I

105TH CONGRESS

2D SESSION H. R. 4788

To amend the Consumer Credit Protection Act to enhance the advertising

of the terms and costs of consumer automobile leases, to permit consumer

comparison of advertised lease offerings, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

OCTOBER 10, 1998

Mr. LAFALCE introduced the following bill; which was referred to the

Committee on Banking and Financial Services

A BILL

To amend the Consumer Credit Protection Act to enhance

the advertising of the terms and costs of consumer automobile leases, to permit consumer comparison of advertised lease offerings, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Consumer Automobile Lease Advertising Act of 1998’’.

6 (b) REFERENCE.—Whenever in this Act an amend7 ment or repeal is expressed in terms of an amendment

8 to, or repeal of, a section or other provision, the reference
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1 shall be considered to be made to a section or other provi2 sion of the Consumer Credit Protection Act.

3 SEC. 2. FINDINGS AND PURPOSE.

4 (a) FINDINGS.—The Congress finds the following:

5 (1) There has been a continuing trend toward

6 leasing of automobiles by consumers as an alter7 native to installment credit sales, with automobile

8 leases now constituting over one-third of all new

9 automobile transactions.

10 (2) Current automobile leasing practices do not

11 provide consumers with consistent or adequate infor12 mation to permit comparison shopping among lease

13 offerings. Important information about lease costs

14 and terms are not available until the consumer visits

15 an automobile dealership, are typically provided only

16 as part of lease negotiations, and often are not fully

17 disclosed until the signing of the lease documents.

18 (3) Automobile lease advertisements tend to

19 confuse and mislead consumers by highlighting the

20 most attractive terms of leases, by minimizing or

21 omitting additional costs, terms or penalties, and by

22 advertising monthly payment amounts based on

23 lease terms that are different from those customarily

24 offered to or selected by consumers.
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1 (4) With leases accounting for a large and

2 growing percentage of all new automobile trans3 actions, there is increasing need for automobile man4 ufacturers, automobile dealers and other firms in5 volved in leasing to provide more relevant and easily

6 understood information in advertising and in writing

7 at the auto dealership to permit consumers to evalu8 ate intelligently the attractiveness of leases offered

9 by an automobile dealership, to compare terms of

10 leases offered and advertised by competing dealer11 ships, and to compare the benefits of automobile

12 leases with alternative purchase transactions.

13 (b) PURPOSE.—The purpose of the amendments

14 made by this Act is to simplify and standardize automobile

15 lease advertising in order to provide consumers with more

16 relevant and easily understood information regarding the

17 terms and costs of lease offerings earlier in the leasing

18 process to permit consumers to compare lease and pur19 chase options and to comparison shop among competing

20 lease opportunities.

21 SEC. 3. APPLICABLE CONSUMER LEASES.

22 Section 181(1) of the Consumer Credit Protection

23 Act (15 U.S.C. 1667(1)) is amended—

24 (1) by striking ‘‘$25,000’’ and inserting

25 ‘‘$50,000’’; and
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1 (2) by adding at the end of the following: ‘‘The

2 limit on the contractual obligation which comes with3 in such term shall be adjusted annually based upon

4 the change reported in the Consumer Price Index by

5 the Department of Labor in June of the preceding

6 year.’’.

7 SEC. 4. GENERAL LEASE ADVERTISING.

8 (a) AMENDMENTS.—Section 184(a) (15 U.S.C.

9 1667c) is amended—

10 (1) by striking ‘‘(a)’’ and inserting ‘‘(a)(1)’’;

11 (2) by redesignating paragraphs (1) through

12 (5) as subparagraphs (A) through (E), respectively;

13 (3) by adding at the end the following:

14 ‘‘(2) Information required to be disclosed under

15 paragraph (1) shall be in the same language that

16 principally is used in the advertisement.

17 ‘‘(3) Identification in a television advertisement

18 of the advertised transaction as a lease, as required

19 by paragraph (1)(A), shall be included in both the

20 audio and video portions of the television advertise21 ment.

22 ‘‘(4) The requirements of this subsection shall

23 apply to all aspects of advertising, including tele24 vision, radio and videotaped advertisements, print

25 advertisements in publications, newsletters and fli-
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1 ers, advertisements on computer programs and on

2 the internet, and advertisements by toll-free tele3 phone numbers.’’.

4 (b) CONFORMING AMENDMENTS.—Section 184(c)

5 (15 U.S.C. 1667c(c)) is amended by striking ‘‘subsection

6 (a)’’ each time it occurs and inserting ‘‘subsection (a)(1)’’

7 and in paragraph (1) by striking ‘‘paragraphs (1) and

8 (2)’’ and inserting ‘‘subparagraphs (A) and (B)’’.

9 SEC. 5. ALTERNATIVE LEASE DISCLOSURES.

10 Section 184(c) (15 U.S.C. 1667c(C)) is amended—

11 (1) by striking ‘‘RADIO’’ in the subsection head12 ing and inserting ‘‘BROADCAST’’;

13 (2) by striking ‘‘radio broadcast’’ each place it

14 occurs and inserting ‘‘radio or television broadcast’’;

15 (3) in paragraph (1)(A), by striking ‘‘para16 graphs (1) and (2)’’ and inserting ‘‘subparagraphs

17 (A), (B), and (F) of subsection (a)(1)’’;

18 (4) in paragraph (2)(A)(iii), by striking ‘‘pro19 vide the’’ and inserting the following: ‘‘provide a re20 corded message which provides, in a uniform manner

21 and in a form which is easily understood and capa22 ble of being repeated, the’’;

23 (5) in paragraph (2)(A), by striking ‘‘and’’ at

24 the end of clause (ii), by striking the period at the
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1 end of clause (iii) and inserting ‘‘; and’’, and by add2 ing after clause (iii) the following:

3 ‘‘(iv) exclude from the information pro4 vided by such toll-free telephone all marketing

5 and sales promotional information.’’; and

6 (6) by amending paragraph (2)(B) to read as

7 follows:

8 ‘‘(B) WRITTEN INFORMATION.—A toll-free

9 number established in accordance with subpara10 graph (A) shall include an option that permits

11 consumers to request the information required

12 to be provided under subparagraph (A)(iii) in

13 written form and by mail.’’.

14 SEC. 6. ADVERTISEMENT FOR AUTOMOBILE LEASE.

15 Section 184 (15 U.S.C. 1667c) is amended by adding

16 at the end the following:

17 ‘‘(d) ADVERTISEMENT FOR AUTOMOBILE LEASE.—

18 ‘‘(1) CERTAIN PRACTICES PROHIBITED.—No

19 advertisement to promote or assist, directly or indi20 rectly, any lease for an automobile shall—

21 ‘‘(A) state that no downpayment is re22 quired on the lease when the lessor requires a

23 capitalized cost reduction payment, acquisition

24 fee, vehicle trade-in or other significant pay25 ment upon initiation of the lease, except that
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1 payment of the first monthly payment on the

2 lease and any refundable deposit shall not be

3 considered a downpayment; and

4 ‘‘(B) include the amount of any monthly or

5 periodic payment, downpayment, lease term, in6 terest rate, or other terms of leases that the les7 sor—

8 ‘‘(i) does not routinely or customarily

9 offer or make available to customers, or

10 does not intend to make available generally

11 to customers as part of any offer or pro12 motion, for vehicles of the same make,

13 model and year as the vehicle advertised;

14 or

15 ‘‘(ii) makes available only to selected

16 customers or to customers with preferred

17 credit ratings.

18 ‘‘(2) LEASE PAYMENT AMOUNTS.—

19 ‘‘(A) An advertisement to promote a lease

20 for an automobile that states a lease payment

21 amount, or must state a lease payment amount

22 under subsection (a)(1)(D), shall calculate such

23 payment amount on the basis of a lease pay24 ment formula which the Board shall set forth in
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1 regulation and which shall be based on the fol2 lowing information—

3 ‘‘(i) the total capitalized cost of the

4 vehicle model advertised which shall not be

5 reduced or adjusted by any down payment

6 amount, capitalized cost reduction, vehicle

7 trade-in amount or other required pay8 ment;

9 ‘‘(ii) a lease term of twenty-four (24)

10 months; and

11 ‘‘(iii) a mileage allowance of 24,000

12 miles, or 12,000 miles for each year of the

13 lease term, before any excess mileage

14 charge may be imposed.

15 ‘‘(B) An advertisement to promote a lease

16 for personal use of an automobile that states a

17 lease payment amount for a vehicle model as

18 provided under subparagraph (A) shall state

19 clearly and conspicuously that the stated lease

20 payment amount applies to a consumer lease

21 with a term of twenty-four (24) months, with

22 no downpayment or trade-in amount and with

23 an annual mileage allowance of 12,000 miles.

24 ‘‘(C) An advertisement to promote a lease

25 for an automobile that states a lease payment
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1 for a vehicle model as provided under subpara2 graph (A) may state a lease payment amount

3 for the same vehicle model that is different

4 than that required to be stated under subpara5 graph (A): Provided, however, That—

6 ‘‘(i) the lease payment amount is not

7 presented more prominently than the lease

8 payment amount required to be stated

9 under subparagraph (A); and

10 ‘‘(ii) the advertisement clearly and

11 conspicuously identifies the lease terms or

12 payment amounts that explain the dif13 ference between the lease payment amount

14 and the payment amount required to be

15 stated under subparagraph (A).’’.

16 SEC. 7. AVAILABILITY OF WRITTEN INFORMATION.

17 Section 184 (15 U.S.C. 1667c), as amended by sec18 tion 6, is amended by adding at the end the following:

19 ‘‘(e) AVAILABILITY OF WRITTEN INFORMATION.—

20 ‘‘(1) ADVERTISED LEASES.—In connection with

21 any advertisement by an automobile dealer to pro22 mote or assist a consumer lease for an automobile

23 that includes a lease payment amount, as provided

24 in subsection (d)(2), or any national or regional ad25 vertisement to promote an automobile lease or vehi-
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1 cle promotion that includes a lease payment amount

2 and that the dealer participates in and offers to con3 sumers, such dealer shall—

4 ‘‘(A) provide separately for each auto5 mobile which is promoted in such advertisement

6 or promotion a statement that is dated and

7 typed or set in type and that sets out accurately

8 and in a clear and conspicuous manner a sum9 mary of the relevant payment amounts and

10 other terms applicable to the advertised lease or

11 vehicle promotion that shall include—

12 ‘‘(i) a description of the vehicle model

13 advertised, including any accessory or op14 tion;

15 ‘‘(ii) a statement of the charges, fees

16 and payments to be included in the capital17 ized cost of the vehicle model advertised,

18 and the total capitalized cost of the vehicle

19 model;

20 ‘‘(iii) the total number of scheduled

21 lease payments;

22 ‘‘(iv) the information used to calculate

23 any advertised monthly lease payment

24 amount, which shall include fees or charges

25 not included in the vehicle capitalized cost,
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1 interest charges and vehicle residual value;

2 and

3 ‘‘(v) the total amount due at lease in4 ception, including all charges or fees to be

5 paid at or before lease signing and upon

6 delivery of the leased automobile; and

7 ‘‘(B) make such statement available for re8 view by the public by—

9 ‘‘(i) placing such statement in a con10 spicuous and prominent location in the

11 dealership; and

12 ‘‘(ii) providing a copy of such state13 ment to any customer who requests it.

14 ‘‘(2) CUSTOMER INCENTIVES.—An automobile

15 dealer engaged in automobile leasing shall make

16 available to the public in a conspicuous and promi17 nent location in the dealership a statement that is

18 dated and that sets out clearly and accurately for

19 each vehicle model offered by the dealer, as applica20 ble, the incentives, special offers or promotions avail21 able for the benefit of consumers in conjunction with

22 consumer lease, purchase and installment credit

23 transactions, that shall include—
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1 ‘‘(A) special interest rates that are offered

2 by automobile manufacturers, financial institu3 tions and leasing companies;

4 ‘‘(B) special incentives, including cash re5 bates and vehicle residual percentages that are

6 offered by automobile manufacturers directly to

7 consumers; and

8 ‘‘(C) special incentives and lease terms, in9 cluding vehicle discounts, residual value per10 centages and other vehicle promotions that are

11 offered to consumers by the dealer.’’.

12 SEC. 8. DEFINITIONS.

13 Section 184 (15 U.S.C. 1667c), as amended by sec14 tions 6 and 7, is further amended by adding at the end

15 the following:

16 ‘‘(f) CLEARLY AND CONSPICUOUSLY.—

17 ‘‘(1) IN GENERAL.—For purposes of this sec18 tion, the term ‘clearly and conspicuously’ means—

19 ‘‘(A) in print advertisements, the required

20 disclosures and explanations of lease terms shall

21 appear in type size, shade, contract, promi22 nence, and location as to be readily noticeable,

23 readable, and comprehensible to an ordinary

24 consumer;
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1 ‘‘(B) in the video portion of television or

2 videotaped advertisements, the required disclo3 sures shall appear on the screen in a type size,

4 shade, contrast, prominence, and location and

5 for a duration as to be readily noticeable, read6 able, and comprehensible to an ordinary con7 sumer;

8 ‘‘(C) in the audio portion of television,

9 videotaped, and radio advertisements, the re10 quired disclosures shall be delivered in a vol11 ume, cadence, and location and for a duration

12 as to be readily noticeable, hearable, and com13 prehensible to an ordinary consumer; and

14 ‘‘(D) in advertisements on the internet, the

15 required disclosures shall appear in a type, size,

16 shade, contract, prominence, and location as to

17 be readily readable and comprehensible to users

18 and shall be separated from marketing and pro19 motional information and easily accessible

20 under the label or heading ‘Important Informa21 tion for Consumers’.

22 ‘‘(2) LIMITATION.—Nothing contrary to, incon23 sistent with, or in mitigation of, the required disclo24 sures shall be used in any advertisement in any me25 dium and no audio, video, or print technique shall
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1 be used that is likely to obscure or detract signifi2 cantly from the communications of the disclosures.’’

3 SEC. 9. ADMINISTRATIVE ENFORCEMENT.

4 Chapter 5 of the Consumer Credit Protection Act is

5 further amended by adding the following new section:

6 ‘‘§ 187. Administrative Enforcement

7 ‘‘Compliance with section 184 of this Chapter shall

8 be enforced by the Federal Trade Commission, except to

9 the extent that enforcement of the requirements imposed

10 under such section is specifically committed to another

11 agency under section 108(a) of this title. For purposes of

12 the exercise by the Commission of its functions and powers

13 under the Federal Trade Commission Act, a violation of

14 section 184 shall be deemed an unfair or deceptive act or

15 practice in violation of that Act. All of the functions of

16 and powers of the Commission under the Federal Trade

17 Commission Act are available to the Commission to en18 force compliance by any person with such section, irrespec19 tive of whether that person is engaged in commerce or

20 meets any other jurisdictional tests in the Federal Trade

21 Commission Act, including the power to enforce the provi22 sions of such section in the same manner as if the violation

23 had been a violation of a Federal Trade Commission trade

24 regulation rule.’’
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1 SEC. 10. CIVIL LIABILITY.

2 Section 130(a)(2) of the Truth in Lending Act (15

3 U.S.C. 1640) is amended by striking ‘‘or’’ at the end of

4 subparagraph (A), by inserting ‘‘or’’ at the end of sub5 paragraph (B), and by adding after subparagraph (B) the

6 following:

7 ‘‘(C) in the case of calculating the total civil li8 ability for violation of any requirement of chapter 5,

9 the liability under this subparagraph shall not be

10 greater than $10,000;’’.

11 SEC. 11. REGULATIONS.

12 The Federal Reserve Board, not later than 6 months

13 after the date of the enactment of this Act, shall issue

14 regulations to implement the amendments made by this

15 Act. The Board shall also issue regulations, together with

16 staff commentary if appropriate, to update and clarify the

17 requirements and definitions for lease disclosures and any

18 other issue relating to consumer leasing to carry out the

19 intent of the amendments made by this Act, to implement

20 any initiative to prevent the circumvention of the amend21 ments made by this Act, and to facilitate compliance with

22 the requirements in the amendments.

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