[Federal Register: April 30, 2007 (Volume 72, Number 82)]
[Proposed Rules]
[Page 21135-21141]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30ap07-17]
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FEDERAL RESERVE SYSTEM
12 CFR Part 213
[Regulation M; Docket No. R-1283]
Consumer Leasing
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Proposed rule; request for comments.
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SUMMARY: The Board is proposing to amend Regulation M, which implements
the Consumer Leasing Act, to withdraw portions of the interim final
rules for the electronic delivery of disclosures issued March 30, 2001.
The interim final rules address the timing and delivery of electronic
disclosures, consistent with the requirements of the Electronic
Signatures in Global and National Commerce Act (E-Sign Act). Compliance
with the 2001 interim final rules is not mandatory. Thus, removing the
interim rules from the Code of Federal Regulations would reduce
confusion about the status of the provisions and simplify the
regulation. The Board is also proposing to amend Regulation M to
provide that when an advertisement is accessed by a consumer in
electronic form, certain disclosures must be provided to the consumer
in electronic form on or with the advertisement, and that in these
circumstances the consumer consent and other provisions of the E-Sign
Act do not apply. Similar rules are being proposed under other consumer
fair lending and financial services regulations administered by the
Board.
DATES: Comments must be received on or before June 29, 2007.
ADDRESSES: You may submit comments, identified by Docket No. R-1283, by
any of the following methods:
Agency Web site: http://www.federalreserve.gov Follow the instructions for submitting comments at http://www.federalreserve.gov/.
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[[Page 21136]]
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: regs.comments@federalreserve.gov. Include the
docket number in the subject line of the message.
FAX: (202) 452-3819 or (202) 452-3102.
Mail: Jennifer J. Johnson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue,
NW., Washington, DC 20551.
All public comments are available from the Board's Web site at
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical reasons. Accordingly, your
comments will not be edited to remove any identifying or contact
information. Public comments may also be viewed electronically or in
paper form in Room MP-500 of the Board's Martin Building (20th and C
Streets, NW.) between 9 a.m. and 5 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT: John C. Wood or David A. Stein,
Counsels, Division of Consumer and Community Affairs, at (202) 452-2412
or (202) 452-3667. For users of Telecommunications Device for the Deaf
(TDD) only, contact (202) 263-4869.
SUPPLEMENTARY INFORMATION:
I. Background
The Consumer Leasing Act (CLA), 15 U.S.C. 1667-1667e, was enacted
into law in 1976 as an amendment to the Truth in Lending Act (TILA), 15
U.S.C. 1601 et seq. The CLA requires lessors to provide lessees with
uniform cost and other disclosures about consumer lease transactions.
The act generally applies to consumer leases of personal property in
which the contractual obligation does not exceed $25,000 and has a term
of more than four months. An automobile lease is the most common type
of consumer lease covered by the act. The Board's Regulation M (12 CFR
part 213) implements the act. The CLA and Regulation M require
disclosures to be provided in writing.
Board Proposals Regarding Electronic Disclosures
On May 2, 1996, the Board proposed to amend Regulation E
(Electronic Fund Transfers) to permit financial institutions to provide
disclosures by sending them electronically (61 FR 19696). Based on
comments received, in 1998 the Board published an interim rule
permitting the electronic delivery of disclosures under Regulation E
(63 FR 14528, March 25, 1998) and proposals under Regulations B (Equal
Credit Opportunity), M (Consumer Leasing), Z (Truth in Lending), and DD
(Truth in Savings) (63 FR 14552, 14538, 14548, and 14533, respectively,
March 25, 1998).
Based on comments received on the 1998 proposals, in September 1999
the Board published revised proposals under Regulations B, E, M, Z, and
DD (64 FR 49688, 49699, 49713, 49722 and 49740, respectively, September
14, 1999). At the same time, the Board published an interim rule under
Regulation DD allowing depository institutions to deliver disclosures
on periodic statements in electronic form if the consumer agreed (64 FR
49846, September 14, 1999). While these rulemakings were pending,
federal legislation was enacted addressing the use of electronic
documents and records, including consumer disclosures.
Federal Legislation Addressing Electronic Commerce
On June 30, 2000, the President signed into law the Electronic
Signatures in Global and National Commerce Act (the E-Sign Act) (15
U.S.C. 7001 et seq.). The E-Sign Act provides that electronic documents
and electronic signatures have the same validity as paper documents and
handwritten signatures. The E-Sign Act contains special rules for the
use of electronic disclosures in consumer transactions. Under the E-
Sign Act, consumer disclosures required by other laws or regulations to
be provided or made available in writing may be provided or made
available, as applicable, in electronic form if the consumer
affirmatively consents after receiving a notice that contains certain
information specified in the statute, and if certain other conditions
are met.
The E-Sign Act, including the special consumer notice provisions,
became effective October 1, 2000, and did not require implementing
regulations. Thus, financial institutions are currently permitted to
provide in electronic form any disclosures that are required to be
provided or made available to the consumer in writing under Regulations
B, E, M, Z, and DD if the consumer affirmatively consents to receipt of
electronic disclosures in the manner required by section 101(c) of the
E-Sign Act.
The Interim Final Rules
On March 30, 2001, the Board published for comment interim final
rules to establish uniform standards for the electronic delivery of
disclosures required under Regulation M (66 FR 17322). Similar interim
final rules for Regulations B, E, Z, and DD were published on March 30,
2001 (66 FR 17329 (Z)) and April 4, 2001 (66 FR 17779 (B), 66 FR 17786
(E), and 66 FR 17795 (DD)). The interim final rules incorporated most
of the provisions that were part of the 1999 proposals.
Each of the interim final rules incorporated, but did not
interpret, the requirements of the E-Sign Act. Lessors, financial
institutions, creditors, and other persons, as applicable, generally
were required to obtain consumers' affirmative consent to provide
disclosures electronically, consistent with the requirements of the E-
Sign Act.
The 2001 interim final rule for Regulation M established uniform
requirements for the timing and delivery of electronic disclosures.
Under the interim rule, disclosures could be sent to an e-mail address
designated by the lessee, or could be made available at another
location, such as an Internet Web site. If the disclosures were not
sent by e-mail, lessors would have to provide a notice to lessees
alerting them to the availability of the disclosures. Disclosures
posted on a Web site would have to be available for at least 90 days to
allow lessees adequate time to access and retain the information.
Lessors also would be required to make a good faith attempt to
redeliver electronic disclosures that were returned undelivered, using
the address information available in their files. Similar provisions
were included in the interim final rules adopted under Regulations B,
E, Z, and DD.
Commenters on the interim final rules identified significant
operational and information security concerns with respect to the
requirement to send the disclosure or an alert notice to an e-mail
address designated by the consumer. For example, commenters stated that
some consumers do not have e-mail addresses or may not want personal
financial information sent to them by e-mail. Commenters also noted
that e-mail is not a secure medium for delivering confidential
information and that consumers' e-mail addresses frequently change. The
commenters also opposed the requirement for redelivery in the event a
disclosure was returned undelivered. In addition, many commenters
asserted that making the disclosures available for at least 90 days, as
required by the interim final rule, would increase costs and would not
be necessary for consumer protection.
In August 2001, in response to comments received, the Board lifted
the previously established October 1, 2001 mandatory compliance date
for all of the interim final rules. (66 FR 41439,
[[Page 21137]]
August 8, 2001.) Thus, institutions are not required to comply with the
interim final rules. Since that time, the Board has not taken further
action with respect to the interim final rules on electronic
disclosures in order to allow electronic commerce, including electronic
disclosure practices, to continue to develop without regulatory
intervention and to allow the Board to gather further information about
such practices.
II. The Proposed Rules
The Board is proposing to amend Regulation M and the official staff
commentary by (1) withdrawing portions of the 2001 interim final rule
on electronic disclosures that restate or cross-reference provisions of
the E-Sign Act and accordingly are unnecessary; (2) withdrawing other
portions of the interim final rule that the Board now believes may
impose undue burdens on electronic banking and commerce and may be
unnecessary for consumer protection; and (3) retaining the substance of
certain provisions of the interim final rule that provide regulatory
relief or guidance regarding electronic disclosures. (Similar
amendments are also being proposed by the Board, in today's issue of
the Federal Register, under Regulations B, E, Z, and DD.)
Because compliance with the 2001 interim final rules is not
mandatory, removing most portions of the interim rules from the Code of
Federal Regulations, while finalizing other provisions, would reduce
confusion about the status of the electronic disclosure provisions and
simplify the regulation. The Board is proposing to adopt certain
provisions that are identical or similar to provisions in the 2001
interim final rules in order to enhance the ability of consumers to
shop for leases online, minimize the information-gathering burdens on
consumers, and provide guidance or eliminate a substantial burden on
the use of electronic disclosures, as discussed further below.
Since 2001, industry and consumers have gained considerable
experience with electronic disclosures. During that period, the Board
has received no indication that consumers have been harmed by the fact
that compliance with the interim final rules is not mandatory. The
Board also has reconsidered certain aspects of the interim final rules,
such as sending disclosures by e-mail, in light of concerns about data
security, identity theft, and ``phishing'' (i.e., prompting consumers
to reveal confidential personal or financial information through
fraudulent e-mail requests that appear to originate from a financial
institution, government agency, or other trusted entity) that have
become more pronounced since 2001. Finally, the Board is proposing to
eliminate certain aspects of the 2001 interim final rule, such as
provisions regarding the availability and retention of electronic
disclosures, as unnecessary in light of current industry practices.
The 2001 interim final rule allowed lessors to provide certain
disclosures to lessees electronically, without regard to the consumer
consent or other provisions of the E-Sign Act, for disclosures provided
on or with an electronic advertisement. The Board reasoned that these
disclosures, which would be available to the general public while
shopping for a lease, did not ``relate to a transaction,'' which is a
prerequisite for triggering the E-Sign consumer consent provisions, and
thus were not subject to those provisions. Some commenters on the
interim final rules did not agree with the Board's rationale. Upon
further consideration, the Board does not believe it is necessary to
determine whether or not these disclosures are related to a
transaction. This proposal does not make such determinations.
Instead, pursuant to the Board's authority under section 187 of the
CLA, as well as under section 104(d) of the E-Sign Act,\1\ the Board is
proposing to specify the circumstances under which certain disclosures
may be provided to a lessee in electronic form, rather than in writing
as generally required by Regulation M, without obtaining the lessee's
consent under section 101(c) of the E-Sign Act. The proposed rule would
also amend Regulation M, as discussed in detail below, to provide that
certain disclosures must be provided to a consumer in electronic form
on or with an advertisement that is accessed by the consumer in
electronic form.
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\1\ Section 187 of CLA provides that regulations prescribed by
the Board under CLA ``may provide for adjustments and exceptions * *
* as the Board considers appropriate.'' Section 104(d) of the E-Sign
Act authorizes federal agencies to adopt exemptions for specified
categories of disclosures from the E-Sign notice and consent
requirements, ``if such exemption is necessary to eliminate a
substantial burden on electronic commerce and will not increase the
material risk of harm to consumers.'' For the reasons stated in this
Federal Register notice, the Board believes that these criteria are
met in the case of the advertising disclosures. In addition, the
Board believes CLA section 187 authorizes the Board to permit
institutions to provide disclosures electronically, rather than in
paper form, independent of the E-Sign Act.
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The Board continues to believe that lessors should not be required
to obtain the consumer's consent in order to provide advertising
disclosures to the consumer in electronic form if the consumer accesses
the advertisement containing those disclosures in electronic form, such
as at an Internet Web site. The Board believes consumers would not be
harmed, and in fact would benefit, by having timely access to
advertising disclosures in electronic form when they are viewing online
lease advertising. The Board also believes that consumers' ability to
shop for leases online and compare the terms of various lease offers
could be substantially diminished if consumers had to consent in
accordance with the E-Sign Act in order to access advertisements that
must be accompanied by disclosures. Applying the consumer consent
provisions of the E-Sign Act to these disclosures could impose
substantial burdens on electronic commerce and make it more difficult
for consumers to gather information and shop for leases.
At the same time, the Board recognizes that consumers who shop or
apply for leases online may not want to receive other disclosures
electronically. Therefore, with respect to the disclosures required
prior to the consummation of a lease, lessors would be required to
provide written disclosures or obtain the lessee's consent in
accordance with the E-Sign Act to provide the disclosures in electronic
form.
Finally, the Board is proposing to delete, as unnecessary, certain
provisions that restate or cross-reference the E-Sign Act's general
rules regarding electronic disclosures (including the consumer consent
provisions) and electronic signatures because the E-Sign Act is a self-
effectuating statute. The proposed revisions to Regulation M and the
official staff commentary are described more fully below in the
Section-by-Section Analysis.
The Board solicits comment on all aspects of this proposal.
Specifically, the Board seeks comment on the appropriateness of
eliminating certain provisions and retaining other provisions contained
in the 2001 interim final rule.
III. Section-by-Section Analysis
12 CFR Part 213 (Regulation M)
Section 213.3 General Disclosure Requirements
Section 213.3(a) generally requires lessors to provide disclosures
in writing and in a form that the lessee may keep. The Board proposes
to revise Sec. 213.3(a) to clarify that lessors may provide
disclosures to lessees in electronic form, subject to compliance with
the consumer consent and other applicable provisions of the E-Sign Act.
Some lessors may provide disclosures to
[[Page 21138]]
lessees both in paper and electronic form and rely on the paper form of
the disclosures to satisfy their compliance obligations. For those
lessors, the duplicate electronic form of the disclosures may be
provided to lessees without regard to the consumer consent or other
provisions of the E-Sign Act because the electronic form of the
disclosure is not used to satisfy the regulation's disclosure
requirements.
Section 213.3(a) would also be revised to provide that the
advertising disclosures required by Sec. 213.7 must be provided to the
consumer in electronic form if the consumer accesses the advertisement
electronically. Under those circumstances, those disclosures may be
provided in electronic form without regard to the consumer consent or
other provisions of the E-Sign Act. The Board believes that, for an
advertisement accessed by the consumer in electronic form, permitting
lessors to provide lease advertising disclosures in electronic form
without regard to the consumer consent and other provisions of the E-
Sign Act will eliminate a potential significant burden on electronic
commerce without increasing the risk of harm to consumers. This
approach will facilitate shopping for leases by enabling consumers to
receive important disclosures at the same time they access an
advertisement without first having to provide consent in accordance
with the requirements of the E-Sign Act. Requiring consumers to follow
the consent procedures set forth in the E-Sign Act in order to access
an online advertisement is potentially burdensome and could discourage
consumers from shopping for leases online. Moreover, because these
consumers are viewing the advertisement online, there appears to be
little, if any, risk that the consumer will be unable to view the
disclosures online as well.
Section 213.3(a)(5) in the 2001 interim final rule refers to Sec.
213.6, the section of the interim final rule setting forth general
rules for electronic disclosures. Because the Board is proposing to
delete Sec. 213.6, as discussed further below, the Board also proposes
to delete Sec. 213.3(a)(5).
Section 213.6 Electronic Communication
Section 213.6 was added by the 2001 interim final rule to address
the general requirements for electronic communications. The Board
proposes to delete Sec. 213.6 from Regulation M and the accompanying
sections of the staff commentary, reserving that section for future
use.
In the interim rule, Sec. 213.6(a) defines the term ``electronic
communication'' to mean a message transmitted electronically that can
be displayed on equipment as visual text, such as a message displayed
on a personal computer monitor screen. The deletion of Sec. 213.6(a)
would not change applicable legal requirements under the E-Sign Act.
Sections 213.6(b) and (c) incorporate by reference provisions of
the E-Sign Act, such as the provision allowing disclosures to be
provided in electronic form and the requirement to obtain the lessee's
affirmative consent before providing such disclosures. The deletion of
these provisions will have no impact on the general applicability of
the E-Sign Act to Regulation M disclosures.
Sections 213.6(d) and (e) address specific timing and delivery
requirements for electronic disclosures under Regulation M, such as the
requirement to send disclosures to a lessee's e-mail address (or post
the disclosures on a Web site and send a notice alerting the lessee to
the disclosures). The Board no longer believes that these additional
provisions are necessary or appropriate. Electronic disclosures have
evolved since 2001, as industry and consumers have gained experience
with them. Although many institutions offer e-mail alert notices to
consumers, some consumers may choose not to receive notifications by e-
mail and the Board sees no reason to require e-mail alert notices. In
addition, the Board has reconsidered certain aspects of the interim
final rules, such as sending disclosures by e-mail, in light of
concerns about data security, identity theft, and phishing that have
become more pronounced since 2001.
With regard to the requirement to attempt to redeliver returned
electronic disclosures, as the commenters noted, lessors would be
required to search their files for an additional e-mail address to use,
and might be required to use a postal mail address for redelivery if no
additional e-mail address was available. The Board believes that both
requirements would likely be unduly burdensome. In addition, the
concerns that have been raised about the requirement to use e-mail for
the initial delivery of a disclosure or notice apply equally to the use
of e-mail for an attempted redelivery.
Under the proposed rule, the Board would not require lessors to
maintain disclosures posted on a Web site for at least 90 days as
provided in the 2001 interim final rule. While the Board is not
proposing to require disclosures to be maintained on an Internet Web
site for any specific time period, the general requirements of
Regulation M continue to apply to electronic disclosures, such as the
requirement to provide disclosures to lessees at a specified time and
in a form that the lessee may keep. Although these general requirements
apply to electronic disclosures, the Board does not believe that the
90-day time period set out in Sec. 213.6(d) of the 2001 interim final
rule is needed to ensure that lessors satisfy these requirements when
they provide electronic disclosures. The Board, however, will monitor
lessors' electronic disclosure practices with regard to the ability of
lessees to retain Regulation M disclosures and will consider further
regulatory action if it appears necessary.
The official staff commentary to Sec. 213.6 of the interim final
rule provides guidance on the provisions set forth in Sec. 213.6 such
as delivery of disclosures or alert notices by e-mail, redelivery if
disclosures or a notice is returned undelivered, and retention of
disclosures on a Web site for 90 days. As noted above, because the
Board is proposing to delete Sec. 213.6 of the regulation, the Board
also proposes to delete the accompanying provisions of the official
staff commentary.
Section 213.7 Advertising
Section 213.7 contains requirements for lease advertisements and
requires that if an advertisement includes certain ``trigger terms''
(such as the payment amount), the advertisement must also include
certain required disclosures (such as the total amount due prior to or
at consummation and a statement that an extra charge may be imposed at
the end of the lease term).
Section 213.7(c) relates to catalogs and other multipage
advertisements and (under this proposal) to electronic advertisements.
The Board is proposing to add a new comment 7(c)-3 to clarify that if a
consumer accesses a lease advertisement in electronic form, the
disclosures required on or with the advertisement must be provided to
the consumer in electronic form on or with the advertisement. A
consumer accesses an advertisement in electronic form when, for
example, the consumer views the advertisement on his or her home
computer. On the other hand, if a consumer receives a written
advertisement in the mail, the lessor would not satisfy its obligation
to provide the disclosures at that time by including a reference in the
advertisement to the Web site where the disclosures are located.
Section 213.7(c) provides that in a catalog or other multipage
[[Page 21139]]
advertisement, the required disclosures need not be shown on each page
where a ``trigger term'' appears, as long as each such page includes a
cross-reference to the page where the required disclosures appear. The
2001 interim final rule clarified, in comment 7(c)-2, that the
multipage rule for lease advertising also applies to advertisements in
electronic form. For example, if a ``trigger term'' appears on a
particular web page, the additional disclosures may appear in a table
or schedule on another web page and still be considered part of a
single advertisement if there is a clear reference to the page or
location where the table or schedule begins (which may be accomplished,
for example, by including a link). The Board proposes to retain the
rule allowing the use of links or other cross-references in electronic
credit advertisements to provide guidance on how the advertising rules
apply to Web sites, by amending Sec. 213.7(c), as well as by retaining
comment 7(c)-2 with minor wording changes.
Section 213.7(b)(1) requires that any affirmative or negative
reference to a charge that constitutes part of the total amount due
prior to or at consummation of the lease not be more prominent in the
advertisement than the disclosure of the total amount due. In the 2001
interim final rule, comment 7(b)(1)-3 was added to state that in an
advertisement using electronic communication, both the reference to the
charge and the disclosure of the total amount due must appear in the
same location so that they can be viewed simultaneously. Section
213.7(b)(2) requires that a percentage rate in an advertisement not be
more prominent than any of the required disclosures, except for a
notice required to accompany the rate under Sec. 213.4(s). The interim
final rule revised comment 7(b)(2)-1 to state that in an advertisement
using electronic communication, both the rate and the accompanying
notice must appear in the same location so that they can be viewed
simultaneously, and that this requirement is not satisfied by the use
of a link that connects the consumer to information appearing at
another location.
The Board proposes to delete comment 7(b)(1)-3, and to delete the
language added to comment 7(b)(2)-1 by the interim final rule, as
unnecessary. The prominence requirements of Sec. 213.7(b) continue to
apply to electronic advertisements no less than to advertisements in
other media. Requiring the consumer to scroll to another part of the
page, or access a link, in order to view the required disclosures would
likely not satisfy this requirement.
IV. Solicitation of Comments Regarding the Use of ``Plain Language''
Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the
Board to use ``plain language'' in all proposed and final rules
published after January 1, 2000. The Board invites comments on whether
the proposed rules are clearly stated and effectively organized, and
how the Board might make the proposed text easier to understand.
V. Initial Regulatory Flexibility Analysis
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA)
generally requires an agency to perform an assessment of the impact a
rule is expected to have on small entities.
However, under section 605(b) of the RFA, 5 U.S.C. 605(b), the
regulatory flexibility analysis otherwise required under section 604 of
the RFA is not required if an agency certifies, along with a statement
providing the factual basis for such certification, that the rule will
not have a significant economic impact on a substantial number of small
entities. Based on its analysis and for the reasons stated below, the
Board believes that this proposed rule will not have a significant
economic impact on a substantial number of small entities. A final
regulatory flexibility analysis will be conducted after consideration
of comments received during the public comment period.
1. Statement of the objectives of the proposal. The Board is
proposing revisions to Regulation M to withdraw the 2001 interim final
rule on electronic communication and to allow lessors to provide
certain disclosures to lessees in electronic form on or with an
advertisement that is accessed by the lessee in electronic form without
regard to the consumer consent and other provisions of the E-Sign Act.
The Board is also proposing to clarify that other Regulation M
disclosures may be provided to lessees in electronic form in accordance
with the consumer consent and other applicable provisions of the E-Sign
Act.
The purpose of CLA is to assure a meaningful disclosure of the
terms of consumer leases, so that the lessee can compare more readily
the various lease terms available, limit balloon payments in consumer
leasing, enable comparison of lease terms with credit terms where
appropriate, and assure meaningful and accurate disclosures of lease
terms in advertisements. 15 U.S.C. 1601. CLA authorizes the Board to
prescribe regulations to carry out the purposes of the statute. 15
U.S.C. 1604(a), 1667f. The Act expressly states that the Board's
regulations may contain ``such classifications, differentiations, or
other provisions, * * *, as in the judgment of the Board are necessary
or proper to effectuate the purposes of [the Act], to prevent
circumvention or evasion of [the Act], or to facilitate compliance with
[the Act].'' 15 U.S.C. 1604(a). The Board believes that the revisions
to Regulation M discussed above are within Congress's broad grant of
authority to the Board to adopt provisions that carry out the purposes
of the statute. These revisions facilitate the informed use of leases
by consumers in circumstances where a consumer accesses a lease
advertisement in electronic form.
2. Small entities affected by the proposal. The ability to provide
advertising disclosures in electronic form on or with an advertisement
that is accessed by the consumer in electronic form applies to all
lessors, regardless of their size. Accordingly, the proposed revisions
would reduce burden and compliance costs for small entities by
providing relief, to the extent the E-Sign Act applies in these
circumstances. The number of small entities affected by this proposal
is unknown.
3. Other federal rules. The Board believes no federal rules
duplicate, overlap, or conflict with the proposed revisions to
Regulation M.
4. Significant alternatives to the proposed revisions. The Board
solicits comment on any significant alternatives that may provide
additional ways to reduce regulatory burden associated with this
proposed rule.
VI. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3506; 5 CFR part 1320 Appendix A.1), the Board reviewed the rule under
the authority delegated to the Board by the Office of Management and
Budget (OMB). The collection of information that is required by this
proposed rule is found in 12 CFR part 213. The Federal Reserve may not
conduct or sponsor, and an organization is not required to respond to,
this information collection unless it displays a currently valid OMB
control number. The OMB control number is 7100-0202.
Sections 105(a) and 187 of TILA (15 U.S.C. 1604(a) and 1667f)
authorize the Board to issue regulations to carry out the provisions of
the Consumer Leasing Act (CLA). The CLA and Regulation M are intended
to provide consumers with meaningful disclosures about the costs and
terms of leases for personal
[[Page 21140]]
property. The disclosures enable consumers to compare the terms for a
particular lease with those for other leases and, when appropriate, to
compare lease terms with those for credit transactions. The act and
regulation also contain rules about advertising consumer leases and
limit the size of balloon payments in consumer lease transactions. The
information collection pursuant to Regulation M is triggered by
specific events. All disclosures must be provided to the lessee prior
to the consummation of the lease and when the availability of consumer
leases on particular terms is advertised. This information collection
is mandatory. Since the Federal Reserve does not collect any
information, no issue of confidentiality normally arises. However, in
the event the Board were to retain records regarding consumer leases
during the course of an examination, the information regarding the
consumer and the lease would be kept confidential pursuant to section
(b)(8) of the Freedom of Information Act (5 U.S.C. 522(b)(8)).
Regulation M applies to all types of lessors of personal property.
The Federal Reserve accounts for the paperwork burden associated with
the regulation only for Federal Reserve-supervised institutions.
Appendix B of Regulation M defines the Federal Reserve-supervised
institutions as: State member banks, branches and agencies of foreign
banks (other than federal branches, federal agencies, and insured state
branches of foreign banks), commercial lending companies owned or
controlled by foreign banks, and organizations operating under section
25 or 25A of the Federal Reserve Act. Other federal agencies account
for the paperwork burden on other lessors for which they have
administrative enforcement authority. To ease the compliance cost
(particularly for small entities) model forms are appended to the
regulation. Lessors are required to retain evidence of compliance for
twenty-four months, but the regulation does not specify types of
records that must be retained.
The estimated annual burden for the entities supervised by the
Federal Reserve is approximately 3,534 hours for the 270 State member
banks that engage in consumer leasing. As mentioned in the Preamble,
Sec. 213.3 would be revised to clarify the disclosure requirements in
Sec. Sec. 213.4 and 213.7. The Federal Reserve estimates that 270
respondents would take approximately 6.5minutes per transaction to
comply with the existing disclosure requirements in Sec. 213.4 and
estimates the annual burden to be 3,509 hours. The Federal Reserve
estimates that 15 respondents would take approximately 2.5 minutes per
transaction to comply with the existing disclosure requirements in
Sec. 213.7 and estimates the annual burden to be 25 hours. The Federal
Reserve requests specific comment on whether the revisions in this
proposed rule would change the burden on respondents.
Comments are invited on: a. Whether the collection of information
is necessary for the proper performance of the Federal Reserve's
functions; including whether the information has practical utility; b.
the accuracy of the Federal Reserve's estimate of the burden of the
information collection, including the cost of compliance; c. ways to
enhance the quality, utility, and clarity of the information to be
collected; and d. ways to minimize the burden of information collection
on respondents, including through the use of automated collection
techniques or other forms of information technology. Comments on the
collections of information should be sent to Secretary, Board of
Governors of the Federal Reserve System, Washington, DC 20551, with
copies of such comments to be sent to the Office of Management and
Budget, Paperwork Reduction Project (7100-0202), Washington, DC 20503.
List of Subjects in 12 CFR Part 213
Advertising, Federal Reserve System, Reporting and recordkeeping
requirements, Truth in lending.
Text of Proposed Revisions
Certain conventions have been used to highlight the proposed
changes to Regulation M. New language is shown inside bold-faced
arrows, while language that would be removed is set off with bold-faced
brackets.
For the reasons set forth in the preamble, the Board proposes to
amend Regulation M, 12 CFR part 213, as set forth below:
PART 213--CONSUMER LEASING (REGULATION M)
1. The authority citation for part 213 continues to read as
follows:
Authority: 15 U.S.C. 1604 and 1667f.
2. Section 213.3 would be amended by revising paragraph (a)
introductory text and removing paragraph (a)(5), to read as follows:
Sec. 213.3 General disclosure requirements.
(a) General requirements. A lessor shall make the disclosures
required by Sec. 213.4, as applicable. The disclosures shall be made
clearly and conspicuously in writing in a form the consumer may keep,
in accordance with this section. [rtrif]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. Sec. 7001 et seq.). For an advertisement accessed by
the consumer in electronic form, the disclosures required by Sec.
213.7 must be provided to the consumer in electronic form on or with
the advertisement. The Sec. 213.7 disclosures may be made in
electronic form without regard to the consumer consent or other
provisions of the E-Sign Act.[ltrif]
* * * * *
[lsqbb](5) Electronic communication. For rules governing the
electronic delivery of disclosures, including a definition of
electronic communication, see Sec. 213.6.[rsqbb]
Sec. 213.6 [Removed and Reserved]
3. Section 213.6 would be removed and reserved.
4. Section 213.7 would be amended by revising paragraph (c), to
read as follows:
Sec. 213.7 Advertising.
* * * * *
(c) Catalogs or other multipage advertisements [rtrif]; electronic
advertisements[ltrif]. A catalog or other multipage advertisement
[rtrif], or an electronic advertisement (such as an advertisement
appearing on an Internet Web site),[ltrif] that provides a table or
schedule of the required disclosures shall be considered a single
advertisement if, for lease terms that appear without all the required
disclosures, the advertisement refers to the page or pages on which the
table or schedule appears.
5. In Supplement I to Part 213, the following amendments would be
made:
a. Section 213.6 would be removed and reserved.
b. In Section 213.7--Advertising, under 7(b)(1) Amount Due at Lease
Signing or Delivery, paragraph 3. would be removed.
c. In Section 213.7--Advertising, under 7(b)(2) Advertisement of a
Lease Rate, paragraph 1., the last two sentences would be removed.
d. In Section 213.7--Advertising, under 7(c) Catalogs or Other
Multipage Advertisements; Electronic Advertisements, paragraph 2. would
be revised and new paragraph 3. would be added.
The amendments read as follows:
Supplement I to Part 213--Official Staff Commentary to Regulation M
* * * * *
[[Page 21141]]
Section 226.7--Advertising
* * * * *
7(b)(1) Amount Due at Lease Signing or Delivery
* * * * *
[lsqbb]3. Electronic advertisements. For advertisements using
electronic communication, to satisfy the prominence rule in Sec.
213.7(b)(1), both the triggering terms and the required disclosures
must appear in the same location so that they can be viewed
simultaneously.[rsqbb]
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 Sec.
213.4(s), the rate cannot be more prominent than any other Sec.
213.4 disclosure stated in the advertisement. [lsqbb]For
advertisements using electronic communication, to comply with
proximity rule in, both the rate and the accompanying notice must
appear in the same location so that they can be viewed
simultaneously. The prominent rule in Sec. 213.7(b)(2) is not met
if the disclosures can be viewed only by use of a link that connects
the consumer to the information appearing at another
location.[rsqbb]
7(c) Catalogs or Other Multipage Advertisements; Electronic
Advertisements
* * * * *
2. Cross references. A catalog or other multiple-page
advertisement or an electronic advertisement [rtrif](such as an
advertisement appearing on an Internet web site)[ltrif] is a single
advertisement (requiring only one set of lease disclosures) if it
contains a table, chart, or schedule with the disclosures required
under Sec. 213.7(d)(2)(i) through (v). If one of the triggering
terms listed in Sec. 213.7(d)(1) appears in a catalog, or in a
multiple-page or electronic advertisement, it must clearly direct
the consumer to the page or location where the table, chart, or
schedule begins. For example, in an electronic advertisement, a term
triggering additional disclosures may be accompanied by a link that
directly connects the consumer to the additional information
[lsqbb](but see comments under Sec. 213.7(b) about rules regarding
the prominence of disclosures)[rsqbb].
[rtrif]3. Electronic form of disclosures. For an advertisement
that is accessed by the consumer in electronic form (such as an
advertisement appearing on an Internet web site), the disclosures
required under this section must be provided to the consumer in
electronic form on or with the advertisement. Providing the
disclosures at a different time or place, or in paper form, would
not comply. Conversely, if a consumer views a paper advertisement,
the required disclosures must be provided in paper form on or with
the advertisement. For example, if a consumer receives an
advertisement in the mail, the creditor would not satisfy its
obligation to provide the disclosures at that time by including a
reference in the advertisement to the web site where the disclosures
are located.[ltrif]
By order of the Board of Governors of the Federal Reserve
System, April 20, 2007.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E7-7877 Filed 4-27-07; 8:45 am]
BILLING CODE 6210-01-P