S.C. 609(b). 

covered persons by updating and 

recodifying Regulation M to reflect the 

transfer of authority to the Bureau and 

certain other changes mandated by the 

Dodd-Frank Act. This will help 

facilitate compliance with the CLA and 

its implementing regulations and help 

reduce any uncertainty regarding the 

applicable regulatory framework. As 

discussed below, the interim final rule 

will not impose any new substantive 

obligations on consumers or covered 

persons and is not expected to have any 

impact on consumers’ access to 

consumer financial products and 

services. 

Although not required by the interim 

final rule, covered persons may incur 

some costs in updating compliance 

manuals and related materials to reflect 

the new numbering and other technical 

changes reflected in the new Regulation 

M. The Bureau has worked to reduce 

any such burden by preserving the 

existing numbering to the extent 

possible and believes that such costs 

will likely be minimal. These changes 

could be handled in the short term by 

providing a short, standalone summary 

alerting users to the changes and in the 

long term could be combined with other 

updates at the firm’s convenience. The 

Bureau intends to continue investigating 

the possible costs to affected entities of 

updating manuals and related materials 

to reflect these changes and solicits 

comments on this and other issues 

discussed in this section. 

The interim final rule will have no 

unique impact on depository 

institutions or credit unions with $10 

billion or less in assets as described in 

section 1026(a) of the Dodd-Frank Act. 

Also, the interim final rule will have no 

unique impact on rural consumers. 

In undertaking the process of 

recodifying Regulation M, as well as 

regulations implementing thirteen other 

existing consumer financial laws,17 the 

Bureau consulted the Federal Deposit 

Insurance Corporation, the Office of the 

Comptroller of the Currency, the 

National Credit Union Administration, 

the Board of Governors of the Federal 

Reserve System, the Federal Trade 

Commission, and the Department of 

Housing and Urban Development, 

including with respect to consistency 

with any prudential, market, or systemic 

objectives that may be administered by 

such agencies.18 The Bureau also has 

consulted with the Office of 

Management and Budget for technical 

assistance. The Bureau expects to have 

further consultations with the 

appropriate Federal agencies during the 

comment period. 

IV. Request for Comment 

Although notice and comment 

rulemaking procedures are not required, 

the Bureau invites comments on this 

notice. Commenters are specifically 

encouraged to identify any technical 

issues raised by the rule. The Bureau is 

also seeking comment in response to a 

notice published at 76 FR 75825 (Dec. 

5, 2011) concerning its efforts to identify 

priorities for streamlining regulations 

that it has inherited from other Federal 

agencies to address provisions that are 

outdated, unduly burdensome, or 

unnecessary. 

V. Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA), 

as amended by the Small Business 

Regulatory Enforcement Fairness Act of 

1996, requires each agency to consider 

the potential impact of its regulations on 

small entities, including small 

businesses, small governmental units, 

and small not-for-profit organizations.19

The RFA generally requires an agency to 

conduct an initial regulatory flexibility 

analysis (IRFA) and a final regulatory 

flexibility analysis (FRFA) of any rule 

subject to notice-and-comment 

rulemaking requirements, unless the 

agency certifies that the rule will not 

have a significant economic impact on 

a substantial number of small entities.20

The Bureau also is subject to certain 

additional procedures under the RFA 

involving the convening of a panel to 

consult with small business 

representatives prior to proposing a rule 

for which an IRFA is required.21

The IRFA and FRFA requirements 

described above apply only where a 

notice of proposed rulemaking is 

required,22 and the panel requirement 

applies only when a rulemaking 

requires an IRFA.23 As discussed above 

in part III, a notice of proposed 

rulemaking is not required for this 

rulemaking. 

In addition, as discussed above, this 

interim final rule has only a minor 

impact on entities subject to Regulation 

M. The rule imposes no new, 

substantive obligations on covered 

entities. Accordingly, the undersigned 

certifies that this interim final rule will 

not have a significant economic impact 

on a substantial number of small 

entities. 

VI. Paperwork Reduction Act 

The Bureau may not conduct or 

sponsor, and a respondent is not 

required to respond to, an information 

collection unless it displays a currently 

valid Office of Management and Budget 

(OMB) control number. This rule 

contains information collection 

requirements under the Paperwork 

Reduction Act (PRA), which have been 

previously approved by OMB, and the 

ongoing PRA burden for which is 

unchanged by this rule. There are no 

new information collection 

requirements in this interim final rule. 

The Bureau’s OMB control number for 

this information collection is: 3170– 

0006. 

List of Subjects in 12 CFR Part 1013 

Advertising, Reporting and 

recordkeeping requirements, Truth in 

Lending. 

Authority and Issuance 

■ For the reasons set forth above, the 

Bureau of Consumer Financial 

Protection adds Part 1013 to Chapter X 

in Title 12 of the Code of Federal 

Regulations to read as follows: 

PART 1013—CONSUMER LEASING 

(REGULATION M) 

Sec. 

1013.1 Authority, scope, purpose, and 

enforcement. 

1013.2 Definitions. 

1013.3 General disclosure requirements. 

1013.4 Content of disclosures. 

1013.5 Renegotiations, extensions, and 

assumptions. 

1013.6 [Reserved] 

1013.7 Advertising. 

1013.8 Record retention. 

1013.9 Relation to state laws. 

Appendix A to Part 1013—Model Forms 

Appendix B to Part 1013—[Reserved] 

Appendix C to Part 1013—Issuance of 

Official Interpretations 

Supplement I to Part 1013—Official 

Interpretations 

Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 

1604, 1667f. 


srobinson on DSK4SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 78503 

§ 1013.1 Authority, scope, purpose, and 

enforcement. 

(a) Authority. The regulation in this 

part, known as Regulation M, is issued 

by the Bureau of Consumer Financial 

Protection to implement the consumer 

leasing provisions of the Truth in 

Lending Act, which is Title I of the 

Consumer Credit Protection Act, as 

amended (15 U.S.C. 1601 et seq.). 

Information collection requirements 

contained in this part have been 

approved by the Office of Management 

and Budget under the provisions of 44 

U.S.C. 3501 et seq. and have been 

assigned OMB control number 3170– 

0006. 

(b) Scope and purpose. This part 

applies to all persons that are lessors of 

personal property under consumer 

leases as those terms are defined in 

§ 1013.2(e)(1) and (h), except persons 

excluded from coverage of this part by 

section 1029 of the Consumer Financial 

Protection Act of 2010, Title X of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank 

Act), Public Law 111–203, 124 Stat. 

1376. The purpose of this part is: 

(1) To ensure that lessees of personal 

property receive meaningful disclosures 

that enable them to compare lease terms 

with other leases and, where 

appropriate, with credit transactions; 

(2) To limit the amount of balloon 

payments in consumer lease 

transactions; and 

(3) To provide for the accurate 

disclosure of lease terms in advertising. 

(c) Enforcement and liability. Section 

108 of the Act contains the 

administrative enforcement provisions. 

Sections 112, 130, 131, and 185 of the 

Act contain the liability provisions for 

failing to comply with the requirements 

of the Act and this part. 

§ 1013.2 Definitions. 

For the purposes of this part the 

following definitions apply: 

(a) Act means the Truth in Lending 

Act (15 U.S.C. 1601 et seq.) and the 

Consumer Leasing Act is Chapter 5 of 

the Truth in Lending Act. 

(b) Advertisement means a 

commercial message in any medium 

that directly or indirectly promotes a 

consumer lease transaction. 

(c) Bureau refers to the Bureau of 

Consumer Financial Protection. 

(d) Closed-end lease means a 

consumer lease other than an open-end 

lease as defined in this section. 

(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 

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.’’ 

(2) The term does not include a lease 

that meets the definition of a credit sale 

in Regulation Z (12 CFR 226.2(a)). It also 

does not include a lease for agricultural, 

business, or commercial purposes or a 

lease made to an organization. 

(3) This part does not apply to a lease 

transaction of personal property which 

is incident to the lease of real property 

and which provides that: 

(i) The lessee has no liability for the 

value of the personal property at the end 

of the lease term except for abnormal 

wear and tear; and 

(ii) The lessee has no option to 

purchase the leased property. 

(f) Gross capitalized cost means the 

amount agreed upon by the lessor and 

the lessee as the value of the leased 

property and any items that are 

capitalized or amortized during the 

lease term, including but not limited to 

taxes, insurance, service agreements, 

and any outstanding prior credit or lease 

balance. Capitalized cost reduction 

means the total amount of any rebate, 

cash payment, net trade-in allowance, 

and noncash credit that reduces the 

gross capitalized cost. The adjusted 

capitalized cost equals the gross 

capitalized cost less the capitalized cost 

reduction, and is the amount used by 

the lessor in calculating the base 

periodic payment. 

(g) Lessee means a natural person who 

enters into or is offered a consumer 

lease. 

(h) Lessor means a person who 

regularly leases, offers to lease, or 

arranges for the lease of personal 

property under a consumer lease. A 

person who has leased, offered, or 

arranged to lease personal property 

more than five times in the preceding 

calendar year or more than five times in 

the current calendar year is subject to 

the Act and this part. 

(i) Open-end lease means a consumer 

lease in which the lessee’s liability at 

the end of the lease term is based on the 

difference between the residual value of 

the leased property and its realized 

value. 

(j) Organization means a corporation, 

trust, estate, partnership, cooperative, 

association, or government entity or 

instrumentality. 

(k) Person means a natural person or 

an organization. 

(l) Personal property means any 

property that is not real property under 

the law of the state where the property 

is located at the time it is offered or 

made available for lease. 

(m) Realized value means: 

(1) The price received by the lessor for 

the leased property at disposition; 

(2) The highest offer for disposition of 

the leased property; or 

(3) The fair market value of the leased 

property at the end of the lease term. 

(n) Residual value means the value of 

the leased property at the end of the 

lease term, as estimated or assigned at 

consummation by the lessor, used in 

calculating the base periodic payment. 

(o) Security interest and security mean 

any interest in property that secures the 

payment or performance of an 

obligation. 

(p) State means any state, the District 

of Columbia, the Commonwealth of 

Puerto Rico, and any territory or 

possession of the United States. 

§ 1013.3 General disclosure requirements. 

(a) General requirements. A lessor 

shall make the disclosures required by 

§ 1013.4, as applicable. The disclosures 

shall be made clearly and conspicuously 

in writing in a form the consumer may 

keep, in accordance with this section. 

The disclosures required by this part 

may be provided to the lessee in 

electronic form, subject to compliance 

with the consumer consent and other 

applicable provisions of the Electronic 

Signatures in Global and National 

Commerce Act (E-Sign Act) (15 U.S.C. 

7001 et seq.). For an advertisement 

accessed by the consumer in electronic 

form, the disclosures required by 

§ 1013.7 may be provided to the 

consumer in electronic form in the 

advertisement, without regard to the 

consumer consent or other provisions of 

the E-Sign Act. 

(1) Form of disclosures. The 

disclosures required by § 1013.4 shall be 

given to the lessee together in a dated 

statement that identifies the lessor and 

the lessee; the disclosures may be made 

either in a separate statement that 

identifies the consumer lease 

transaction or in the contract or other 

document evidencing the lease. 

Alternatively, the disclosures required 

to be segregated from other information 

under paragraph (a)(2) of this section 

may be provided in a separate dated 

statement that identifies the lease, and 

the other required disclosures may be 


srobinson on DSK4SPTVN1PROD with RULES
78504 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 

provided in the lease contract or other 

document evidencing the lease. In a 

lease of multiple items, the property 

description required by § 1013.4(a) may 

be given in a separate statement that is 

included in the disclosure statement 

required by this paragraph. 

(2) Segregation of certain disclosures. 

The following disclosures shall be 

segregated from other information and 

shall contain only directly related 

information: §§ 1013.4(b) through (f), 

(g)(2), (h)(3), (i)(1), (j), and (m)(1). The 

headings, content, and format for the 

disclosures referred to in this paragraph 

(a)(2) shall be provided in a manner 

substantially similar to the applicable 

model form in Appendix A of this part. 

(3) Timing of disclosures. A lessor 

shall provide the disclosures to the 

lessee prior to the consummation of a 

consumer lease. 

(4) Language of disclosures. The 

disclosures required by § 1013.4 may be 

made in a language other than English 

provided that they are made available in 

English upon the lessee’s request. 

(b) Additional information; 

nonsegregated disclosures. Additional 

information may be provided with any 

disclosure not listed in paragraph (a)(2) 

of this section, but it shall not be stated, 

used, or placed so as to mislead or 

confuse the lessee or contradict, 

obscure, or detract attention from any 

disclosure required by this part. 

(c) Multiple lessors or lessees. When 

a transaction involves more than one 

lessor, the disclosures required by this 

part may be made by one lessor on 

behalf of all the lessors. When a lease 

involves more than one lessee, the 

lessor may provide the disclosures to 

any lessee who is primarily liable on the 

lease. 

(d) Use of estimates. If an amount or 

other item needed to comply with a 

required disclosure is unknown or 

unavailable after reasonable efforts have 

been made to ascertain the information, 

the lessor may use a reasonable estimate 

that is based on the best information 

available to the lessor, is clearly 

identified as an estimate, and is not 

used to circumvent or evade any 

disclosures required by this part. 

(e) Effect of subsequent occurrence. If 

a required disclosure becomes 

inaccurate because of an event occurring 

after consummation, the inaccuracy is 

not a violation of this part. 

(f) Minor variations. A lessor may 

disregard the effects of the following in 

making disclosures: 

(1) That payments must be collected 

in whole cents; 

(2) That dates of scheduled payments 

may be different because a scheduled 

date is not a business day; 

(3) That months have different 

numbers of days; and 

(4) That February 29 occurs in a leap 

year. 

§ 1013.4 Content of disclosures. 

For any consumer lease subject to this 

part, the lessor shall disclose the 

following information, as applicable: 

(a) Description of property. A brief 

description of the leased property 

sufficient to identify the property to the 

lessee and lessor. 

(b) Amount due at lease signing or 

delivery. The total amount to be paid 

prior to or at consummation or by 

delivery, if delivery occurs after 

consummation, using the term ‘‘amount 

due at lease signing or delivery.’’ The 

lessor shall itemize each component by 

type and amount, including any 

refundable security deposit, advance 

monthly or other periodic payment, and 

capitalized cost reduction; and in motor 

vehicle leases, shall itemize how the 

amount due will be paid, by type and 

amount, including any net trade-in 

allowance, rebates, noncash credits, and 

cash payments in a format substantially 

similar to the model forms in Appendix 

A of this part. 

(c) Payment schedule and total 

amount of periodic payments. The 

number, amount, and due dates or 

periods of payments scheduled under 

the lease, and the total amount of the 

periodic payments. 

(d) Other charges. The total amount of 

other charges payable to the lessor, 

itemized by type and amount, that are 

not included in the periodic payments. 

Such charges include the amount of any 

liability the lease imposes upon the 

lessee at the end of the lease term; the 

potential difference between the 

residual and realized values referred to 

in paragraph (k) of this section is 

excluded. 

(e) Total of payments. The total of 

payments, with a description such as 

‘‘the amount you will have paid by the 

end of the lease.’’ This amount is the 

sum of the amount due at lease signing 

(less any refundable amounts), the total 

amount of periodic payments (less any 

portion of the periodic payment paid at 

lease signing), and other charges under 

paragraphs (b), (c), and (d) of this 

section. In an open-end lease, a 

description such as ‘‘you will owe an 

additional amount if the actual value of 

the vehicle is less than the residual 

value’’ shall accompany the disclosure. 

(f) Payment calculation. In a motor 

vehicle lease, a mathematical 

progression of how the scheduled 

periodic payment is derived, in a format 

substantially similar to the applicable 

model form in Appendix A of this part, 

which shall contain the following: 

(1) Gross capitalized cost. The gross 

capitalized cost, including a disclosure 

of the agreed upon value of the vehicle, 

a description such as ‘‘the agreed upon 

value of the vehicle [state the amount] 

and any items you pay for over the lease 

term (such as service contracts, 

insurance, and any outstanding prior 

credit or lease balance),’’ and a 

statement of the lessee’s option to 

receive a separate written itemization of 

the gross capitalized cost. If requested 

by the lessee, the itemization shall be 

provided before consummation. 

(2) Capitalized cost reduction. The 

capitalized cost reduction, with a 

description such as ‘‘the amount of any 

net trade-in allowance, rebate, noncash 

credit, or cash you pay that reduces the 

gross capitalized cost.’’ 

(3) Adjusted capitalized cost. The 

adjusted capitalized cost, with a 

description such as ‘‘the amount used in 

calculating your base [periodic] 

payment.’’ 

(4) Residual value. The residual value, 

with a description such as ‘‘the value of 

the vehicle at the end of the lease used 

in calculating your base [periodic] 

payment.’’ 

(5) Depreciation and any amortized 

amounts. The depreciation and any 

amortized amounts, which is the 

difference between the adjusted 

capitalized cost and the residual value, 

with a description such as ‘‘the amount 

charged for the vehicle’s decline in 

value through normal use and for any 

other items paid over the lease term.’’ 

(6) Rent charge. The rent charge, with 

a description such as ‘‘the amount 

charged in addition to the depreciation 

and any amortized amounts.’’ This 

amount is the difference between the 

total of the base periodic payments over 

the lease term minus the depreciation 

and any amortized amounts. 

(7) Total of base periodic payments. 

The total of base periodic payments 

with a description such as ‘‘depreciation 

and any amortized amounts plus the 

rent charge.’’ 

(8) Lease payments. The lease 

payments with a description such as 

‘‘the number of payments in your 

lease.’’ 

(9) Base periodic payment. The total 

of the base periodic payments divided 

by the number of payment periods in 

the lease. 

(10) Itemization of other charges. An 

itemization of any other charges that are 

part of the periodic payment. 

(11) Total periodic payment. The sum 

of the base periodic payment and any 

other charges that are part of the 

periodic payment. 


srobinson on DSK4SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 78505 

(g) Early termination—(1) Conditions 

and disclosure of charges. A statement 

of the conditions under which the lessee 

or lessor may terminate the lease prior 

to the end of the lease term; and the 

amount or a description of the method 

for determining the amount of any 

penalty or other charge for early 

termination, which must be reasonable. 

(2) Early termination notice. In a 

motor vehicle lease, a notice 

substantially similar to the following: 

‘‘Early Termination. You may have to 

pay a substantial charge if you end this 

lease early. The charge may be up to 

several thousand dollars. The actual 

charge will depend on when the lease 

is terminated. The earlier you end the 

lease, the greater this charge is likely to 

be.’’ 

(h) Maintenance responsibilities. The 

following provisions are required: 

(1) Statement of responsibilities. A 

statement specifying whether the lessor 

or the lessee is responsible for 

maintaining or servicing the leased 

property, together with a brief 

description of the responsibility; 

(2) Wear and use standard. A 

statement of the lessor’s standards for 

wear and use (if any), which must be 

reasonable; and 

(3) Notice of wear and use standard. 

In a motor vehicle lease, a notice 

regarding wear and use substantially 

similar to the following: ‘‘Excessive 

Wear and Use. You may be charged for 

excessive wear based on our standards 

for normal use.’’ The notice shall also 

specify the amount or method for 

determining any charge for excess 

mileage. 

(i) Purchase option. A statement of 

whether or not the lessee has the option 

to purchase the leased property, and: 

(1) End of lease term. If at the end of 

the lease term, the purchase price; and 

(2) During lease term. If prior to the 

end of the lease term, the purchase price 

or the method for determining the price 

and when the lessee may exercise this 

option. 

(j) Statement referencing 

nonsegregated disclosures. A statement 

that the lessee should refer to the lease 

documents for additional information 

on early termination, purchase options 

and maintenance responsibilities, 

warranties, late and default charges, 

insurance, and any security interests, if 

applicable. 

(k) Liability between residual and 

realized values. A statement of the 

lessee’s liability, if any, at early 

termination or at the end of the lease 

term for the difference between the 

residual value of the leased property 

and its realized value. 

(l) Right of appraisal. If the lessee’s 

liability at early termination or at the 

end of the lease term is based on the 

realized value of the leased property, a 

statement that the lessee may obtain, at 

the lessee’s expense, a professional 

appraisal by an independent third party 

(agreed to by the lessee and the lessor) 

of the value that could be realized at 

sale of the leased property. The 

appraisal shall be final and binding on 

the parties. 

(m) Liability at end of lease term 

based on residual value. If the lessee is 

liable at the end of the lease term for the 

difference between the residual value of 

the leased property and its realized 

value: 

(1) Rent and other charges. The rent 

and other charges, paid by the lessee 

and required by the lessor as an incident 

to the lease transaction, with a 

description such as ‘‘the total amount of 

rent and other charges imposed in 

connection with your lease [state the 

amount].’’ 

(2) Excess liability. A statement about 

a rebuttable presumption that, at the 

end of the lease term, the residual value 

of the leased property is unreasonable 

and not in good faith to the extent that 

the residual value exceeds the realized 

value by more than three times the base 

monthly payment (or more than three 

times the average payment allocable to 

a monthly period, if the lease calls for 

periodic payments other than monthly); 

and that the lessor cannot collect the 

excess amount unless the lessor brings 

a successful court action and pays the 

lessee’s reasonable attorney’s fees, or 

unless the excess of the residual value 

over the realized value is due to 

unreasonable or excessive wear or use of 

the leased property (in which case the 

rebuttable presumption does not apply). 

(3) Mutually agreeable final 

adjustment. A statement that the lessee 

and lessor are permitted, after 

termination of the lease, to make any 

mutually agreeable final adjustment 

regarding excess liability. 

(n) Fees and taxes. The total dollar 

amount for all official and license fees, 

registration, title, or taxes required to be 

paid in connection with the lease. 

(o) Insurance. A brief identification of 

insurance in connection with the lease 

including: 

(1) Through the lessor. If the 

insurance is provided by or paid 

through the lessor, the types and 

amounts of coverage and the cost to the 

lessee; or 

(2) Through a third party. If the lessee 

must obtain the insurance, the types and 

amounts of coverage required of the 

lessee. 

(p) Warranties or guarantees. A 

statement identifying all express 

warranties and guarantees from the 

manufacturer or lessor with respect to 

the leased property that apply to the 

lessee. 

(q) Penalties and other charges for 

delinquency. The amount or the method 

of determining the amount of any 

penalty or other charge for delinquency, 

default, or late payments, which must 

be reasonable. 

(r) Security interest. A description of 

any security interest, other than a 

security deposit disclosed under 

paragraph (b) of this section, held or to 

be retained by the lessor; and a clear 

identification of the property to which 

the security interest relates. 

(s) Limitations on rate information. If 

a lessor provides a percentage rate in an 

advertisement or in documents 

evidencing the lease transaction, a 

notice stating that ‘‘this percentage may 

not measure the overall cost of financing 

this lease’’ shall accompany the rate 

disclosure. The lessor shall not use the 

term ‘‘annual percentage rate,’’ ‘‘annual 

lease rate,’’ or any equivalent term. 

(t) Non-motor vehicle open-end 

leases. Non-motor vehicle open-end 

leases remain subject to section 182(10) 

of the Act regarding end of term 

liability. 

§ 1013.5 Renegotiations, extensions, and 

assumptions. 

(a) Renegotiation. A renegotiation 

occurs when a consumer lease subject to 

this part is satisfied and replaced by a 

new lease undertaken by the same 

consumer. A renegotiation requires new 

disclosures, except as provided in 

paragraph (d) of this section. 

(b) Extension. An extension is a 

continuation, agreed to by the lessor and 

the lessee, of an existing consumer lease 

beyond the originally scheduled end of 

the lease term, except when the 

continuation is the result of a 

renegotiation. An extension that exceeds 

six months requires new disclosures, 

except as provided in paragraph (d) of 

this section. 

(c) Assumption. New disclosures are 

not required when a consumer lease is 

assumed by another person, whether or 

not the lessor charges an assumption 

fee. 

(d) Exceptions. New disclosures are 

not required for the following, even if 

they meet the definition of a 

renegotiation or an extension: 

(1) A reduction in the rent charge; 

(2) The deferment of one or more 

payments, whether or not a fee is 

charged; 


srobinson on DSK4SPTVN1PROD with RULES
78506 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 

(3) The extension of a lease for not 

more than six months on a month-tomonth basis or otherwise; 

(4) A substitution of leased property 

with property that has a substantially 

equivalent or greater economic value, 

provided no other lease terms are 

changed; 

(5) The addition, deletion, or 

substitution of leased property in a 

multiple-item lease, provided the 

average periodic payment does not 

change by more than 25 percent; or 

(6) An agreement resulting from a 

court proceeding. 

§ 1013.6 [Reserved] 

§ 1013.7 Advertising. 

(a) General rule. An advertisement for 

a consumer lease may state that a 

specific lease of property at specific 

amounts or terms is available only if the 

lessor usually and customarily leases or 

will lease the property at those amounts 

or terms. 

(b) Clear and conspicuous standard. 

Disclosures required by this section 

shall be made clearly and 

conspicuously. 

(1) Amount due at lease signing or 

delivery. Except for the statement of a 

periodic payment, any affirmative or 

negative reference to a charge that is a 

part of the disclosure required under 

paragraph (d)(2)(ii) of this section shall 

not be more prominent than that 

disclosure. 

(2) Advertisement of a lease rate. If a 

lessor provides a percentage rate in an 

advertisement, the rate shall not be 

more prominent than any of the 

disclosures in § 1013.4, with the 

exception of the notice in § 1013.4(s) 

required to accompany the rate; and the 

lessor shall not use the term ‘‘annual 

percentage rate,’’ ‘‘annual lease rate,’’ or 

equivalent term. 

(c) Catalogs or other multipage 

advertisements; electronic 

advertisements. A catalog or other 

multipage advertisement, or an 

electronic advertisement (such as an 

advertisement appearing on an Internet 

Web site), that provides a table or 

schedule of the required disclosures 

shall be considered a single 

advertisement if, for lease terms that 

appear without all the required 

disclosures, the advertisement refers to 

the page or pages on which the table or 

schedule appears. 

(d) Advertisement of terms that 

require additional disclosure. (1) 

Triggering terms. An advertisement that 

states any of the following items shall 

contain the disclosures required by 

paragraph (d)(2) of this section, except 

as provided in paragraphs (e) and (f) of 

this section: 

(i) The amount of any payment; or 

(ii) A statement of any capitalized cost 

reduction or other payment (or that no 

payment is required) prior to or at 

consummation or by delivery, if 

delivery occurs after consummation. 

(2) Additional terms. An 

advertisement stating any item listed in 

paragraph (d)(1) of this section shall 

also state the following items: 

(i) That the transaction advertised is 

a lease; 

(ii) The total amount due prior to or 

at consummation or by delivery, if 

delivery occurs after consummation; 

(iii) The number, amounts, and due 

dates or periods of scheduled payments 

under the lease; 

(iv) A statement of whether or not a 

security deposit is required; and 

(v) A statement that an extra charge 

may be imposed at the end of the lease 

term where the lessee’s liability (if any) 

is based on the difference between the 

residual value of the leased property 

and its realized value at the end of the 

lease term. 

(e) Alternative disclosures— 

merchandise tags. A merchandise tag 

stating any item listed in paragraph 

(d)(1) of this section may comply with 

paragraph (d)(2) of this section by 

referring to a sign or display 

prominently posted in the lessor’s place 

of business that contains a table or 

schedule of the required disclosures. 

(f) Alternative disclosures—television 

or radio advertisements—(1) Toll-free 

number or print advertisement. An 

advertisement made through television 

or radio stating any item listed in 

paragraph (d)(1) of this section complies 

with paragraph (d)(2) of this section if 

the advertisement states the items listed 

in paragraphs (d)(2)(i) through (iii) of 

this section, and: 

(i) Lists a toll-free telephone number 

along with a reference that such number 

may be used by consumers to obtain the 

information required by paragraph (d)(2) 

of this section; or 

(ii) Directs the consumer to a written 

advertisement in a publication of 

general circulation in the community 

served by the media station, including 

the name and the date of the 

publication, with a statement that 

information required by paragraph (d)(2) 

of this section is included in the 

advertisement. The written 

advertisement shall be published 

beginning at least three days before and 

ending at least ten days after the 

broadcast. 

(2) Establishment of toll-free number. 

(i) The toll-free telephone number shall 

be available for no fewer than ten days, 

beginning on the date of the broadcast. 

(ii) The lessor shall provide the 

information required by paragraph (d)(2) 

of this section orally, or in writing upon 

request. 

§ 1013.8 Record retention. 

A lessor shall retain evidence of 

compliance with the requirements 

imposed by this part, other than the 

advertising requirements under 

§ 1013.7, 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. 

§ 1013.9 Relation to state laws. 

(a) Inconsistent state law. A state law 

that is inconsistent with the 

requirements of the Act and this part is 

preempted to the extent of the 

inconsistency. If a lessor cannot comply 

with a state law without violating a 

provision of this part, the state law is 

inconsistent within the meaning of 

section 186(a) of the Act and is 

preempted, unless the state law gives 

greater protection and benefit to the 

consumer. A state, through an official 

having primary enforcement or 

interpretative responsibilities for the 

state consumer leasing law, may apply 

to the Bureau for a preemption 

determination. 

(b) Exemptions—(1) Application. A 

state may apply to the Bureau for an 

exemption from the requirements of the 

Act and this part for any class of lease 

transactions within the state. The 

Bureau will grant such an exemption if 

the Bureau determines that: 

(i) The class of leasing transactions is 

subject to state law requirements 

substantially similar to the Act and this 

part or that lessees are afforded greater 

protection under state law; and 

(ii) There is adequate provision for 

state enforcement. 

(2) Enforcement and liability. After an 

exemption has been granted, the 

requirements of the applicable state law 

(except for additional requirements not 

imposed by Federal law) will constitute 

the requirements of the Act and this 

part. No exemption will extend to the 

civil liability provisions of sections 130, 

131, and 185 of the Act. 

Appendix A to Part 1013—Model 

Forms 

A–1—Model Open-End or Finance Vehicle 

Lease Disclosures 

A–2—Model Closed-End or Net Vehicle 

Lease Disclosures 

A–3—Model Furniture Lease Disclosures 

BILLING CODE 4810–AM–P 


srobinson on DSK4SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 78507 


srobinson on DSK4SPTVN1PROD with RULESER19DE11.010</GPH>
78508 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 


srobinson on DSK4SPTVN1PROD with RULESER19DE11.011</GPH>
Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 78509 


srobinson on DSK4SPTVN1PROD with RULESER19DE11.012</GPH>
78510 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 


srobinson on DSK4SPTVN1PROD with RULESER19DE11.013</GPH>
Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 78511 


srobinson on DSK4SPTVN1PROD with RULESER19DE11.014</GPH>
78512 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 


srobinson on DSK4SPTVN1PROD with RULESER19DE11.015</GPH>
Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 78513 

Appendix B to Part 1013—[Reserved] 

Appendix C to Part 1013—Issuance of 

Official Interpretations 

Interpretations of this part issued by 

officials of the Bureau provide the formal 

protection afforded under section 130(f) of 

the Act. Except in unusual circumstances, 

interpretations will not be issued separately 

but will be incorporated in an official 

commentary to Regulation M (Supplement I 

of this part), which will be amended 

periodically. No official interpretations will 

be issued approving a lessor’s forms, 

statements, or calculation tools or methods. 

Supplement I to Part 1013—Official 

Interpretations 

Introduction 

1. Official status. The commentary in 

Supplement I is the vehicle by which the 

Bureau of Consumer Financial Protection 

issues official interpretations of Regulation M 

(12 CFR part 1013). Good faith compliance 

with this commentary affords protection from 

liability under section 130(f) of the Truth in 

Lending Act (15 U.S.C. 1640(f)). Section 

130(f) protects lessors from civil liability for 

any act done or omitted in good faith in 

conformity with any interpretation issued by 

the Bureau. 

2. Procedures for requesting 

interpretations. Under Appendix C of 

Regulation M, anyone may request an official 

interpretation. Interpretations that are 

adopted will be incorporated in this 

commentary following publication in the 

Federal Register. No official interpretations 

are expected to be issued other than by 

means of this commentary. 

3. Comment designations. Each comment 

in the commentary is identified by a number 

and the regulatory section or paragraph that 

it interprets. The comments are designated 

with as much specificity as possible 

according to the particular regulatory 

provision addressed. For example, some of 

the comments to § 1013.4(f) are further 

divided by subparagraph, such as comment 

4(f)(1)–1 and comment 4(f)(2)–1. In other 

cases, comments have more general 

application and are designated, for example, 

as comment 4(a)–1. This introduction may be 

cited as comments I–1 through I–4. An 

appendix may be cited as comment 

app. A–1. 

4. Illustrations. Lists that appear in the 

commentary may be exhaustive or 

illustrative; the appropriate construction 

should be clear from the context. Illustrative 

lists are introduced by phrases such as 

‘‘including,’’ ‘‘such as,’’ ‘‘to illustrate,’’ and 

‘‘for example.’’ 

Section 1013.1—Authority, Scope, Purpose, 

and Enforcement 

1. Foreign applicability. Regulation M 

applies to all persons (including branches of 

foreign banks or leasing companies located in 

the United States) that offer consumer leases 

to residents of any state (including foreign 

nationals) as defined in § 1013.2(p), except 

persons excluded from coverage of this part 

by section 1029 of the Consumer Financial 

Protection Act of 2010, Title X of the DoddFrank Wall Street Reform and Consumer 

Protection Act, Pub. L. 111–203, 124 Stat. 

1376. The regulation does not apply to a 

foreign branch of a U.S. bank or to a leasing 

company leasing to a U.S. citizen residing or 

visiting abroad or to a foreign national 

abroad. 

Section 1013.2—Definitions 

2(b) Advertisement 

1. Coverage. The term advertisement 

includes messages inviting, offering, or 

otherwise generally announcing to 

prospective customers the availability of 

consumer leases, whether in visual, oral, 

print or electronic media. Examples include: 

i. Messages in newspapers, magazines, 

leaflets, catalogs, and fliers. 

ii. Messages on radio, television, and 

public address systems. 

iii. Direct mail literature. 

iv. Printed material on any interior or 

exterior sign or display, in any window 

display, in any point-of-transaction literature 

or price tag that is delivered or made 

available to a lessee or prospective lessee in 

any manner whatsoever. 

v. Telephone solicitations. 

vi. Online messages, such as those on the 

Internet. 

2. Exclusions. The term does not apply to 

the following: 

i. Direct personal contacts, including 

follow-up letters, cost estimates for 

individual lessees, or oral or written 

communications relating to the negotiation of 

a specific transaction. 

ii. Informational material distributed only 

to businesses. 

iii. Notices required by Federal or state 

law, if the law mandates that specific 

information be displayed and only the 

mandated information is included in the 

notice. 

iv. News articles controlled by the news 

medium. 

v. Market research or educational materials 

that do not solicit business. 

3. Persons covered. See the commentary to 

§ 1013.7(a). 

2(d) Closed-End Lease 

1. General. In closed-end leases, sometimes 

referred to as ‘‘walk-away’’ leases, the lessee 

is not responsible for the residual value of 

the leased property at the end of the lease 

term. 

2(e) Consumer Lease 

1. Primary purposes. A lessor must 

determine in each case if the leased property 

will be used primarily for personal, family, 

or household purposes. If a question exists as 

to the primary purpose for a lease, the fact 

that a lessor gives disclosures is not 

controlling on the question of whether the 

transaction is covered. The primary purpose 

of a lease is determined before or at 

consummation and a lessor need not provide 

Regulation M disclosures where there is a 

subsequent change in the primary use. 

2. Period of time. To be a consumer lease, 

the initial term of the lease must be more 

than four months. Thus, a lease of personal 

property for four months, three months or on 

a month-to-month or week-to-week basis 

(even though the lease actually extends 

beyond four months) is not a consumer lease 

and is not subject to the disclosure 

requirements of the regulation. However, a 

lease that imposes a penalty for not 

continuing the lease beyond four months is 

considered to have a term of more than four 

months. To illustrate: 

i. A three-month lease extended on a 

month-to-month basis and terminated after 

one year is not subject to the regulation. 

ii. A month-to-month lease with a penalty, 

such as the forfeiture of a security deposit for 

terminating before one year, is subject to the 

regulation. 

3. Total contractual obligation. The total 

contractual obligation is not necessarily the 

same as the total of payments disclosed 

under § 1013.4(e). The total contractual 

obligation includes nonrefundable amounts a 

lessee is contractually obligated to pay to the 

lessor, but excludes items such as: 

i. Residual value amounts or purchaseoption prices; 

ii. Amounts collected by the lessor but 

paid to a third party, such as taxes, licenses, 

and registration fees. 

4. Credit sale. The regulation does not 

cover a lease that meets the definition of a 

credit sale in Regulation Z, 12 CFR 

226.2(a)(16), which is defined, in part, as a 

bailment or lease (unless terminable without 

penalty at any time by the consumer) under 

which the consumer: 

i. Agrees to pay as compensation for use a 

sum substantially equivalent to, or in excess 

of, the total value of the property and 

services involved; and 

ii. Will become (or has the option to 

become), for no additional consideration or 

for nominal consideration, the owner of the 

property upon compliance with the 

agreement. 

5. Agricultural purpose. Agricultural 

purpose means a purpose related to the 

production, harvest, exhibition, marketing, 

transportation, processing, or manufacture of 

agricultural products by a natural person 

who cultivates, plants, propagates, or 

nurtures those agricultural products, 

including but not limited to the acquisition 

of personal property and services used 

primarily in farming. Agricultural products 

include horticultural, viticultural, and dairy 

products, livestock, wildlife, poultry, bees, 

forest products, fish and shellfish, and any 

products thereof, including processed and 

manufactured products, and any and all 

products raised or produced on farms and 

any processed or manufactured products 

thereof. 

6. Organization or other entity. A consumer 

lease does not include a lease made to an 

organization such as a corporation or a 

government agency or instrumentality. Such 

a lease is not covered by the regulation even 

if the leased property is used (by an 

employee, for example) primarily for 

personal, family or household purposes, or is 

guaranteed by or subsequently assigned to a 

natural person. 

7. Leases of personal property incidental to 

a service. The following leases of personal 

property are deemed incidental to a service 

and thus are not subject to the regulation: 

i. Home entertainment systems requiring 

the consumer to lease equipment that enables 


srobinson on DSK4SPTVN1PROD with RULES
78514 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 

a television to receive the transmitted 

programming. 

ii. Security alarm systems requiring the 

installation of leased equipment intended to 

monitor unlawful entries into a home and in 

some cases to provide fire protection. 

iii. Propane gas service where the 

consumer must lease a propane tank to 

receive the service. 

8. Safe deposit boxes. The lease of a safe 

deposit box is not a consumer lease under 

§ 1013.2(e). 

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. 

2(g) Lessee 

1. Guarantors. Guarantors are not lessees 

for purposes of the regulation. 

2(h) Lessor 

1. Arranger of a lease. To ‘‘arrange’’ for the 

lease of personal property means to provide 

or offer to provide a lease that is or will be 

extended by another person under a business 

or other relationship pursuant to which the 

person arranging the lease (a) receives or will 

receive a fee, compensation, or other 

consideration for the service or (b) has 

knowledge of the lease terms and participates 

in the preparation of the contract documents 

required in connection with the lease. To 

illustrate: 

i. An entity that, pursuant to a business 

relationship, completes the necessary lease 

agreement before forwarding it for execution 

to the leasing company (to whom the 

obligation is payable on its face) is 

‘‘arranging’’ for the lease. 

ii. An entity that, without receiving a fee 

for the service, refers a customer to a leasing 

company that will prepare all relevant 

contract documents is not ‘‘arranging’’ for the 

lease. 

2. Consideration. The term ‘‘other 

consideration’’ as used in comment 2(h)–1 

refers to an actual payment corresponding to 

a fee or similar compensation and not to 

intangible benefits, such as the advantage of 

increased business, which may flow from the 

relationship between the parties. 

3. Assignees. An assignee may be a lessor 

for purposes of the regulation in 

circumstances where the assignee has 

substantial involvement in the lease 

transaction. See cf. Ford Motor Credit Co. v. 

Cenance, 452 U.S. 155 (1981) (held that an 

assignee was a creditor for purposes of the 

pre-1980 Truth in Lending Act and 

Regulation Z because of its substantial 

involvement in the credit transaction). 

4. Multiple lessors. See the commentary to 

§ 1013.3(c). 

2(j) Organization 

1. Coverage. The term ‘‘organization’’ 

includes joint ventures and persons operating 

under a business name. 

2(l) Personal Property 

1. Coverage. Whether property is personal 

property depends on state or other applicable 

law. For example, a mobile home or 

houseboat may be considered personal 

property in one state but real property in 

another. 

2(m) Realized Value 

1. General. Realized value refers to either 

the retail or wholesale value of the leased 

property at early termination or at the end of 

the lease term. It is not a required disclosure. 

Realized value is relevant only to leases in 

which the lessee’s liability at early 

termination or at the end of the lease term 

typically is based on the difference between 

the residual value (or the adjusted lease 

balance) of the leased property and its 

realized value. 

2. Options. Subject to the contract and to 

state or other applicable law, the lessor may 

calculate the realized value in determining 

the lessee’s liability at the end of the lease 

term or at early termination in one of the 

three ways stated in § 1013.2(m). If the lessor 

sells the property prior to making the 

determination about liability, the price 

received for the property (or the fair market 

value) is the realized value. If the lessor does 

not sell the property prior to making that 

determination, the highest offer or the fair 

market value is the realized value. 

3. Determination of realized value. 

Disposition charges are not subtracted in 

determining the realized value but amounts 

attributable to taxes may be subtracted. 

4. Offers. In determining the highest offer 

for disposition, the lessor may disregard 

offers that an offeror has withdrawn or is 

unable or unwilling to perform. 

5. Lessor’s appraisal. See commentary to 

§ 1013.4(l). 

2(o) Security Interest and Security 

1. Disclosable interests. For purposes of 

disclosure, a security interest is an interest 

taken by the lessor to secure performance of 

the lessee’s obligation. For example, if a bank 

that is not a lessor makes a loan to a leasing 

company and takes assignments of consumer 

leases generated by that company to secure 

the loan, the bank’s security interest in the 

lessor’s receivables is not a security interest 

for purposes of this part. 

2. General coverage. An interest the lessor 

may have in leased property must be 

disclosed only if it is considered a security 

interest under state or other applicable law. 

The term includes, but is not limited to, 

security interests under the Uniform 

Commercial Code; real property mortgages, 

deeds of trust, and other consensual or 

confessed liens whether or not recorded; 

mechanic’s, materialman’s, artisan’s, and 

other similar liens; vendor’s liens in both real 

and personal property; liens on property 

arising by operation of law; and any interest 

in a lease when used to secure payment or 

performance of an obligation. 

3. Insurance exception. The lessor’s right 

to insurance proceeds or unearned insurance 

premiums is not a security interest for 

purposes of this part. 

Section 1013.3—General Disclosure 

Requirements 

3(a) General Requirements 

1. Basis of disclosures. Disclosures must 

reflect the terms of the legal obligation 

between the parties. For example: 

i. In a three-year lease with no penalty for 

termination after a one-year minimum term, 

disclosures are based on the full three-year 

term of the lease. The one-year minimum 

term is only relevant to the early termination 

provisions of §§ 1013.4 (g)(1), (k) and (l). 

2. Clear and conspicuous standard. The 

clear and conspicuous standard requires that 

disclosures be reasonably understandable. 

For example, the disclosures must be 

presented in a way that does not obscure the 

relationship of the terms to each other; 

Appendix A of this part contains model 

forms that meet this standard. In addition, 

although no minimum typesize is required, 

the disclosures must be legible, whether 

typewritten, handwritten, or printed by 

computer. 

3. Multipurpose disclosure forms. A lessor 

may use a multipurpose disclosure form 

provided the lessor is able to designate the 

specific disclosures applicable to a given 

transaction, consistent with the requirement 

that disclosures be clearly and conspicuously 

provided. 

4. Number of transactions. Lessors have 

flexibility in handling lease transactions that 

may be viewed as multiple transactions. For 

example: 

i. When a lessor leases two items to the 

same lessee on the same day, the lessor may 

disclose the leases as either one or two lease 

transactions. 

ii. When a lessor sells insurance or other 

incidental services in connection with a 

lease, the lessor may disclose in one of two 

ways: As a single lease transaction (in which 

case Regulation M, not Regulation Z, 

disclosures are required) or as a lease 

transaction and a credit transaction. 

iii. When a lessor includes an outstanding 

lease or credit balance in a lease transaction, 

the lessor may disclose the outstanding 

balance as part of a single lease transaction 


srobinson on DSK4SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 78515 

(in which case Regulation M, not Regulation 

Z, disclosures are required) or as a lease 

transaction and a credit transaction. 

3(a)(1) Form of Disclosures 

1. Cross-references. Lessors may include in 

the nonsegregated disclosures a crossreference to items in the segregated 

disclosures rather than repeat those items. A 

lessor may include in the segregated 

disclosures numeric or alphabetic 

designations as cross-references to related 

information so long as such references do not 

obscure or detract from the segregated 

disclosures. 

2. Identification of parties. While 

disclosures must be made clearly and 

conspicuously, lessors are not required to use 

the word ‘‘lessor’’ and ‘‘lessee’’ to identify 

the parties to the lease transaction. 

3. Lessor’s address. The lessor must be 

identified by name; an address (and 

telephone number) may be provided. 

4. Multiple lessors and lessees. In 

transactions involving multiple lessors and 

multiple lessees, a single lessor may make all 

the disclosures to a single lessee as long as 

the disclosure statement identifies all the 

lessors and lessees. 

5. Lessee’s signature. The regulation does 

not require that the lessee sign the disclosure 

statement, whether disclosures are separately 

provided or are part of the lease contract. 

Nevertheless, to provide evidence that 

disclosures are given before a lessee becomes 

obligated on the lease transaction, the lessor 

may, for example, ask the lessee to sign the 

disclosure statement or an acknowledgement 

of receipt, may place disclosures that are 

included in the lease documents above the 

lessee’s signature, or include instructions 

alerting a lessee to read the disclosures prior 

to signing the lease. 

3(a)(2) Segregation of Certain Disclosures 

1. Location. The segregated disclosures 

referred to in § 1013.3(a)(2) may be provided 

on a separate document and the other 

required disclosures may be provided in the 

lease contract, so long as all disclosures are 

given at the same time. Alternatively, all 

disclosures may be provided in a separate 

document or in the lease contract. 

2. Additional information among 

segregated disclosures. The disclosures 

required to be segregated may contain only 

the information required or permitted to be 

included among the segregated disclosures. 

3. Substantially similar. See commentary 

to Appendix A of this part. 

3(a)(3) Timing of Disclosures 

1. Consummation. When a contractual 

relationship is created between the lessor and 

the lessee is a matter to be determined under 

state or other applicable law. 

3(b) Additional Information; Nonsegregated 

Disclosures 

1. State law disclosures. A lessor may 

include in the nonsegregated disclosures any 

state law disclosures that are not inconsistent 

with the Act and regulation under § 1013.9 

as long as, in accordance with the standard 

set forth in § 1013.3(b) for additional 

information, the state law disclosures are not 

used or placed to mislead or confuse or 

detract from any disclosure required by the 

regulation. 

3(c) Multiple Lessors or Lessees 

1. Multiple lessors. If a single lessor 

provides disclosures to a lessee on behalf of 

several lessors, all disclosures for the 

transaction must be given, even if the lessor 

making the disclosures would not otherwise 

have been obligated to make a particular 

disclosure. 

3(d) Use of Estimates 

1. Time of estimated disclosure. The lessor 

may, after making a reasonable effort to 

obtain information, use estimates to make 

disclosures if necessary information is 

unknown or unavailable at the time the 

disclosures are made. 

2. Basis of estimates. Estimates must be 

made on the basis of the best information 

reasonably available at the time disclosures 

are made. The ‘‘reasonably available’’ 

standard requires that the lessor, acting in 

good faith, exercise due diligence in 

obtaining information. The lessor may rely 

on the representations of other parties. For 

example, the lessor might look to the 

consumer to determine the purpose for 

which leased property will be used, to 

insurance companies for the cost of 

insurance, or to an automobile manufacturer 

or dealer for the date of delivery. See 

commentary to § 1013.4(n) for estimating 

official fees and taxes. 

3. Residual value of leased property at 

termination. In an open-end lease where the 

lessee’s liability at the end of the lease term 

is based on the residual value of the leased 

property as determined at consummation, the 

estimate of the residual value must be 

reasonable and based on the best information 

reasonably available to the lessor (see 

§ 1013.4(m)). A lessor should generally use 

an accepted trade publication listing 

estimated current or future market prices for 

the leased property unless other information 

or a reasonable belief based on its experience 

provides the better information. For example: 

i. An automobile lessor offering a threeyear open-end lease assigns a wholesale 

value to the vehicle at the end of the lease 

term. The lessor may disclose as an estimate 

a wholesale value derived from a generally 

accepted trade publication listing current 

wholesale values. 

ii. Same facts as above, except that the 

lessor discloses an estimated value derived 

by adjusting the residual value quoted in the 

trade publication because, in its experience, 

the trade publication values either understate 

or overstate the prices actually received in 

local used vehicle markets. The lessor may 

adjust estimated values quoted in trade 

publications if the lessor reasonably believes 

based on its experience that the values are 

understated or overstated. 

4. Retail or wholesale value. The lessor 

may choose either a retail or a wholesale 

value in estimating the value of leased 

property at termination of an open-end lease 

provided the choice is consistent with the 

lessor’s general practice when determining 

the value of the property at the end of the 

lease term. The lessor should indicate 

whether the value disclosed is a retail or 

wholesale value. 

5. Labeling estimates. Generally, only the 

disclosure for which the exact information is 

unknown is labeled as an estimate. 

Nevertheless, when several disclosures are 

affected because of the unknown 

information, the lessor has the option of 

labeling as an estimate every affected 

disclosure or only the disclosure primarily 

affected. 

3(e) Effect of Subsequent Occurrence 

1. Subsequent occurrences. Examples of 

subsequent occurrences include: 

i. An agreement between the lessee and 

lessor to change from a monthly to a weekly 

payment schedule. 

ii. An increase in official fees or taxes. 

iii. An increase in insurance premiums or 

coverage caused by a change in the law. 

iv. Late delivery of an automobile caused 

by a strike. 

2. Redisclosure. When a disclosure 

becomes inaccurate because of a subsequent 

occurrence, the lessor need not make new 

disclosures unless new disclosures are 

required under § 1013.5. 

3. Lessee’s failure to perform. The lessor 

does not violate the regulation if a previously 

given disclosure becomes inaccurate when a 

lessee fails to perform obligations under the 

contract and a lessor takes actions that are 

necessary and proper in such circumstances 

to protect its interest. For example, the 

addition of insurance or a security interest by 

the lessor because the lessee has not 

performed obligations contracted for in the 

lease is not a violation of the regulation. 

Section 1013.4—Content of Disclosures 

4(a) Description of Property 

1. Placement of description. Although the 

description of leased property may not be 

included among the segregated disclosures, a 

lessor may choose to place the description 

directly above the segregated disclosures. 

4(b) Amount Due at Lease Signing or Delivery 

1. Consummation. See commentary to 

§ 1013.3(a)(3). 

2. Capitalized cost reduction. A capitalized 

cost reduction is a payment in the nature of 

a downpayment on the leased property that 

reduces the amount to be capitalized over the 

term of the lease. This amount does not 

include any amounts included in a periodic 

payment paid at lease signing or delivery. 

3. ‘‘Negative’’ equity trade-in allowance. If 

an amount owed on a prior lease or credit 

balance exceeds the agreed upon value of a 

trade-in, the difference is not reflected as a 

negative trade-in allowance under 

§ 1013.4(b). The lessor may disclose the 

trade-in allowance as zero or not applicable, 

or may leave a blank line. 

4. Rebates. Only rebates applied toward an 

amount due at lease signing or delivery are 

required to be disclosed under § 1013.4(b). 

5. Balance sheet approach. In motor 

vehicle leases, the total for the column 

labeled ‘‘total amount due at lease signing or 

delivery’’ must equal the total for the column 

labeled ‘‘how the amount due at lease signing 

or delivery will be paid.’’ 

6. Amounts to be paid in cash. The term 

cash is intended to include payments by 

check or other payment methods in addition 


srobinson on DSK4SPTVN1PROD with RULES
78516 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 

to currency; however, a lessor may add a line 

item under the column ‘‘how the amount due 

at lease signing or delivery will be paid’’ for 

non-currency payments such as credit cards. 

4(c) Payment Schedule and Total Amount of 

Periodic Payments 

1. Periodic payments. The phrase ‘‘number, 

amount, and due dates or periods of 

payments’’ requires the disclosure of all 

payments that are made at regular or irregular 

intervals and generally derived from rent, 

capitalized or amortized amounts such as 

depreciation, and other amounts that are 

collected by the lessor at the same interval(s), 

including, for example, taxes, maintenance, 

and insurance charges. Other periodic 

payments may, but need not, be disclosed 

under § 1013.4(c). 

4(d) Other Charges 

1. Coverage. Section 1013.4(d) requires the 

disclosure of charges that are anticipated by 

the parties incident to the normal operation 

of the lease agreement. If a lessor is unsure 

whether a particular fee is an ‘‘other charge,’’ 

the lessor may disclose the fee as such 

without violating § 1013.4(d) or the 

segregation rule under § 1013.3(a)(2). 

2. Excluded charges. This section does not 

require disclosure of charges that are 

imposed when the lessee terminates early, 

fails to abide by, or modifies the terms of the 

existing lease agreement, such as charges for: 

i. Late payment. 

ii. Default. 

iii. Early termination. 

iv. Deferral of payments. 

v. Extension of the lease. 

3. Third-party fees and charges. Thirdparty fees or charges collected by the lessor 

on behalf of third parties, such as taxes, are 

not disclosed under § 1013.4(d). 

4. Relationship to other provisions. The 

other charges mentioned in this paragraph 

are charges that are not required to be 

disclosed under some other provision of 

§ 1013.4. To illustrate: 

i. The price of a mechanical breakdown 

protection (MBP) contract is sometimes 

disclosed as an ‘‘other charge.’’ Nevertheless, 

the price of MBP is sometimes reflected in 

the periodic payment disclosure under 

§ 1013.4(c) or in states where MBP is 

regarded as insurance, the cost is be 

disclosed in accordance with § 1013.4(o). 

5. Lessee’s liabilities at the end of the lease 

term. Liabilities that the lessor imposes upon 

the lessee at the end of the scheduled lease 

term and that must be disclosed under 

§ 1013.4(d) include disposition and ‘‘pickup’’ charges. 

6. Optional ‘‘disposition’’ charges. 

Disposition and similar charges that are 

anticipated by the parties as an incident to 

the normal operation of the lease agreement 

must be disclosed under § 1013.4(d). If, 

under a lease agreement, a lessee may return 

leased property to various locations, and the 

lessor charges a disposition fee depending 

upon the location chosen, under § 1013.4(d), 

the lessor must disclose the highest amount 

charged. In such circumstances, the lessor 

may also include a brief explanation of the 

fee structure in the segregated disclosure. For 

example, if no fee or a lower fee is imposed 

for returning a leased vehicle to the 

originating dealer as opposed to another 

location, that fact may be disclosed. By 

contrast, if the terms of the lease treat the 

return of the leased property to a location 

outside the lessor’s service area as a default, 

the fee imposed is not disclosed as an ‘‘other 

charge,’’ although it may be required to be 

disclosed under § 1013.4(q). 

4(e) Total of Payments 

1. Open-end lease. The additional 

statement is required under § 1013.4(e) for 

open-end leases because, with some 

limitations, a lessee is liable at the end of the 

lease term for the difference between the 

residual and realized values of the leased 

property. 

4(f) Payment Calculation 

1. Motor vehicle lease. Whether leased 

property is a motor vehicle is determined by 

state or other applicable law. 

2. Multiple items. If a lease transaction 

involves multiple items of leased property, 

one of which is not a motor vehicle under 

state law, at their option, lessors may include 

all items in the disclosures required under 

§ 1013.4(f). See comment 3(a)–4 regarding 

disclosure of multiple transactions. 

4(f)(1) Gross Capitalized Cost 

1. Agreed upon value of the vehicle. The 

agreed upon value of a motor vehicle 

includes the amount of capitalized items 

such as charges for vehicle accessories and 

options, and delivery or destination charges. 

The lessor may also include taxes and fees 

for title, licenses, and registration that are 

capitalized. Charges for service or 

maintenance contracts, insurance products, 

guaranteed automobile protection, or an 

outstanding balance on a prior lease or credit 

transaction are not included in the agreed 

upon value. 

2. Itemization of the gross capitalized cost. 

The lessor may choose to provide the 

itemization of the gross capitalized cost only 

on request or may provide the itemization as 

a matter of course. In the latter case, the 

lessor need not provide a statement of the 

lessee’s option to receive an itemization. The 

gross capitalized cost must be itemized by 

type and amount. The lessor may include in 

the itemization an identification of the items 

and amounts of some or all of the items 

contained in the agreed upon value of the 

vehicle. The itemization must be provided at 

the same time as the other disclosures 

required by § 1013.4, but it may not be 

included among the segregated disclosures. 

4(f)(7) Total of Base Periodic Payments 

1. Accuracy of disclosure. If the periodic 

payment calculation under § 1013.4(f) has 

been calculated correctly, the amount 

disclosed under § 1013.4(f)(7)—the total of 

base periodic payments—is correct for 

disclosure purposes even if that amount 

differs from the base periodic payment 

disclosed under § 1013.4(f)(9) multiplied by 

the number of lease payments disclosed 

under § 1013.4(f)(8), when the difference is 

due to rounding. 

4(f)(8) Lease Payments 

1. Lease Term. The lease term may be 

disclosed among the segregated disclosures. 

4(g) Early Termination 

4(g)(1) Conditions and Disclosure of Charges 

1. Reasonableness of charges. See the 

commentary to § 1013.4(q). 

2. Description of the method. Section 

1013.4(g)(1) requires a full description of the 

method of determining an early termination 

charge. The lessor should attempt to provide 

consumers with clear and understandable 

descriptions of its early termination charges. 

Descriptions that are full, accurate, and not 

intended to be misleading will comply with 

§ 1013.4(g)(1), even if the descriptions are 

complex. In providing a full description of an 

early termination method, a lessor may use 

the name of a generally accepted method of 

computing the unamortized cost portion (also 

known as the ‘‘adjusted lease balance’’) of its 

early termination charges. For example, a 

lessor may state that the ‘‘constant yield’’ 

method will be utilized in obtaining the 

adjusted lease balance, but must specify how 

that figure, and any other term or figure, is 

used in computing the total early termination 

charge imposed upon the consumer. 

Additionally, if a lessor refers to a named 

method in this manner, the lessor must 

provide a written explanation of that method 

if requested by the consumer. The lessor has 

the option of providing the explanation as a 

matter of course in the lease documents or on 

a separate document. 

3. Timing of written explanation of a 

named method. While a lessor may provide 

an address or telephone number for the 

consumer to request a written explanation of 

the named method used to calculate the 

adjusted leased balance, if at consummation 

a consumer requests such an explanation, the 

lessor must provide a written explanation at 

that time. If a consumer requests an 

explanation after consummation, the lessor 

must provide a written explanation within a 

reasonable time after the request is made. 

4. Default. When default is a condition for 

early termination of a lease, default charges 

must be disclosed under § 1013.4(g)(1). See 

the commentary to § 1013.4(q). 

5. Lessee’s liability at early termination. 

When the lessee is liable for the difference 

between the unamortized cost and the 

realized value at early termination, the 

method of determining the amount of the 

difference must be disclosed under 

§ 1013.4(g)(1). 

4(h) Maintenance Responsibilities 

1. Standards for wear and use. No 

disclosure is required if a lessor does not set 

standards or impose charges for wear and use 

(such as excess mileage). 

4(i) Purchase Option 

1. Mandatory disclosure of no purchase 

option. Generally the lessor need only make 

the specific required disclosures that apply to 

a transaction. In the case of a purchase option 

disclosure, however, a lessor must disclose 

affirmatively that the lessee has no option to 

purchase the leased property if the purchase 

option is inapplicable. 


srobinson on DSK4SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 78517 

2. Existence of purchase option. Whether a 

purchase option exists under the lease is 

determined by state or other applicable law. 

The lessee’s right to submit a bid to purchase 

property at termination of the lease is not an 

option to purchase under § 1013.4(i) if the 

lessor is not required to accept the lessee’s 

bid and the lessee does not receive 

preferential treatment. 

3. Purchase-option fee. A purchase-option 

fee is disclosed under § 1013.4(i), not 

§ 1013.4(d). The fee may be separately 

itemized or disclosed as part of the purchaseoption price. 

4. Official fees and taxes. Official fees such 

as those for taxes, licenses, and registration 

charged in connection with the exercise of a 

purchase option may be disclosed under 

§ 1013.4(i) as part of the purchase-option 

price (with or without a reference to their 

inclusion in that price) or may be separately 

disclosed and itemized by category. 

Alternatively, a lessor may provide a 

statement indicating that the purchase-option 

price does not include fees for tags, taxes, 

and registration. 

5. Purchase-option price. Lessors must 

disclose the purchase-option price as a sum 

certain or as a sum certain to be determined 

at a future date by reference to a readily 

available independent source. The reference 

should provide sufficient information so that 

the lessee will be able to determine the actual 

price when the option becomes available. 

Statements of a purchase price as the 

‘‘negotiated price’’ or the ‘‘fair market value’’ 

do not comply with the requirements of 

§ 1013.4(i). 

4(j) Statement Referencing Nonsegregated 

Disclosures 

1. Content. A lessor may delete 

inapplicable items from the disclosure. For 

example, if a lease contract does not include 

a security interest, the reference to a security 

interest may be omitted. 

4(l) Right of Appraisal 

1. Disclosure inapplicable. The lessee does 

not have the right to an independent 

appraisal merely because the lessee is liable 

at the end of the lease term or at early 

termination for unreasonable wear or use. 

Thus, the disclosure under § 1013.4(l) does 

not apply. For example: 

i. The automobile lessor might expect a 

lessee to return an undented car with four 

good tires at the end of the lease term. Even 

though it may hold the lessee liable for the 

difference between a dented car with bald 

tires and the value of a car in reasonably 

good repair, the disclosure under § 1013.4(l) 

is not required. 

2. Lessor’s appraisal. If the lessor obtains 

an appraisal of the leased property to 

determine its realized value, that appraisal 

does not suffice for purposes of section 

183(c) of the Act; the lessor must disclose the 

lessee’s right to an independent appraisal 

under § 1013.4(l). 

3. Retail or wholesale. In providing the 

disclosures in § 1013.4(l), a lessor must 

indicate whether the wholesale or retail 

appraisal value will be used. 

4. Time restriction on appraisal. The 

regulation does not specify a time period in 

which the lessee must exercise the appraisal 

right. The lessor may require a lessee to 

obtain the appraisal within a reasonable time 

after termination of the lease. 

4(m) Liability at End of Lease Term Based on 

Residual Value 

1. Open-end leases. Section 1013.4(m) 

applies only to open-end leases. 

2. Lessor’s payment of attorney’s fees. 

Section 183(a) of the Act requires that the 

lessor pay the lessee’s attorney’s fees in all 

actions under § 1013.4(m), whether 

successful or not. 

4(m)(1) Rent and Other Charges 

1. General. This disclosure is intended to 

represent the cost of financing an open-end 

lease based on charges and fees that the 

lessor requires the lessee to pay. Examples of 

disclosable charges, in addition to the rent 

charge, include acquisition, disposition, or 

assignment fees. Charges imposed by a third 

party whose services are not required by the 

lessor (such as official fees and voluntary 

insurance) are not included in the 

§ 1013.4(m)(1) disclosure. 

4(m)(2) Excess Liability 

1. Coverage. The disclosure limiting the 

lessee’s liability for the value of the leased 

property does not apply in the case of early 

termination. 

2. Leases with a minimum term. If a lease 

has an alternative minimum term, the 

disclosures governing the liability limitation 

are not applicable for the minimum term. 

3. Charges not subject to rebuttable 

presumption. The limitation on liability 

applies only to liability at the end of the lease 

term that is based on the difference between 

the residual value of the leased property and 

its realized value. The regulation does not 

preclude a lessor from recovering other 

charges from the lessee at the end of the lease 

term. Examples of such charges include: 

i. Disposition charges. 

ii. Excess mileage charges. 

iii. Late payment and default charges. 

iv. In simple-interest accounting leases, 

amount by which the unamortized cost 

exceeds the residual value because the lessee 

has not made timely payments. 

4(n) Fees and Taxes 

1. Treatment of certain taxes. Taxes paid 

in connection with the lease are generally 

disclosed under § 1013.4(n), but there are 

exceptions. To illustrate: 

i. Taxes paid by lease signing or delivery 

are disclosed under § 1013.4(b) and 

§ 1013.4(n). 

ii. Taxes that are part of the scheduled 

payments are reflected in the disclosure 

under § 1013.4(c), (f), and (n). 

iii. A tax payable by the lessor that is 

passed on to the consumer and is reflected 

in the lease documentation must be disclosed 

under § 1013.4(n). A tax payable by the lessor 

and absorbed as a cost of doing business need 

not be disclosed. 

iv. Taxes charged in connection with the 

exercise of a purchase option are disclosed 

under § 1013.4(i), not § 1013.4(n). 

2. Estimates. In disclosing the total amount 

of fees and taxes under § 1013.4(n), lessors 

may need to base the disclosure on estimated 

tax rates or amounts and are afforded great 

flexibility in doing so. Where a rate is 

applied to the future value of leased 

property, lessors have flexibility in 

estimating that value, including, but not 

limited to, using the mathematical average of 

the agreed upon value and the residual value 

or published valuation guides; or a lessor 

could prepare estimates using the agreed 

upon value and disclose a reasonable 

estimate of the total fees and taxes. Lessors 

may include a statement that the actual total 

of fees and taxes may be higher or lower 

depending on the tax rates in effect or the 

value of the leased property at the time a fee 

or tax is assessed. 

4(o) Insurance 

1. Coverage. If insurance is obtained 

through the lessor, information on the type 

and amount of insurance coverage (whether 

voluntary or required) as well as the cost, 

must be disclosed. 

2. Lessor’s insurance. Insurance purchased 

by the lessor primarily for its own benefit, 

and absorbed as a business expense and not 

separately charged to the lessee, need not be 

disclosed under § 1013.4(o) even if it 

provides an incidental benefit to the lessee. 

3. Mechanical breakdown protection and 

other products. Whether products purchased 

in conjunction with a lease, such as 

mechanical breakdown protection (MBP) or 

guaranteed automobile protection (GAP), 

should be treated as insurance is determined 

by state or other applicable law. In states that 

do not treat MBP or GAP as insurance, 

§ 1013.4(o) disclosures are not required. In 

such cases the lessor may, however, disclose 

this information in accordance with the 

additional information provision in 

§ 1013.3(b). For MBP insurance contracts not 

capped by a dollar amount, lessors may 

describe coverage by referring to a limitation 

by mileage or time period, for example, by 

indicating that the mechanical breakdown 

contract insures parts of the automobile for 

up to 100,000 miles. 

4(p) Warranties or Guarantees 

1. Brief identification. The statement 

identifying warranties may be brief and need 

not describe or list all warranties applicable 

to specific parts such as for air conditioning, 

radio, or tires in an automobile. For example, 

manufacturer’s warranties may be identified 

simply by a reference to the standard 

manufacturer’s warranty. If a lessor provides 

a comprehensive list of warranties that may 

not all apply, to comply with § 1013.4(p) the 

lessor must indicate which warranties apply 

or, alternatively, which warranties do not 

apply. 

2. Warranty disclaimers. Although a 

disclaimer of warranties is not required by 

the regulation, the lessor may give a 

disclaimer as additional information in 

accordance with § 1013.3(b). 

3. State law. Whether an express warranty 

or guaranty exists is determined by state or 

other law. 

4(q) Penalties and Other Charges for 

Delinquency 

1. Collection costs. The automatic 

imposition of collection costs or attorney fees 

upon default must be disclosed under 


srobinson on DSK4SPTVN1PROD with RULES
78518 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 

§ 1013.4(q). Collection costs or attorney fees 

that are not imposed automatically, but are 

contingent upon expenditures in conjunction 

with a collection proceeding or upon the 

employment of an attorney to effect 

collection, need not be disclosed. 

2. Charges for early termination. When 

default is a condition for early termination of 

a lease, default charges must also be 

disclosed under § 1013.4(g)(1). The 

§ 1013.4(q) and (g)(1) disclosures may, but 

need not, be combined. Examples of 

combined disclosures are provided in the 

model lease disclosure forms in Appendix A. 

3. Simple-interest leases. In a simpleinterest accounting lease, the additional rent 

charge that accrues on the lease balance 

when a periodic payment is made after the 

due date does not constitute a penalty or 

other charge for late payment. Similarly, 

continued accrual of the rent charge after 

termination of the lease because the lessee 

fails to return the leased property does not 

constitute a default charge. But in either case, 

if the additional charge accrues at a rate 

higher than the normal rent charge, the lessor 

must disclose the amount of or the method 

of determining the additional charge under 

§ 1013.4(q). 

4. Extension charges. Extension charges 

that exceed the rent charge in a simpleinterest accounting lease or that are added 

separately are disclosed under § 1013.4(q). 

5. Reasonableness of charges. Pursuant to 

section 183(b) of the Act, penalties or other 

charges for delinquency, default, or early 

termination may be specified in the lease but 

only in an amount that is reasonable in light 

of the anticipated or actual harm caused by 

the delinquency, default, or early 

termination, the difficulties of proof of loss, 

and the inconvenience or nonfeasibility of 

otherwise obtaining an adequate remedy. 

4(r) Security Interest 

1. Disclosable security interests. See 

§ 1013.2(o) and accompanying commentary 

to determine what security interests must be 

disclosed. 

4(s) Limitations on Rate Information 

1. Segregated disclosures. A lease rate may 

not be included among the segregated 

disclosures referenced in § 1013.3(a)(2). 

Section 1013.5—Renegotiations, Extensions, 

and Assumptions 

1. Coverage. Section 1013.5 applies only to 

existing leases that are covered by the 

regulation. It does not apply to the 

renegotiation or extension of leases with an 

initial term of four months or less, because 

such leases are not covered by the definition 

of consumer lease in § 1013.2(e). Whether 

and when a lease is satisfied and replaced by 

a new lease is determined by state or other 

applicable law. 

5(a) Renegotiation 

1. Basis of disclosures. Lessors have 

flexibility in making disclosures so long as 

they reflect the legal obligation under the 

renegotiated lease. For example, assume that 

a 24-month lease is replaced by a 36-month 

lease. The initial lease began on January 1, 

1998, and was renegotiated and replaced on 

July 1, 1998, so that the new lease term ends 

on January 1, 2001. 

i. If the renegotiated lease covers the 36- 

month period beginning January 1, 1998, the 

new disclosures would reflect all payments 

made by the lessee on the initial lease and 

all payments on the renegotiated lease. In 

this example, since the renegotiated lease 

covers a 36-month period beginning January 

1, 1998, the disclosures must reflect 

payments made since that date. On the model 

form, the ‘‘total of base periodic payments’’ 

disclosed under § 1013.4(f)(7) should reflect 

periodic payments to be made over the entire 

36-month term. Payments received since 

January 1, 1998, are added as a new line item 

disclosed as ‘‘total of payments received’’ 

and are subtracted from the ‘‘total of base 

periodic payments’’ in calculating a new item 

disclosed as the ‘‘total of base periodic 

payments remaining.’’ For example, if 6 

monthly payments of $300 were received 

since January 1, 1998, the disclosure form 

should include a ‘‘total of base periodic 

payments’’ line from which $1,800 is 

subtracted to arrive at the ‘‘total of base 

periodic payments remaining.’’ The 

remainder of the disclosures would not 

change. 

ii. If the renegotiated lease covers only the 

remaining 30 months, from July 1, 1998, to 

January 1, 2001, the disclosures would reflect 

only the charges incurred in connection with 

the renegotiation and the payments for the 

remaining period. 

5(b) Extension 

1. Time of extension disclosures. If a 

consumer lease is extended for a specified 

term greater than six months, new 

disclosures are required at the time the 

extension is agreed upon. If the lease is 

extended on a month-to-month basis and the 

cumulative extensions exceed six months, 

new disclosures are required at the 

commencement of the seventh month and at 

the commencement of each seventh month 

thereafter for as long as the extensions 

continue. If a consumer lease is extended for 

terms of varying durations, one of which will 

exceed six months beyond the originally 

scheduled termination date of the lease, new 

disclosures are required at the 

commencement of the term that will exceed 

six months beyond the originally scheduled 

termination date. 

2. Content of disclosures for month-tomonth extensions. The disclosures for a lease 

extended on a month-to-month basis for more 

than six months should reflect the month-tomonth nature of the transaction. 

3. Basis of disclosures. The disclosures 

should be based on the extension period, 

including any upfront costs paid in 

connection with the extension. For example, 

assume that initially a lease ends on March 

1, 1999. In January 1999, agreement is 

reached to extend the lease until October 1, 

1999. The disclosure would include any 

extension fee paid in January and the 

periodic payments for the seven-month 

extension period beginning in March. 

Section 1013.6—[Reserved] 

Section 1013.7—Advertising 

7(a) General Rule 

1. Persons covered. All ‘‘persons’’ must 

comply with the advertising provisions in 

this section, not just those that meet the 

definition of a lessor in § 1013.2(h). Thus, 

automobile dealers (to the extent they are not 

excluded from the Bureau’s rulemaking 

authority by section 1029 of the Dodd-Frank 

Act), merchants, and others who are not 

themselves lessors must comply with the 

advertising provisions of the regulation if 

they advertise consumer lease transactions. 

Pursuant to section 184(b) of the Act, 

however, owners and personnel of the media 

in which an advertisement appears or 

through which it is disseminated are not 

subject to civil liability for violations under 

section 185(b) of the Act. 

2. ‘‘Usually and customarily.’’ Section 

1013.7(a) does not prohibit the advertising of 

a single item or the promotion of a new 

leasing program, but prohibits the advertising 

of terms that are not and will not be 

available. Thus, an advertisement may state 

terms that will be offered for only a limited 

period or terms that will become available at 

a future date. 

3. Total contractual obligation of 

advertised lease. Section 1013.7 applies to 

advertisements for consumer leases, as 

defined in § 1013.2(e). Under § 1013.2(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, § 1013.7 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 § 1013.7 

unless all of the advertised leases are exempt 

under § 1013.2(e). For example: 

i. 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 § 1013.7 because it 

refers only to an exempt lease. 

ii. 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 § 1013.7 


srobinson on DSK4SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 78519 

because it refers to terms for consumer leases 

that are not exempt. 

iii. 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 § 1013.7 because it refers to a 

consumer lease that is not exempt. 

7(b) Clear and Conspicuous Standard 

1. Standard. The disclosures in an 

advertisement in any media must be 

reasonably understandable. For example, 

very fine print in a television advertisement 

or detailed and very rapidly stated 

information in a radio advertisement does 

not meet the clear and conspicuous standard 

if consumers cannot see and read or hear, 

and cannot comprehend, the information 

required to be disclosed. 

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

Delivery 

1. Itemization not required. Only a total of 

amounts due at lease signing or delivery is 

required to be disclosed, not an itemization 

of its component parts. Such an itemization 

is provided in any transaction-specific 

disclosures provided under § 1013.4. 

2. Prominence rule. Except for a periodic 

payment, oral or written references to 

components of the total due at lease signing 

or delivery (for example, a reference to a 

capitalized cost reduction, where permitted) 

may not be more prominent than the 

disclosure of the total amount due at lease 

signing or delivery. 

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 

§ 1013.4(s), the rate cannot be more 

prominent than any other § 1013.4 disclosure 

stated in the advertisement. 

7(c) Catalogs or Other Multi-Page 

Advertisements; Electronic Advertisements 

1. General rule. The multiple-page 

advertisements referred to in § 1013.7(c) are 

advertisements consisting of a series of 

numbered pages—for example, a supplement 

to a newspaper. A mailing comprising several 

separate flyers or pieces of promotional 

material in a single envelope is not a single 

multiple-page advertisement. 

2. Cross references. A catalog or other 

multiple-page advertisement or an electronic 

advertisement (such as an advertisement 

appearing on an internet Web site) is a single 

advertisement (requiring only one set of lease 

disclosures) if it contains a table, chart, or 

schedule with the disclosures required under 

§ 1013.7(d)(2)(i) through (v). If one of the 

triggering terms listed in § 1013.7(d)(1) 

appears in a catalog, or in a multiple-page or 

electronic advertisement, it must clearly 

direct the consumer to the page or location 

where the table, chart, or schedule begins. 

For example, in an electronic advertisement, 

a term triggering additional disclosures may 

be accompanied by a link that directly 

connects the consumer to the additional 

information. 

7(d)(1) Triggering Terms 

1. Typical example. When any triggering 

term appears in a lease advertisement, the 

additional terms enumerated in 

§ 1013.7(d)(2)(i) through (v) must also appear. 

In a multi-lease advertisement, an example of 

one or more typical leases with a statement 

of all the terms applicable to each may be 

used. The examples must be labeled as such 

and must reflect representative lease terms 

that are made available by the lessor to 

consumers. 

7(d)(2) Additional Terms 

1. Third-party fees that vary by state or 

locality. The disclosure of a periodic 

payment or total amount due at lease signing 

or delivery may: 

i. Exclude third-party fees, such as taxes, 

licenses, and registration fees and disclose 

that fact; or 

ii. Provide a periodic payment or total that 

includes third-party fees based on a 

particular state or locality as long as that fact 

and the fact that fees may vary by state or 

locality are disclosed. 

7(e) Alternative Disclosures—Merchandise 

Tags 

1. Multiple-item leases. Multiple-item 

leases that utilize merchandise tags requiring 

additional disclosures may use the alternate 

disclosure rule. 

7(f) Alternative Disclosures—Television or 

Radio Advertisements 

7(f)(1) Toll-Free Number or Print 

Advertisement 

1. Publication in general circulation. A 

reference to a written advertisement 

appearing in a newspaper circulated 

nationally, for example, USA Today or the 

Wall Street Journal, may satisfy the general 

circulation requirement in § 1013.7(f)(1)(ii). 

2. Toll-free number, local or collect calls. 

In complying with the disclosure 

requirements of § 1013.7(f)(1)(i), a lessor 

must provide a toll-free number for nonlocal 

calls made from an area code other than the 

one used in the lessor’s dialing area. 

Alternatively, a lessor may provide any 

telephone number that allows a consumer to 

reverse the phone charges when calling for 

information. 

3. Multi-purpose number. When an 

advertised toll-free number responds with a 

recording, lease disclosures must be provided 

early in the sequence to ensure that the 

consumer receives the required disclosures. 

For example, in providing several dialing 

options—such as providing directions to the 

lessor’s place of business—the option 

allowing the consumer to request lease 

disclosures should be provided early in the 

telephone message to ensure that the option 

to request disclosures is not obscured by 

other information. 

4. Statement accompanying toll free 

number. Language must accompany a 

telephone and television number indicating 

that disclosures are available by calling the 

toll-free number, such as ‘‘call 1–(800) 000– 

0000 for details about costs and terms.’’ 

Section 1013.8—Record Retention 

1. Manner of retaining evidence. A lessor 

must retain evidence of having performed 

required actions and of having made required 

disclosures. Such records may be retained in 

paper form, on microfilm, microfiche, or 

computer, or by any other method designed 

to reproduce records accurately. The lessor 

need retain only enough information to 

reconstruct the required disclosures or other 

records. 

Section 1013.9—Relation to State Laws 

1. Exemptions granted. The Bureau 

recognizes exemptions granted by the Board 

of Governors of the Federal Reserve System 

prior to July 21, 2011, until and unless the 

Bureau makes and publishes any contrary 

determination. Effective October 1, 1982, the 

Board of Governors of the Federal Reserve 

System granted the following exemptions 

from portions of the Consumer Leasing Act: 

i. Maine. Lease transactions subject to the 

Maine Consumer Credit Code and its 

implementing regulations are exempt from 

Chapters 2, 4, and 5 of the Federal act. (The 

exemption does not apply to transactions in 

which a federally chartered institution is a 

lessor.) 

ii. Oklahoma. Lease transactions subject to 

the Oklahoma Consumer Credit Code are 

exempt from Chapters 2 and 5 of the Federal 

act. (The exemption does not apply to 

sections 132 through 135 of the Federal act, 

nor does it apply to transactions in which a 

federally chartered institution is a lessor.) 

Appendix A—Model Forms 

1. Permissible changes. Although use of the 

model forms is not required, lessors using 

them properly will be deemed to be in 

compliance with the regulation. Generally, 

lessors may make certain changes in the 

format or content of the forms and may delete 

any disclosures that are inapplicable to a 

transaction without losing the Act’s 

protection from liability. For example, the 

model form based on monthly periodic 

payments may be modified for singlepayment lease transactions or for quarterly or 

other regular or irregular periodic payments. 

The model form may also be modified to 

reflect that a transaction is an extension. The 

content, format, and headings for the 

segregated disclosures must be substantially 

similar to those contained in the model 

forms; therefore, any changes should be 

minimal. The changes to the model forms 

should not be so extensive as to affect the 

substance and the clarity of the disclosures. 

2. Examples of acceptable changes. 

i. Using the first person, instead of the 

second person, in referring to the lessee. 

ii. Using ‘‘lessee,’’ ‘‘lessor,’’ or names 

instead of pronouns. 

iii. Rearranging the sequence of the 

nonsegregated disclosures. 

iv. Incorporating certain state ‘‘plain 

English’’ requirements. 


srobinson on DSK4SPTVN1PROD with RULES
78520 Federal Register / Vol. 76, No. 243 / Monday, December 19, 2011 / Rules and Regulations 

v. Deleting or blocking out inapplicable 

disclosures, filling in ‘‘N/A’’ (not applicable) 

or ‘‘0,’’ crossing out, leaving blanks, checking 

a box for applicable items, or circling 

applicable items (this should facilitate use of 

multipurpose standard forms). 

vi. Adding language or symbols to indicate 

estimates. 

vii. Adding numeric or alphabetic 

designations. 

viii. Rearranging the disclosures into 

vertical columns, except for § 1013.4(b) 

through (e) disclosures. 

ix. Using icons and other graphics. 

3. Model closed-end or net vehicle lease 

disclosure. Model A–2 is designed for a 

closed-end or net vehicle lease. Under the 

‘‘Early Termination and Default’’ provision a 

reference to the lessee’s right to an 

independent appraisal of the leased vehicle 

under § 1013.4(l) is included for those 

closed-end leases in which the lessee’s 

liability at early termination is based on the 

vehicle’s realized value. 

4. Model furniture lease disclosures. Model 

A–3 is a closed-end lease disclosure 

statement designed for a typical furniture 

lease. It does not include a disclosure of the 

appraisal right at early termination required 

under § 1013.4(l) because few closed-end 

furniture leases base the lessee’s liability at 

early termination on the realized value of the 

leased property. The disclosure should be 

added if it is applicable. 

Dated: October 24, 2011. 

Alastair M. Fitzpayne, 

Deputy Chief of Staff and Executive Secretary, 

Department of the Treasury. 

[FR Doc. 2011–31723 Filed 12–16–11; 8:45 am] 

BILLING CODE 4810–AM–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2011–0651; Directorate 

Identifier 2011–NM–041–AD; Amendment 

39–16879; AD 2011–25–03] 

RIN 2120–AA64 

Airworthiness Directives; Learjet Inc. 

Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule. 

SUMMARY: We are adopting a new 

airworthiness directive (AD) for all 

Learjet Inc. Model 45 airplanes. This AD 

was prompted by a report of the 

potential for fatigue cracking of the end 

cap of the main landing gear (MLG) 

prior to the published life limitation. 

This AD requires revising the 

maintenance program to incorporate life 

limits for the MLG actuator end cap. We 

are issuing this AD to prevent fatigue 

cracking of the end cap of the MLG, 

which could result in the failure of the 

MLG actuator upon landing, and failure 

of the MLG to extend or retract during 

flight. 

DATES: This AD is effective January 23, 

2012. 

The Director of the Federal Register 

approved the incorporation by reference 

of certain publications listed in the AD 

as of January 23, 2012. 

ADDRESSES: For service information 

identified in this AD, contact Learjet, 

Inc., One Learjet Way, Wichita, Kansas 

67209–2942; telephone (316) 946–2000; 

fax (316) 946–2220; email 

ac.ict@aero.bombardier.com; Internet 

http://www.bombardier.com. You may 

review copies of the referenced service 

information at the FAA, Transport 

Airplane Directorate, 1601 Lind Avenue 

SW., Renton, Washington. For 

information on the availability of this 

material at the FAA, call (425) 227– 

1221. 

Examining the AD Docket 

You may examine the AD docket on 

the Internet at http:// 

www.regulations.gov; or in person at the 

Docket Management Facility between 

9 a.m. and 5 p.m., Monday through 

Friday, except Federal holidays. The AD 

docket contains this AD, the regulatory 

evaluation, any comments received, and 

other information. The address for the 

Docket Office (phone: (800) 647–5527) 

is Document Management Facility, U.S. 

Department of Transportation, Docket 

Operations, M–30, West Building 

Ground Floor, Room W12–140, 1200 

New Jersey Avenue SE., Washington, 

DC 20590. 

FOR FURTHER INFORMATION CONTACT: Paul 

Chapman, Aerospace Engineer, 

Airframe and Services Branch, ACE– 

118W, FAA, Wichita Aircraft 

Certification Office, 1801 Airport Road, 

Room 100, Mid-Continent Airport, 

Wichita, KS 67209; phone: (316) 946– 

4152; fax: (316) 946–4129; email: 

paul.chapman@faa.gov. 

SUPPLEMENTARY INFORMATION: 

Discussion 

We issued a notice of proposed 

rulemaking (NPRM) to amend 14 CFR 

part 39 to include an AD that would 

apply to the specified products. That 

NPRM published in the Federal 

Register on July 8, 2011 (76 FR 40291). 

That NPRM proposed to require revising 

the maintenance program to incorporate 

life limits for the MLG actuator end cap. 

Comments 

We gave the public the opportunity to 

participate in developing this AD. We 

received no comments on the NPRM (76 

FR 40291, July 8, 2011) or on the 

determination of the cost to the public. 

Conclusion 

We reviewed the relevant data and 

determined that air safety and the 

public interest require adopting the AD 

as proposed. 

Costs of Compliance 

We estimate that this AD affects 351 

airplanes of U.S. registry. We estimate 

the following costs to comply with this 

AD: 

ESTIMATED COSTS

Action Labor cost Parts cost Cost per product Cost on U.S. 

operators 

Revise maintenance plan ........................... 1 work-hour × $85 per hour = $85 per revision.$0 $ 85 per revision ..... $29,835 

Authority for this Rulemaking 

Title 49 of the United States Code 

specifies the FAA’s authority to issue 

rules on aviation safety. Subtitle I, 

section 106, describes the authority of 

the FAA Administrator. Subtitle VII: 

Aviation Programs, describes in more 

detail the scope of the Agency’s 

authority. 

We are issuing this rulemaking under 

the authority described in subtitle VII, 

part A, subpart III, section 44701: 

‘‘General requirements.’’ Under that 

section, Congress charges the FAA with 


srobinson on DSK4SPTVN1PROD with RULES