Supplement I to Part 1013 - Official Interpretations
12:8.0.2.1.14.0.1.10.33 :
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 Dodd-Frank 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 purchase-option 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 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 in comment 2(e)-11 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. Comment 2(e)-11 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.
10. No increase in the CPI-W. If the CPI-W in effect on
June 1 does not increase from the CPI-W in effect on June 1 of the
previous year, the threshold amount effective the following January
1 through December 31 will not change from the previous year. When
this occurs, for the years that follow, the threshold is calculated
based on the annual percentage change in the CPI-W applied to the
dollar amount that would have resulted, after rounding, if
decreases and any subsequent increases in the CPI-W had been taken
into account.
i. Net increases. If the resulting amount calculated,
after rounding, is greater than the current threshold, then the
threshold effective January 1 the following year will increase
accordingly.
ii. Net decreases. If the resulting amount calculated,
after rounding, is equal to or less than the current threshold,
then the threshold effective January 1 the following year will not
change, but future increases will be calculated based on the amount
that would have resulted.
11. Threshold. For purposes of § 1013.2(e)(1), the
threshold amount in effect during a particular period is the amount
stated below for that period.
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.
iii. From January 1, 2012 through December 31, 2012, the
threshold amount is $51,800.
iv. From January 1, 2013 through December 31, 2013, the
threshold amount is $53,000.
v. From January 1, 2014 through December 31, 2014, the threshold
amount is $53,500.
vi. From January 1, 2015 through December 31, 2015, the
threshold amount is $54,600.
vii. From January 1, 2016 through December 31, 2016, the
threshold amount is $54,600.
viii. From January 1, 2017 through December 31, 2017, the
threshold amount is $54,600.
ix. From January 1, 2018 through December 31, 2018, the
threshold amount is $55,800.
x. From January 1, 2019 through December 31, 2019, the threshold
amount is $57,200.
xi. From January 1, 2020 through December 31, 2020, the
threshold amount is $58,300.
xii. From January 1, 2021 through December 31, 2021, the
threshold amount is $58,300.
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 (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 cross-reference 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 three-year 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
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. Third-party 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 “pick-up” 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.
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 purchase-option
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 § 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 simple-interest
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 simple-interest 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-to-month extensions.
The disclosures for a lease extended on a month-to-month basis for
more than six months should reflect the month-to-month 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 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 single-payment 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.
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.
[76 FR 78502, Dec. 19, 2011, as amended at 76 FR 81790, Dec. 29,
2011; 77 FR 69736, Nov. 21, 2012; 79 FR 70194, Nov. 25, 2013; 79 FR
56483, Sept. 22, 2014; 80 FR 73947, Nov. 27, 2015, as amended at 81
FR 86259, Nov. 30, 2016; 82 FR 51977, Nov. 9, 2017; 83 FR 59276,
Nov. 23, 2018; 84 FR 58019, Oct. 30, 2019; 85 FR 79393, Dec. 10,
2020]
