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F ed e r a l R es e r v e Ba n k
of

Dallas

ROBERT D. M cTEER,JR.
DALLAS, TEXAS

P R E S ID E N T

75265-5906

A N D C H IE F E X E C U T IV E O F F IC E R

April 17, 1998
Notice 98-31

TO: The Chief Executive Officer of each
financial institution and others concerned
in the Eleventh Federal Reserve District

SUBJECT
Interim Rule for Regulation E;
Proposed Rules for Regulations E, B, M, Z, and DD
DETAILS
The Board of Governors of the Federal Reserve System has published an interim rule
amending Regulation E, Electronic Fund Transfers, to permit depository institutions to deliver
by electronic communication disclosures required in connection with fund transfers to and from
consumer asset accounts, if the consumer agrees. The interim rule became effective March 25,
1998. The Board has also published a proposed amendment to Regulation E that would reduce
the time period for investigating errors that involve point-of-sale debit card and foreign-initiated
transactions.
At the same time, the Federal Reserve Board issued proposals to permit the electronic
delivery of disclosures required by four of its consumer protection regulations: Regulation B,
Equal Credit Opportunity; Regulation M, Consumer Leasing; Regulation Z, Truth in Lending;
and Regulation DD, Truth in Savings. Technical amendments to Regulations M and DD also
were proposed.
The Board must receive comments about the interim rule for Regulation E (Docket
No. R-1002) and the proposed rules for Regulation E (Docket No. R-1007), Regulation B
(Docket No. R-1006), Regulation M (Docket No. R-1004), Regulation Z (Docket No. R-1005),
and Regulation DD (Docket No. R-1003) by May 15, 1998. Please address comments, referring
to the respective docket number, to William W. Wiles, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue, N.W., Washington, DC 20551.

For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal
Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012;
Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

ATTACHMENTS
Copies of the Board’s notices as they appear on pages 14528-32 (Regulation E
interim rule), 14533-38 (Regulation DD proposed rule), 14538^18 (Regulation M proposed
rule), 14548-52 (Regulation Z proposed rule), 14552-55 (Regulation B proposed rule) and
14555-58 (Regulation E proposed rule), Vol. 63, No. 57 of the Federal Register dated March 25,
1998, are attached.
MORE INFORMATION
For more information on the interim rule and proposed rule for Regulation E, please
contact Peggy Atcher at (214) 922-6202. For more information on the proposed rules for
Regulations B, M, Z, and DD, contact Eugene Coy at (214) 922-6201. For additional copies of
this Bank’s notice, please contact the Public Affairs Department at (214) 922-5254.
Sincerely yours,

Wednesday
March 25, 1998

Part III

Federal Reserve
System
12 CFR Part 205
Electronic Fund Transfers; Final Rule
12 CFR Part 230 et al.
Truth in Savings, Consumer Leasing,
Truth in Lending, Equal Credit
Opportunity, Electronic Fund Transfers;
Proposed Rules

14527

14528

Federal Register/Vol. 63, No. 5 7 /Wednesday, March 25, 1998/Rules and Regulations

FEDERAL RESERVE SYSTEM
12 CFR Part 205
[Regulation E; Docket No. R -1 00 2 ]

Electronic Fund Transfers
B oard of G overnors of th e
F ederal Reserve System .
ACTION: In terim ru le w ith req u e st for
com m ents.
AGENCY:

T he Board is p u b lish in g an
in te rim ru le am en d in g R egulation E,
w h ic h im p lem en ts th e E lectronic F u n d
T ransfer A ct (EFTA). T h e EFT A
estab lish es ce rtain rights, liabilities, an d
resp o n sib ilities of p a rtic ip a n ts in v o lv ed
in electronic fu n d transfers (EFTs) to
a n d from co n su m er asset accounts.
A m ong other things, th e act an d
reg u latio n req u ire d isclosures a b o u t th e
term s an d co n d itio n s of EFT services,
ac co u n t activity, error reso lu tio n , an d
au th o riza tio n s or co nfirm ation s
co n cern in g EFTs. T hese d isclo sures
m u st generally b e p ro v id e d in w riting.
In M ay 1996, th e B oard issu ed a
p ro p o se d ru le p erm ittin g fin an cial
in stitu tio n s to satisfy the req u irem en t
th a t certain d isclosures a n d other
in fo rm atio n be in w ritin g b y sending
in fo rm atio n electro nically subject to
certain req uirem ents. T h e in terim rule
allow s d ep o sito ry in stitu tio n s or other
en tities subject to th e act to d eliv er by
electron ic c o m m u n ic atio n an y of th ese
d isclosures a n d other info rm atio n
re q u ire d by th e act an d reg ulatio n, as
long as th e co n su m er agrees to su ch
delivery. For p u rp o ses of th e regulation,
an electronic co m m u n ic atio n is a
m essage tra n sm itted electro nically th at
allow s v isu al tex t to be d isp lay e d on
eq u ip m e n t su c h as a m o d e m -eq u ip p e d
com puter. T his in terim ru le p erm its
fin an cial in stitu tio n s to begin
im p lem en tin g system s th a t allow for the
electron ic delivery of EFTA d isclosures
d u rin g co n sid eratio n of sim ilar
pro p o sals u n d e r other financial services
a n d fair le n d in g law s, ap p earin g
elsew here in to d a y ’s Federal Register.
DATES: In terim ru le effective M arch 25,
1998; com m en ts m u st b e receiv ed by
M ay 15, 1998.
ADDRESSES: C om m ents sh o u ld refer to
D ocket No. R -10 02, a n d m ay b e m ailed
to W illiam W. W iles, Secretary, B oard of
G overnors of th e F ederal Reserve
System , 20th Street an d C on stitutio n
A venue, N.W., W ashington, DC 20551.
C om m ents also m ay be d eliv ere d to
Room B -2222 of th e Eccles B uilding
b e tw e en 8:45 a.m. a n d 5:15 p.m .
w eekday s, or to th e guard sta tio n in the
Eccles B u ilding co u rty ard o n 20 th
Street, N.W. (betw een C o n stitu tio n
SUMMARY:

A ven ue an d C Street) at an y tim e.
C om m ents m ay be in sp e cted in Room
M P -5 0 0 of th e M artin B uilding b etw een
9:00 a.m. a n d 5:00 p.m . w eekdays,
ex cep t as p ro v id ed in 12 CFR 261.12 of
th e B o ard ’s Rules Regarding A vailability
of Inform ation.
FOR FURTHER INFORMATION CONTACT:

M ichael H entrel or O brea P oindexter,
Staff A ttorneys, or John W ood, Senior
A ttorney, D ivision of C on su m er an d
C o m m u nity Affairs, at ( 2 0 2 ) 4 52-241 2
or (202) 452 -366 7. For th e hearing
im p aired only, T elecom m unication s
D evice for th e D eaf (TDD), contact D iane
Jenkins at (2 0 2 ) 4 52-3544.
SUPPLEMENTARY INFORMATION:

I. Background
T he E lectronic F u n d T ransfer A ct
(EFTA), 15 U.S.C. 1693 e ts e q ., en acted
in 1978, pro v id es a basic fram ew ork
establishing th e rights, liabilities, an d
resp o n sib ilities of p articip a n ts in
electron ic fu n d tran sfer (EFT) system s.
T he B o ard ’s R egulation E (12 CFR Part
205) im p lem en ts th e act. T ypes of
transfers co vered b y th e act a n d
regulatio n in c lu d e transfers in itia ted
th ro u g h an au to m ated teller m ach in e
(ATM), point-of-sale term inal,
au to m ated clearinghouse, te lep h o n e
b ill-p a y m e n t p la n , or h o m e banking
program . T he act an d reg u latio n contain
ru les th a t govern th ese a n d o th er EFTs.
T he ru les prescribe restrictio ns on the
u n so lic ite d issu an ce of ATM cards an d
o ther access devices; d isclo su re of term s
a n d co n d itio n s of an EFT service;
d o cu m en ta tio n of EFTs by m ean s of
te rm in al rec eip ts an d p erio d ic accou nt
statem ents; lim itatio n s on con sum er
liab ility for u n a u th o riz e d transfers;
p ro ce d u re s for error resolu tion; an d
certain rights related to p rea u th o rize d
EFTs.
D epository in stitu tio n s, service
pro viders, an d o th er en tities use
electron ic co m m u n ic atio n to offer a
w id e v ariety of fin an cial services
relating to checking an d o th er co n su m er
asset acco unts in clu d in g : A cco u n t
inqu iries; tran sa ctio n verifications;
req u e st a n d d o cu m en ta tio n of fu n d
transfers b etw e en accounts; b ill
p ay m en t services; a n d full acco unt
m anagem ent. C om m u nicating
electron ically p ro v id es a fast,
conv enient, a n d less costly m ean s of
receiving an d d elivering inform ation. In
offering h o m e ban kin g a n d other
fin an cial services, depository
in stitu tio n s a n d others have asked
w h e th e r th ey satisfy the req u irem en ts of
th e EFTA an d R egulation E by pro viding
or accepting in fo rm atio n electronically.
In c o n n e ctio n w ith electronic
com m erce, som e service p ro viders

w o u ld like to o btain th e electronic
eq u iv alen t of a w ritte n a n d signed
au th o riza tio n so th a t c o n su m ers’
acco unts can be d eb ited on a recurring
basis to p a y for p ro d u cts or services.
In M ay 1996, th e B oard u p d a te d
R egulation E an d th e staff com m entary
u n d e r th e B oard’s R egulatory P lan n in g
a n d R eview program , w h ic h requires
regu lation s to be rev ie w ed a n d u p d a te d
period ically. (See 61 FR 19661, M ay 2,
1996.) D uring th a t process an d in its
review of regu lations p u rs u a n t to
sectio n 303 of th e Riegle C om m unity
D evelopm ent an d R egulatory
Im p ro v em en t A ct of 1994 (12 U.S.C.
4803), th e B oard d eterm in e d th a t th e
u se of electronic co m m u n ic atio n to
d eliver in fo rm atio n to co n su m ers th a t is
req u ired b y federal co n su m er fin ancial
services a n d fair le n d in g law s could
effectively red u c e co m p lian ce costs
w ith o u t adv ersely affecting co n su m er
protections. S im u ltan eo u s w ith the
issu an ce of R egulation E u p d ate, th e
B oard issu e d a p ro p o sed ru le p erm ittin g
financial in stitu tio n s to satisfy th e EFTA
re q u ire m e n t th a t ce rtain d isclosures an d
other in fo rm atio n be in w ritin g by
sen ding in fo rm atio n electro nically in a
form at th e allow s th e d isp lay of text
m essages in a clear a n d read ily
u n d e rsta n d a b le form. T he p ro p o sal also
req u ired th a t d isclo sures be p ro v id ed in
a form th e co n su m er m ay retain, a
req u irem en t th a t a n in stitu tio n could
satisfy b y p ro v id in g in fo rm atio n th a t
m ay be p rin te d or d o w nloaded. T he
p ro p o sed ru le allo w ed consu m ers to
request a p a p e r copy of a d isclo su re for
u p to one y ear after its original delivery
(61 FR 19696, M ay 2, 1996).
T he B oard receiv ed app ro x im ately
110 com m ents on th e propo sal. The
m ajority of com m ents w ere su b m itted
by d ep o sito ry in stitu tio n s an d th e ir
trad e associations. T he com m enters,
in c lu d in g co n su m er rep resen tatives,
generally s u p p o rte d th e u se of
electron ic co m m u n ic atio n to deliver
in fo rm atio n re q u ire d by th e EFTA an d
R egulation E. M any com m enters
suggested specific m od ificatio ns an d
so ug ht clarification o n vario us aspects
of th e p ro p o sed rule; th e se com m ents
are a d d re ssed b elo w in th e section-bysectio n d isc u ssio n of th e in terim rule.
B ased o n a rev ie w of th e com m ents
a n d fu rth e r analysis, th e B oard is
p u b lish in g a n in terim ru le th a t allow s
fin an cial in stitu tio n s to pro v id e
R egulation E d isclosu res electronically;
su ch d isclosu res rem a in subject to
ap p lica b le tim ing, form at, a n d other
req u irem en ts of th e act a n d regulation.
T he in terim ru le w ill allo w financial
in stitu tio n s to im p lem en t system s to
p ro v id e EFTA inform atio n
electron ically w h ile p ro p o sed ru les are

Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Rules and Regulations
being c o n sid ered to allow th e electronic
d elivery of d isclo sures u n d e r other
laws. T he te rm financial in stitu tio n is
b ro ad ly defin ed in th e EFTA to in c lu d e
p erso n s th a t d irectly or in d ire c tly h o ld
ac co u n ts belonging to co nsum ers or th at
issu e a n access device a n d agree to
p ro v id e EFT services. In th is notice, the
te rm “ fin an cial in s titu tio n ” is u s e d in
th a t context.
T he in terim ru le is sim ilar to the
p ro p o se d rule. T h e in te rim rule,
ho w ever, does n o t req u ire financial
in stitu tio n s to p ro v id e p a p e r cop ies of
disclo su res to a co n su m er u p o n req uest
if th e co n su m er h as agreed to receive
disclo su res electronically. T he Board
believes th a t m o st financial in stitu tio n s
w ill accom m odate co n su m er requests
for p ap e r cop ies w h e n feasible.
E lsew h ere in to d a y ’s F ederal Register,
th e B oard is p u b lish in g p ro p o se d rules
sim ilar to th e in terim ru le u n d e r
R egulation E to ad d ress electronic
co m m u n ic atio n u n d e r R egulation B
(Equal C redit O p po rtu nity), R egulation
DD (T ruth in Savings), R egulation M
(C onsum er Leasing), a n d R egulation Z
(T ruth in Lending). P reviously, the
B oard p u b lish e d am en d m e n ts to the
staff co m m entary to R egulation CC
(A vailability of F u n d s a n d C ollection of
Checks) allo w in g dep o sito ry in stitu tio n s
to se n d notices electro n ically (62 FR
13801, M arch 18, 1997).
II. Regulatory R evisions
T he EFTA an d R egulation E req u ire a
n u m b e r of d isclosu res to b e p ro v id ed to
consum ers in w riting. T he req u irem en t
th a t d isclosures be in w riting has b een
p resu m e d to req u ire th a t in stitu tio n s
p ro v id e p a p e r do cu m en ts. H ow ever,
u n d e r m a n y law s th a t call for
inform ation to be in w riting,
inform ation in electronic form is
co n sid ered to be “w ritte n .” Inform ation
p ro d u ce d , stored, or co m m u n ic ate d by
co m p u ter is also generally co n sid ered to
be a w riting, w h ere v isu a l tex t is
involved.
P u rsu a n t to its a u th o rity u n d e r
sectio ns 904(a) an d (c) of th e EFTA, th e
Board is issu in g a n in terim ru le
am en d in g R egulation E to perm it
fin an cial in stitu tio n s to u se electronic
co m m u n ic atio n w h ere th e regu lation
req u ires th a t in fo rm atio n be p ro v id ed in
w riting. T h e te rm “ electronic
c o m m u n ic a tio n ” is lim ite d to a
co m m u n ic atio n in a form th a t can be
d isp lay e d as v isu al text. A n exam ple is
an electron ic v isu a l text m essage th a t is
d isp la y e d o n a screen (su ch as a
co n su m e r’s co m p u ter m onitor).
C o m m u n icatio n b y te le p h o n e voicem ail
system s does n o t m eet th e d efin itio n of
“ electronic co m m u n ic a tio n ” for
p u rp o ses of th is am e n d m e n t b ecause it

does n o t h av e th e feature generally
associated w ith a w riting —v isu a l text.
D efinition
S ectio n 205.4(c)(1) defines electronic
c o m m u n ic atio n for p u rp o ses of
R egulation E. T he d efin itio n is generally
th e sam e as in th e M ay 1996 p ro p o sed
rule, ex cept th a t ed ito rial changes have
b een m ade in th e in terim ru le to clarify
an d sim plify th e definition. T he
reference in th e p ro p o sal to e q u ip m en t
“ in th e c o n s u m e r’s p o sse ssio n ” has
b een d elete d so as n o t to p rec lu d e
ap p lic a tio n of th e ru le w here, for
exam ple, a co n su m er u ses a co m p u ter
te rm in al in a p u b lic lo catio n su c h as a
lib rary or fin an cial in stitu tio n . The
exam ple of a screen p h o n e h as b een
d elete d as unnecessary .
A g ree m en ts B etw een F in a n cia l
In stitu tio n s a n d C onsum ers
S ection 205.4(c)(2) perm its financial
in stitu tio n s to se n d electronic
d isclosures if th e co n su m er agrees. T he
in te rim ru le sim p lifies th e w ord in g th a t
w as u se d in th e p ro p o se d rule. M any
com m enters on th e p ro p o sed ru le
req u e sted th a t th e B oard clarify w h e n an
agreem ent b e tw e en a financial
in stitu tio n an d a co n su m er exists. M ore
specifically, th e co m m enters sought
clarification th a t agreem ents m ay be
estab lish ed electronically. T h ere m ay be
various w ays th a t a financial in stitu tio n
a n d a co n su m er c o u ld agree to the
electron ic delivery of d isclo su res an d
o th e r inform ation. W h ether su c h an
agreem ent exists b e tw e en th e p arties is
d eterm in e d by ap p lica b le state law. T he
reg u latio n does n o t p re c lu d e a finan cial
in stitu tio n an d a co n su m er from
entering in to an agreem ent
electronically, n o r does it p rescribe a
form al m e ch a n ism for doing so. T he
B oard does b elieve, how ever, th a t
co n su m ers sh o u ld be clearly inform ed
w h e n th e y are co nsenting to th e
deliv ery of EFTA d isclosures a n d oth er
in fo rm atio n electronically. ,
R eq u irem en t T h a t F in an cia l In stitu tio n s
“S e n d ” E lectro n ic D isclosures to
C onsum ers
T he in te rim ru le in § 205.4(c)(2), like
th e p ro p o sed rule, p ro v id es th a t
d isclosures m ay be “ s e n t” to a
co n su m er electronically. T his is
c o n siste n t w ith existing req u irem en ts in
R egulation E, w h ic h gen erally specify
th a t d isclo sures, d o cu m en ta tio n , an d
no tices be “m a ile d ,” “ d e liv ere d ,” or
“p ro v id e d .” M any co m m en ters on th e
p ro p o sed ru le suggested th a t m aking
electron ic d isclo su res “ av ailab le” to
consum ers sh o u ld satisfy the
requ irem en t. C om m enters b elieved th at
consum ers w o u ld b enefit from th e

14529

ability to o b tain in fo rm atio n from the
financial in stitu tio n , at any tim e, if th e
disclosu res are “ av ailab le” at a specified
location. C om m enters suggested that,
altern ativ ely co nsum ers m ig h t hav e to
w ait for th e in stitu tio n to sen d
in fo rm atio n to a specific location, for
exam ple, a n e-m ail ad d ress p ro v id ed by
th e consum er.
G enerally, th e reg u latio n requ ires the
financial in stitu tio n to d eliver the
in fo rm atio n — ty p ically by m ail—to an
ad d ress desig n ated b y th e consum er.
For a p a p e r co m m u n ic atio n , a financial
in stitu tio n generally w o u ld n o t satisfy
th a t re q u ire m e n t by m aking disclosu res
“ availab le,” for exam ple, at the financial
in s titu tio n ’s office (or o th er location).
(The staff co m m en tary to R egulation E
does allow fin ancial in stitu tio n s to
perm it, b u t n o t require, co n su m ers to
p ic k u p th e ir p erio d ic statem en ts at th e
in stitu tio n . See co m m en t 9(b)-4 to
§ 205.9.) T h e B oard believes th a t
consum ers receiving disclosu res by
electron ic c o m m u n ic atio n sh o u ld hav e
p ro tectio n s regarding d elivery sim ila r to
th o se afforded co n su m ers receiving
p ap e r d isclosures. S im ply p osting
in fo rm atio n o n an In tern et site w ith o u t
som e a p p ro p riate n otice a n d
in stru c tio n s ab out h o w th e co n su m er
m ay ob tain th e re q u ire d in form ation
w o u ld n o t satisfy th e requ irem ent.
T herefore, th e in terim ru le, like th e
propo sal, requires th a t d isclosures be
se n t (delivered or tran sm itted ) to
consu m ers, b u t allow s th e op tio n
c o n ta in e d in co m m en t 9(b)-4.
T he re q u ire m e n t to se n d or deliver
d isclosures to a co n su m er is satisfied
w h e n th e in stitu tio n en su res th a t th e
d isclosures w ill be d isp la y e d in a tim ely
m an ner. F or exam ple, u n d e r R egulation
E, in itia l d isclosures m u st be p ro v id ed
at th e tim e a co n su m er signs u p for an
EFT service or before th e first
tran saction . A ssum e th a t a co n su m er
uses a p erso n a l co m p u ter to sign u p for
a EFT service an d co n sen ts to th e
electronic delivery of th e in itial
disclosures. If th e disclosu res
au to m atically a p p e ar o n th e co m p u ter
screen before th e co n su m er co m m its to
th e service (in acco rdance w ith th e
form at a n d an y o th er req u irem en ts of
th e act an d regulation), th e in stitu tio n
has satisfied th e re q u ire m e n t to se n d (or
deliver or transm it) d isclosures to the
consum er.
As a p ractical m atter, th ere m ay be
little d istin c tio n b etw e en se n d in g or
deliv erin g electronic d isclosu res an d
m aking th e m “ availab le.” F in an cial
in stitu tio n s h av e flexibility in h o w they
m ay d eliv er electron ic disclosu res to
consu m ers, in c lu d in g , b u t n o t lim ite d
to, th e follow ing exam ples. T hey m ay
se n d d isclosures to a consum er-

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Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Rules and Regulations

d esig nated electronic m ail ad d re ss or
th e y m ay design ate a lo catio n o n a
w ebsite w h ere th e co n su m er m ig h t en ter
a p erso n al id e n tific atio n n u m b e r or
o th e r id e n tifie r to access req u ired
inform ation. In th e scenario described
above, assu m e th a t th e co n su m er signs
u p for an EFT service, receives the
in itia l d isclosures at th a t tim e, a n d
agrees to receive all EFTA d isclo sures
electronically. S u b seq u e n t d isclosures
se n t to a d esig n ated ad d ress or p laced
at a d esig nated lo catio n (for exam ple,
p erio d ic statem ents or change-in-term s
notices) w o u ld generally satisfy the
deliv ery req u irem en ts of § 205.4(c)(2).
E lectronic c o m m u n ic atio n rem ains
subject to any tim ing or o th er ap p licab le
req u irem en ts u n d e r R egulation E. For
exam ple, a fin an cial in stitu tio n th at
sends a change-in-term s no tice req u ired
by § 205.8 of R egulation E m u st satisfy
th e re q u irem en t to p ro v id e th e n o tice to
th e co n su m er at least 21 days in
ad v a n ce of th e change. T he Board
solicits co m m en t on w h e th e r furth er
g u id an ce is n e e d e d on h o w to com ply
w ith th e tim in g req u irem en ts w h e n a
n o tice is p o ste d on a n In tern et w ebsite.
R eq u irem en t T h a t In fo rm a tio n Be
“Clear a n d R e a d ily U n d ersta n d a b le”
U n d er th e act an d regulation,
disclo su res m u st be p ro v id e d to
co n su m ers in a clear a n d read ily
u n d e rsta n d a b le form. T he p ro p o se d ru le
stated th a t d isclosures p ro v id ed by
electro nic c o m m u n ic atio n are subject to
th is stand ard . S ection 205.4(c)(2) of th e
in terim ru le reta in s th is req u irem en t, by
cross referencing th e cu rren t regulatory
requirem ent.
Som e com m enters believ ed th a t the
re q u ire m e n t w o u ld im p o se a
co m p lia n ce b u rd e n if fin an cial
in stitu tio n s h a d to d eterm in e w h eth e r
th e co n su m er possesses th e p ro p er
eq u ip m e n t to en su re th a t a disclosure
p ro v id ed electron ically m eets the
stan d ard . Som e com m en ters expressed
co n c ern th a t th e “ clear a n d read ily
u n d e rsta n d a b le ” req u irem en t, co u p led
w ith th e screen p h o n e ex am ple in th e
su p p le m e n ta ry in fo rm atio n to th e
p ro p o se d ru le, im p lic itly d isa p p ro v e d of
ce rtain types of technologies. F urther,
som e com m enters objected to any
co n sid eratio n of th e am o u n t of text th at
m ay b e v iew ed at an y one tim e (or the
screen size of a device) as a factor in
determ in in g w h e th e r the
co m m u n ic atio n satisfies th e
requirem en t.
U n d e r th e in terim rule, th e “ clear an d
read ily u n d e rsta n d a b le ” req u irem en t
ap p lies to electron ic com m unicatio n.
T he B oard does n o t in te n d to discourage
or encourage specific ty p es of
technologies. Regardless of the

technology, how ever, th e disclosures
p ro v id ed b y electron ic co m m u n ic atio n
m u st m eet th e “ clear a n d read ily
u n d e rsta n d a b le ” stan d ard . W hile a
fin an cial in stitu tio n is generally n o t
re q u ire d to e n su re th a t th e co n su m er
has th e e q u ip m e n t to rea d the
disclosu res, in som e circu m stan ces an
in stitu tio n w o u ld h av e th e
resp o n sib ility of m aking sure th e p ro p er
eq u ip m e n t is in place. For exam ple, if
EFT services are offered th ro u g h
te rm in als in an in stitu tio n ’s lobby, or
th ro u g h kiosks located in p u b lic or
o th er places, the in stitu tio n m u st ensure
th a t th e eq u ip m e n t m eets th e clear an d
read ily u n d ersta n d a b le sta n d ard for
EFTA d isclo sures th a t are being
p ro v id ed electronically.
C o n su m er A b ility to R etain D isclosures
U n d er R egulation E, m o st disclosures
m u st be p ro v id ed in a form th a t the
co n su m er m ay keep. S ection 205.4(c)(2)
of th e in terim rule, like the proposal,
ap p lies th e sam e req u irem en t to
d isclosures p ro v id ed by electronic
co m m u nication. F in an c ial in stitu tio n s
satisfy th e re te n tio n re q u irem en t if, for
exam ple, d isclosures can be p rin te d or
d o w n lo a d e d b y th e consu m er. M ost
com m enters agreed w ith th e B oard’s
in terp re tatio n . M any com m enters u rged
th e B oard to clarify th a t financial
in stitu tio n s are n o t obligated to m o n ito r
an in d iv id u a l c o n su m er’s ability to
reta in th e info rm atio n, or to ascertain
w h e th e r th e co n su m er has actually
reta in e d it.
T he req u irem en ts or p ro ced u res for
electron ic d eliv ery are sim ila r to the
p ap e r delivery req u irem en ts, w h ere th e
financial in stitu tio n generally m u st m ail
or o th erw ise d eliv er th e co m m u n ic atio n
to th e co n su m er b u t n e e d n o t o therw ise
e n su re th a t th e co n su m er reads or
reta in s it. T h us, financial in stitu tio n s
are generally n o t req u ired to m o n ito r a
c o n su m e r’s ability to reta in the
inform ation, n o r to take steps to find out
w h e th e r th e co n su m er has in fact
re ta in e d it. T he Board an ticip ates that,
w h ere ap p ro p riate, a fin ancial
in stitu tio n w ill inform co nsum ers of any
special te ch n ic al specification s for
receiving or retainin g in fo rm atio n before
or at th e tim e a co n su m er agrees to
receive in fo rm atio n electronically.
S im ilar to th e “ clear an d read ily
u n d e rsta n d a b le ” sta n d a rd d iscu ssed
above, in circum stances w h ere th e
financial in stitu tio n (or a n etw o rk in
w h ic h th e in stitu tio n is a m em ber)
controls th e e q u ip m e n t to b e u se d for an
EFT service— su c h as A TM s or kiosks in
p u b lic or o th er places— th e in stitu tio n
does have th e resp o n sib ility of en su ring
retainability. P ro v id ed th a t th e delivery
req u irem en ts are satisfied— for exam ple,

th a t d isclosures a p p e ar on a screen—
m e th o d s for fulfilling th is rete n tio n
req u irem en t c o u ld in c lu d e, for exam ple,
p rin te rs in c o rp o rated in to te rm in als or a
screen m essage offering to tran sm it the
disclo su re th a t ap p ears on th e screen to
th e c o n su m e r’s electro nic m a il or p o st
office address.
C o n su m er’s A b ility to R eq u est a P aper
C opy o f an E lectronic D isclosure
T he p ro p o se d ru le w o u ld have
req u ired a fin ancial in stitu tio n to
prov ide, u p o n request, a p ap e r copy of
any d isclo su re sen t by electronic
co m m u n icatio n . T he co n su m er could
ob tain a p a p e r copy for u p to one year
after th e d isclo su re w as sent
electronically. M any of th e com m enters
d id n o t object to th e p a p e r copy
req u irem en t, alth o u g h m ost
re c o m m e n d ed th a t th e B oard establish a
sh o rter tim e p erio d for p ro v id in g a
copy. Som e com m enters b eliev ed th at
the req u irem en t co u ld d im in ish th e ir
ability to estab lish electronic acco unts
an d elim in ate th e p o te n tia l cost savings
of electronic com m u nication.
T he in te rim ru le does n o t req uire
fin an cial in stitu tio n s to p ro v id e a p ap e r
copy u p o n request. In som e instances,
how ever, co n su m ers w h o receive
d isclosures b y electronic
co m m u n ic atio n c o u ld experience
co m p u ter or p rin te r m alfunctio ns. T hey
m ay be u sin g p u b lic electronic
te rm in als th a t do n o t h av e a p rin t or
d o w n lo ad capability, or th ey m ay
o therw ise n ee d a p ap e r copy of a
d isclo su re o n occasion. T he B oard
expects th a t fin an cial in stitu tio n s w ill
accom m od ate a c o n su m e r’s req u e st for a
p ap e r copy, or th a t th e y w ill redeliver
d isclosures electronically, to th e extent
th a t it is feasible to do so.
P aper C onfirm ation o f E lectronic
C om m u n ica tio n s
U n d er th e act an d regulation,
consu m ers m u st p ro v id e certain
inform ation to fin an cial in stitu tio n s,
an d in stitu tio n s have th e o p tio n of
requiring th a t it be in w riting.
R egulation E p ro v id es th a t a consum er
m ay stop p ay m en t of a p rea u th o rize d
EFT or allege an error b y notifying the
in stitu tio n orally or in w riting, a n d th a t
th e in stitu tio n m ay req u ire w ritte n
confirm ation of an oral stop -paym ent
order or n o tice of error.
In th e su p p le m e n ta ry in fo rm atio n to
th e M ay 1996 p ro p o sed rule, the Board
stated its belief th a t (as in th e case of an
oral com m un icatio n) if th e consu m er
sen ds an electronic co m m u n ic atio n to
th e fin an cial in stitu tio n , th e in stitu tio n
co u ld req u ire p ap e r co n firm atio n from
th e co n su m er (particularly since th e
co n su m er w as en titled to a p ap e r copy

Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Rules and Regulations
u p o n req u e st u n d e r th e p ro p o se d rule).
T he B oard req u e sted co m m en t on
w h e th e r an d h o w th e reg u latio n sh o u ld
ad d ress this point.
Som e financial in stitu tio n s
c o m m en ted th a t in acceptin g electronic
co m m u n ic atio n from a co nsum er, they
m ay n e e d to req u ire p ap e r
confirm atio ns for th e ir o w n a n d th e
c o n s u m e r’s protection. M any
co m m en ters stated th a t th e re w ill be
situ atio n s in w h ic h it is im p o rta n t for
fin an cial in stitu tio n s to h av e th e ability
to req u ire p ap e r con firm ation s (for
exam ple, b ecau se it m ay be m ore
secure). T h ese com m en ters req u ested
th a t th e B oard allow fin an cial
in stitu tio n s to req u e st p ap e r
confirm ation s for certain
com m unication s.
U n d er th e in terim rule, financial
in stitu tio n s m ay req u e st p ap e r
confirm ation s in cases w h ere th e y can
cu rren tly req u ire w ritte n con firm ation —
electronic an d oral sto p-paym ent
notices, an d electron ic an d oral notices
of error. T he financial in stitu tio n ,
how ever, m u st clearly id e n tify to the
co n su m er th e in fo rm atio n subject to
p a p e r co nfirm atio n an d m u st pro v id e
th e ad d ress w h ere w ritte n confirm ation
m u st be sent.
C onsum ers preserv e th e ir rights u n d e r
th e act an d reg u la tio n w h e n th e y se n d
n o tices of error electronically. If the
co n su m er notifies th e fin an cial
in stitu tio n of an alleged error, th e
financial in stitu tio n m u st begin its
in vestigatio n p ro m p tly u p o n receiving
th e electronic notice. T he financial
in stitu tio n m ay n o t delay its
in vestigatio n u n til it has receiv ed a
p a p e r confirm ation. T his req u irem en t is
th e sam e as th e req u irem en t for w ritte n
co n firm atio n follow ing a n oral error
n otice (see co m m en t l l ( c ) - 2 of th e staff
com m entary).
C o n su m er Sig n a tu res a n d S im ila r
A u th e n tic a ti on
S ectio n 205.10(b) requires th a t
p rea u th o riz e d EFTs be au th o rize d only
b y a w ritin g signed or sim ilarly
a u th e n tic a te d by th e consu m er. T he
p h ra se “ or sim ilarly a u th e n tic a te d ” w as
a d d e d in th e 1996 rev iew of R egulation
E. T he B oard in d ic a te d in th e Federal
Register n o tice ac com p an yin g the
a m e n d m e n t th a t th e a u th en tica tio n
m e th o d sh o u ld p ro v id e th e sam e
assu ran ce as a signature in a p ap erb ased system , a n d cited secu rity codes
a n d digital signatures as exam ples of
a u th en tica tio n devices th a t m ig h t m eet
th e req u irem en ts of § 205.10(b). Since
th e 1996 am en d m e n t, th e B oard has
received requ ests for fu rth er g u id ance
on electronic au th e n tic a tio n m eth ods.
T he B oard is in tereste d in learn ing

abou t oth er w ays in w h ic h
au th e n tic a tio n in an electronic
en v iro n m en t m ig h t take th e p lace of th e
c o n su m e r’s signature.
C urrent N e e d fo r S afeguards C oncerning
th e E lectronic D elivery o f D isclosures
T oday, m ost consum ers receive
federal d isclosu res in p a p e r form. As
electronic com m erce a n d electronic
ban kin g in crease an d techno lo gical
advances take place, obtaining
d isclosures b y electronic
c o m m u n ic atio n w ill likely becom e m ore
com m onplace. C urrently, h ow ever, th e
u se of electronic c o m m u n ic atio n in the
deliv ery of fin an cial services is still
evolving. T hus, it is difficult to fully
p re d ic t th e exten t to w h ic h a d d itio n a l
safeguards, if any, m ay be n ee d ed to
ensu re th a t con sum ers receive th e sam e
pro tectio n s th a t exist for d isclo sures in
p a p e r form. T h e Board expects th at
dep o sito ry in stitu tio n s a n d other
in stitu tio n s subject to th e EFTA an d
R egulation E w ill p ro v id e sufficient
details ab ou t th e delivery of disclosures.
T he Board p la n s to closely m o n ito r the
dev e lo p m e n t of electronic delivery of
EFTA d isclosures a n d other
info rm ation, an d w ill ad dress
co m p lian ce or o th er issu es th a t m ay
arise as ap pro priate.
III. Form o f Comment Letters
C om m ent letters sh o u ld refer to
Docket No. R -1002 and, w h e n possible,
sh o u ld u se a sta n d a rd typeface w ith a
ty p e size of 10 or 12 characters p e r inch.
T his w ill enable th e B oard to convert
th e text to m a ch in e-read ab le form
th ro u g h electro nic scanning, an d w ill
facilitate au to m ated retrieval of
com m ents for review . A lso, if
acco m p an ie d by an original d o cu m en t
in p ap e r form, co m m ents m ay be
su b m itte d o n 3 V2 in c h or 5 V4 in c h
c o m p u ter d iskettes in any IBMcom patible D O S-based format.
IV. Regulatory Flexibility A nalysis
In accord an ce w ith se ctio n 3(a) of th e
Regulatory F lexibility A ct an d section
904(a)(2) of th e EFTA, th e B o ard ’s Office
of th e S ecretary has rev ie w ed th e
in terim am en d m e n ts to R egulation E.
O verall, th e in terim a m en d m e n ts are n o t
expected to h ave an y significant im p act
on sm all en tities. T he in terim rule
w o u ld relieve co m p lian ce b u rd e n by
giving financial in stitu tio n s flexibility
in pro v id in g disclosures. A final
regulatory flexibility analy sis w ill be
co n d u c te d after c o n sid eratio n of
com m en ts receiv ed d u rin g th e p u b lic
co m m en t period.

14531

V. Paperw ork R eduction Act
In acco rdance w ith sectio n 3506 of
th e P ap erw o rk R ed u ctio n A ct of 1995
(44 U.S.C. Ch. 35; 5 CFR p art 1320
A p p e n d ix A .l), th e B oard rev ie w ed the
in terim ru le u n d e r th e au th o rity
delegated to th e B oard b y th e Office of
M anagem ent an d Budget.
*
T he co llectio n of info rm ation
req u irem en ts in th is in terim reg ulatio n
are fo u n d in 12 CFR P art 205. T his
in fo rm atio n w o u ld be m a n d ato ry to
e n su re ad eq u ate d isclo su re of basic
term s, costs, an d rights relating to
services affecting co nsum ers usin g
certain hom e-b an king services an d
co n su m ers receiving ce rtain disclosures
by electronic co m m unication . T he
re sp o n d e n ts/rec o rd k eep e rs are for-profit
financial in stitu tio n s, in c lu d in g sm all
bu sin esses. T his reg u latio n ap p lies to all
types of d epo sitory in stitu tio n s, n o t just
state m em b er banks. H ow ever, u n d e r
P aperw ork R e duction A ct regulations,
th e F ed eral Reserve acco unts for the
b u rd e n of th e p ap e rw o rk associated
w ith th e reg u latio n only for state
m em b er banks. O ther agencies ac co u n t
for th e p ap e rw o rk b u rd e n on th e ir
resp ectiv e co n stitu en cies u n d e r th is
regulation.
T he F ed eral Reserve h as n o d ata on
w h ic h to estim ate th e b u rd e n the
regulatory a m en d m e n ts w o u ld im po se
on state m em b er banks. H ow ever, since
th e am en d m e n ts p ro v id e an alternative
m e th o d for delivering d isclosures an d
notices, it is a n ticip ate d th a t the
req u irem en ts w o u ld n o t b e burd en som e.
T he u se of electronic co m m u n ic atio n
w o u ld likely red u c e th e p ap e rw o rk
b u rd e n of financial in stitu tio n s.
In stitu tio n s w o u ld be able to use
electronic co m m u n ic atio n to pro vide
d isclosures a n d o th er info rm atio n rath e r
th a n having to p rin t a n d m ail the
in fo rm atio n in p ap e r form.
The F ed eral Reserve requests
com m en ts from in stitu tio n s, especially
state m em b er banks, th a t w ill h elp to
estim ate th e n u m b e r a n d b u rd e n of th e
v arious d isclosu res th a t w o u ld be m ade
in th e first year th is in terim reg ulation
is effective. C om m ents are in v ite d on:
(a) T he cost of co m p lian ce; (b) w ays to
en h a n ce th e quality, utility, a n d clarity
of th e in fo rm atio n to be disclosed; an d
(c) w ays to m in im iz e th e b u rd e n of
d isclo su re o n resp o n d e n ts, in c lu d in g
th ro u g h th e use of au to m ated disclosure
te ch n iq u e s or other form s of inform ation
technology. C om m ents o n th e collection
of in fo rm atio n sh o u ld be se n t to the
Office of M anagem ent an d Budget,
P ap erw ork R e du ctio n P roject (7100­
0 2 0 0 ), W ashington, DC 20503, w ith
copies of su c h co m m ents se n t to M ary
M. M cLaughlin, F ederal Reserve B oard

14532

Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Rules and Regulations

C learance Officer, D ivision of R esearch
a n d Statistics, M ail Stop 97, B oard of
G overnors of th e F ederal Reserve
System , W ashington, DC 20551.

PART 205— ELECTRONIC FUND
TRANSFERS (REGULATION E)
1 . T he a u th o rity citatio n for p art 205
c o n tin u es to rea d as follows:

List o f Subjects in 12 CFR Part 205
Banks, Banking, C on sum er pro tection ,
E lectronic fu n d transfers, R eporting an d
rec o rd k eeping req uirem en ts.
P u rsu a n t to th e a u th o rity gran ted in
sectio ns 904(a) an d (c) of th e E lectronic
F u n d T ransfer Act, 15 U.S.C. 1693b(a)
an d (c), a n d for th e reaso n s set fo rth in
th e pream ble, th e B oard am ends
R egulation E, 12 CFR p art 205, as set
forth below :

A uthority: 15 U.S.C. 1 693-1693r.

2 . S ection 205.4 is a m e n d e d by
ad d in g p arag rap h (c) to read as follows:
§ 205.4 General disclosure requirements;
join tly offered services.

*

*
*
*
*
(c) E lectronic c o m m u n ic a tio n .— (1)
D efinition. For p u rp o ses of th is
regulation, th e term electronic
c o m m u n ic a tio n m ean s a m essage
tran sm itted electro nically b etw e en a
co n su m er an d a fin an cial in stitu tio n in
a form at th a t allow s v isu al text to be
d isp lay e d o n e q u ip m e n t su c h as a
p erso n a l co m p u ter m onitor.

(2 ) E lectronic c o m m u n ic a tio n betw een
fin a n c ia l in stitu tio n a n d con su m er. A
financial in stitu tio n a n d a co n su m er
m ay agree to sen d b y electronic
c o m m u n ic atio n an y in fo rm atio n
re q u ire d by th is reg u latio n to b e in
w riting. Inform ation se n t by electronic
co m m u n ic atio n to a co n su m er m u st
co m p ly w ith parag rap h (a) of this
section an d th e ap p licab le tim ing an d
o th er req u irem en ts c o n ta in e d in the
regulation.
*
*
*
*
*
By o rd er of th e B oard of G overnors of th e
F e d e ral R eserve System , M arch 12, 1998.
W illiam W. W iles,
S ecreta ry o f th e Board.
[FR Doc. 9 8 -6 9 8 8 F iled 3 -2 4 -9 8 ; 8:45 am]
BILLING CODE 6 210 -01 -P

Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Proposed Rules
FEDERAL RESERVE SYSTEM
12 CFR Part 230
[Regulation DD; Docket No. R -1 00 3 ]

Truth in Savings
B oard of G overnors o f th e
F ed eral Reserve System .
ACTION: P ro p o sed rule.
AGENCY:

SUMMARY: T he B oard is p u b lish in g for
co m m en t a p ro p o se d ru le am en d in g
R egulation DD w h ic h im p lem en ts the
T ru th in Savings Act. T he p ro p o se d ru le
w o u ld allow d ep o sito ry in stitu tio n s to
d eliver by electro n ic c o m m u n ic atio n
d isclosures re q u ire d by th e act an d
reg ulatio n, if th e co n su m er agrees to
su c h delivery. In ad d itio n , th e B oard is
p u b lish in g p ro p o se d am e n d m e n ts to
im p lem en t am en d m e n ts to th e T ru th in
Savings A ct e n a cted as p a rt o f th e
E conom ic G row th a n d Regulatory
P ap erw o rk R ed u ctio n A ct of 1996. The
law m od ifies th e ru les for in d o o r lobby
signs, elim inates su b se q u en t disclosu re
req u irem en ts for au to m atically
ren e w a b le tim e acco unts w ith term s less
th a n one m o n th , a n d rep eals th e civil
liability pro v isio n s as of S ep tem ber 30,

2001.

C om m ents m u st be receiv ed by
M ay 15, 1998.
ADDRESSES: C om m ents sh o u ld refer to
D ocket No. R -1003, a n d m a y be m ailed
to W illiam W. W iles, Secretary, B oard of
G overnors of th e F ed eral Reserve
System , 20th Street an d C o n stitu tio n
A venue, N.W ., W ashington, DC 20551.
C om m ents also m ay be d eliv ere d to
Room B- 2 2 2 2 of th e Eccles B uild in g
b e tw e en 8:45 a.m. a n d 5:15 p.m .
w eekd ay s, or to th e gu ard sta tio n in the
Eccles B u ilding c o u rty a rd o n 20th
Street, N.W. (betw een C o n stitu tio n
A v en u e a n d C Street) at an y tim e.
C om m ents m ay be in sp e c te d in Room
M P -5 0 0 o f th e M artin B u ild in g b etw e en
9:00 a.m. a n d 5:00 p.m . w eekd ays,
ex cep t as p ro v id e d in 12 CFR 261.12 of
th e B o ard ’s R ules R egarding A vailability
of Inform ation.
DATES:

FOR FURTHER INFORMATION CONTACT:

M ichael H en trel or O brea P oindexter,
Staff A ttorneys, D ivision o f C o nsum er
a n d C o m m u nity Affairs, at (2 0 2 ) 452­
3667 or 45 2-2 412 . F or th e hearin g
im p a ire d only, T eleco m m u n icatio n s
D evice for th e D eaf (TDD), co n tac t D iane
Jenkins, at ( 2 0 2 ) 4 52-3544.
SUPPLEMENTARY INFORMATION:

I. Background
T he T ru th in Savings A ct (TISA) is
im p le m e n te d by th e B oard’s R egulation
DD, issu ed S ep tem ber 2 1 ,1 9 9 2 (57 FR
43337) (correction n otice at 57 FR

46480, O ctober 9, 1992). C om pliance
w ith th e reg u latio n becam e m an d ato ry
in June 1993. T he act an d reg ulatio n
req u ire d ep o sito ry in stitu tio n s to
disclose yields, fees, a n d o th er term s
concerning d ep o sit accou nts to
consum ers at ac co u n t opening. The
reg u latio n also in c lu d e s ru les about
ad vertisin g of d ep o sit acco unts. C redit
u n io n s are govern ed by a su b stan tially
sim ilar reg ulation issu ed by th e
N ation al C redit U n io n A d m in istratio n .
A s p a rt o f th e R egulatory P lan n in g
a n d R eview P rogram a n d its rev iew of
regu lation s u n d e r section 303 o f th e
Riegle C o m m u n ity D evelopm ent an d
Regulatory Im p ro v em en t A ct of 1994 (12
U.S.C. 4803), th e B oard d e te rm in e d th at
th e u se o f electron ic c o m m u n ic atio n for
delivery of in fo rm atio n to co nsum ers
th a t is req u ired by federal co n su m er
financial services an d fair le n d in g law s
co u ld effectively re d u c e regulatory
co m p lian ce b u rd e n w ith o u t adversely
affecting co n su m er p rotection s. T hus,
th e B oard h as b ee n c o n sid erin g th e
issu e a n d closely follow ing th e
d ev e lo p m e n t of electronic
com m u n icatio n . For ex am p le in M ay
1996, th e B oard p ro p o se d to am en d
R egulation E (Electronic F u n d
Transfers) to p e rm it d isclosu res to be
p ro v id e d electronically. In M arch 1997,
th e B oard issu ed an a m e n d m e n t to the
staff com m en tary to R egulation CC
(A vailability of F u n d s an d C ollection of
Checks) th a t allo w ed financial
in stitu tio n s to se n d n otices
electronically. (62 FR 13801, M arch 18,
1997.)
H aving co n sid ered th e com m ents
receiv ed on th e R egulation E pro p o sal
a n d oth er ru lem akin gs, th e B oard n o w
propo ses to am en d R egulation DD to
allo w in stitu tio n s to p ro v id e R egulation
DD disclosu res electronically; such
d isclosures w o u ld rem a in subject to any
app lica b le tim ing, form at, a n d other
req u irem en ts of th e act a n d the
regulation. C oncurrently, th e B oard is
issuing sim ila r p ro p o se d revisions to
ad d re ss electron ic co m m u n ic atio n
u n d e r R egulations B (Equal C redit
O p p ortunity ), M (C onsum er Leasing),
a n d Z (T ruth in L ending), p u b lish e d
elsew here in to d a y ’s Federal Register.
In ad d itio n , th e B oard h as issu ed an
in terim ru le u n d e r R egulation E also
p u b lish e d elsew here in to d a y ’s Federal
Register, so th a t fin an cial in stitu tio n s
c a n im p le m e n t system s to pro v id e
E lectronic F u n d T ransfer A ct
in fo rm atio n electronically.
II. Proposed Regulatory R evisions
E lectronic C o m m u n ica tio n
T he TISA an d R egulation DD requ ire
several d isclosures to be p ro v id ed to

14533

c o n su m ers in w riting. U n d er R egulation
DD, th e regulatory re q u ire m e n t th a t
d isclosures be in w ritin g has been
p re su m e d to req u ire in stitu tio n s to
p ro v id e p ap e r do cu m ents. H ow ever,
u n d e r m a n y law s th a t call for
in fo rm atio n to be in w riting,
in fo rm atio n in electronic form is
co n sid ered to be “w ritte n .” Inform ation
p ro d u ce d , stored, or co m m u n ic ate d by
co m p u ter is also generally co n sid ered to
be a w ritin g at least w h ere v isu a l te x t is
involved.
T herefore, p u rs u a n t to its au th o rity
u n d e r S ection 269 o f th e TISA, th e
B oard p rop oses to am e n d R egulation DD
to p e rm it d ep o sito ry in stitu tio n s to u se
electron ic c o m m u n ic atio n w h ere the
reg u latio n calls for in fo rm atio n to be
p ro v id ed in w riting. T he term
“ electronic co m m u n ic a tio n ” is lim ite d
to a c o m m u n ic atio n th a t can be
d isp la y e d as v isu al text. A n exam ple is
a n electron ic v isu a l tex t m essage th a t is
d isp la y e d o n a screen (such as th e
c o n su m e r’s co m p u ter m onitor).
C o m m un icatio ns by te lep h o n e
v oicem ail system s do n o t m eet the
d efin itio n of “ electronic
c o m m u n ic a tio n ” for p u rp o ses o f th is
reg u latio n b ecau se th e y do n o t have th e
feature generally associated w ith a
w riting—v isu a l text.
S ta tu to ry A m e n d m e n ts
T he E conom ic G row th an d Regulatory
P ap erw o rk R e d uction A ct of 1996 (1996
Act) co n tain s am en d m e n ts to th e TISA.
A n a m e n d m e n t to sectio n 266(a)(3)
elim in ates th e req u irem en t th a t
in stitu tio n s p ro v id e d isclo sures in
advance of m atu rity for au to m atically
ren ew ab le (rollover) tim e accou nts w ith
a te rm of 30 days or less. T he Board
believes th e C ongressional in te n t w as to
elim in ate an y su b se q u e n t disclosures
for m o n th ly tim e acco unts. A ccordingly,
th e p ro p o se d am en d m e n ts to R egulation
DD d elete § 230.5(c), w h ic h requ ires th at
in stitu tio n s d isclose (after th e ac co u n t is
opened) a n y changes in ac co u n t term s
for rollov er tim e ac co u n ts w ith a
m a tu rity of one m o n th or less.
In stitu tio n s w ill c o n tin u e to p ro vide
disclo su res w h e n th e se accou nts are
opened.
A n am e n d m e n t to sectio n 263(c) of
th e act ex p a n d s a n ex e m p tio n from
certain ad v ertising pro v isio n s for signs
on th e p rem ises of a deposito ry
in stitu tio n . T he p ro p o se d am en d m e n ts
to R egulation DD a p p ly th is ex em p tio n
to all signs o n th e prem ises of an
in stitu tio n . S ection 230.8(e) w o u ld be
rev ise d to ex e m p t th o se signs th a t are
in sid e th e p rem ises of th e d eposito ry
in stitu tio n , in c lu d in g those th a t face
out. A ny sign p o ste d o u tsid e the
d ep o sito ry in stitu tio n w o u ld rem a in

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Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Proposed Rules

covered by th e ad vertising p ro v isions
u n le ss th e sign is ex em p t by som e oth er
p ro v isio n (such as th e electron ic m e d ia
exem ption). T he 1996 A ct rep eals the
T ISA ’s civil liab ility p rovisions,
effective S eptem ber 30, 2001. T his
statu to ry a m e n d m e n t does n o t req u ire a
regulatory rev ision, as th e regu lation
g enerally does n o t ad d ress civil liability.
III. Section-by-Section A nalysis
Section 230.3 G eneral D isclosure
Requirem ents
S ection 230.3(a) w o u ld be revised to
ad d re ss electron ic co m m unication .
“E lectronic c o m m u n ic a tio n ” is a v isu al
text m essage electro n ically tran sm itted
b etw e en a d ep o sito ry in stitu tio n a n d a
c o n su m e r’s h o m e co m p u ter or other
electronic device u se d by a consum er.
A g ree m en ts B etw een In stitu tio n s a n d
C onsum ers
S ection 230.3(a)(2) w o u ld p erm it
d ep o sito ry in stitu tio n s to se n d
electron ic d isclo su res if th e co n su m er
agrees. T here m a y be vario us w ays th a t
a fin an cial in stitu tio n a n d a co n su m er
c o u ld agree to th e electronic d eliv ery of
disclosu res a n d o th er inform ation.
W h e th e r su c h a n agreem ent exists
b e tw e en th e parties w o u ld be
d eterm in e d by ap p lica b le state law. T he
reg u latio n w o u ld n o t p rec lu d e a
dep o sito ry in stitu tio n an d a co n su m er
from entering into an agreem ent
electronically, n o r does it p rescribe a
form al m e c h a n ism for doing so. T he
B oard does believe, h ow ever, th a t
consum ers sh o u ld be clearly in form ed
w h e n th e y are co n sen ting to th e
deliv ery of TISA d isclosures a n d other
in fo rm atio n electronically.
D elivery R eq u irem en ts fo r E lectronic
C om m unica tio n
R egulation DD pro v id es th a t an
in stitu tio n m u st, for exam ple, “ p ro v id e ”
or “ d e liv e r” in fo rm atio n to a consum er.
G enerally, th e delivery req u irem en t
an ticip ate s th a t a dep o sito ry in stitu tio n
w ill d eliv er th e in fo rm atio n —ty pically
by m ail—to an ad d ress d esig n ated by
th e consum er. For a p ap e r
co m m u n ic atio n , a d ep o sito ry in stitu tio n
w o u ld n o t satisfy th a t req u irem en t by
m aking d isclosures “ av ailab le” to
consu m ers, for exam ple, at a financial
in stitu tio n ’s office (or o th er location).
T he B oard believes th a t co n su m ers
receiving d isclo sures by electronic
c o m m u n ic atio n sh o u ld have p rotection s
regarding d eliv ery sim ilar to tho se
afforded co n su m ers receiving
d isclosures in p a p e r form. S im ply
po sting in fo rm atio n on a n In tern et site
w ith o u t som e a p p ro p riate n otice an d
in stru c tio n s abo ut h o w th e co n su m er

m ay ob tain th e re q u ire d in form ation
w o u ld n o t satisfy th e requirem ent.
T he req u irem en t to sen d or d eliver
d isclosures to a co n su m er w o u ld be
satisfied if the in stitu tio n en su res th at
th e d isclosu res w ill be d isp lay e d in a
tim ely m anner. For exam ple, u n d e r
R egulation DD, accoun t d isclosures
m u st be p ro v id ed before th e co n su m er
op en s an ac co u n t or a service is
pro v id ed , w h ich e v er is earlier. A ssum e
th a t a co n su m er uses a person al
co m p u ter to o p en a n ac co u n t a n d
co n sen ts to th e electronic d eliv ery of
ac co u n t disclosures. If th e disclosu res
au to m atically a p p e ar on th e co m p u ter
screen before th e ac co u n t is o p en e d or
th e service is p ro v id ed (in acco rdance
w ith the form at, tim ing, a n d an y other
req u irem en ts of th e act a n d regulation),
th e in stitu tio n w o u ld satisfy the
req u irem en t to se n d (or d eliv er or
transm it) d isclo sures to th e consum er.
As a p ractical m atter, th e re m ay be
little d istin c tio n b etw e en sen d in g or
d eliverin g electro nic d isclosu res an d
m aking th e m “ av ailable.” D epository
in stitu tio n s h av e flexibility in h o w they
deliv er electronic d isclo sures to
co n su m ers in clu d in g , b u t n o t lim ite d to,
th e follow ing exam ples. T h ey m ay se n d
disclosures to a co nsu m er-d esignated
electronic m ail add ress, or they m ay
designate a lo cation on a w eb site w here
th e co n su m er m ig h t enter a p erso n al
id e n tific atio n n u m b e r or o th er id en tifier
to access req u ired inform ation. If a
co n su m er o p en s an account, receives
th e ac co u n t d isclosures at th a t tim e, a n d
agrees to receive all R egulation DD
disclo su res electronically, su b se q u en t
disclosu res, su c h as p erio d ic statem ents
or change-in-term s notices, se n t (or
delivered) to th e desig nated ad d ress or
p la ce d at a desig n ated lo catio n w o u ld
g enerally satisfy th e delivery
req u irem en ts of th e regulation.
E lectronic co m m u n ic atio n w o u ld
rem a in subject to an y tim ing or other
ap p licab le req u irem en ts u n d e r
R egulation DD. For exam ple, a
d ep o sito ry in stitu tio n th a t sen ds a
change-in-term s notice req u ired by
§ 230.5(a) of R egulation DD m u st satisfy
th e re q u ire m e n t to p ro v id e th e n otice to
a co n su m er at least 30 days in advance
of th e change. T h e B oard solicits
co m m en t on w h e th e r fu rth er g uid an ce
is n e e d e d on h o w to com ply w th the
tim in g req u irem en ts w h e n a notice is
p o ste d on an In tern et w ebsite.
T im in g o f P roviding A c c o u n t O p enin g
D isclosures
A cc o u n t o pen in g disclosures,
req u ired u n d e r § 230.4(a), set forth the
term s an d co n d itio n s of th e account.
T hese disclosures inform th e con sum ers
of th e typ es a n d am o u n t of an y fees th a t

m ay be im p o sed an d th e in terest rate
a n d a n n u a l p ercentag e y ie ld (APY) th a t
w ill be p a id o n th e account. S ection
230.4(a)(1) requires th a t ac co u n t
disclosu res be p ro v id ed before an
ac co u n t is o p en e d or a service is
pro v id ed , w h ich e v er is earlier.
S ection 266(b) of th e TISA p rov id es
th a t if th e co n su m er is n o t p rese n t at the
in stitu tio n w h e n an in itia l ac co u n t is
ac ce p te d (and th e d isclo sures hav e n o t
b een fu rn ish e d previously) th e
in stitu tio n sh all m ail or d eliv er th e
d isclosures n o later th a n te n days after
th e ac co u n t is o p e n e d or th e service is
pro v id ed . T h e ratio n ale u n d erly in g th e
ten -d ay ex c ep tio n is that, in som e
in stan ces (such as w h e n an ac co u n t is
o p e n e d by telepho ne), th e in stitu tio n
ca n n o t p ro v id e w ritte n disclosures
before a n ac co u n t is opened. B ecause
this p ro p o sal w o u ld p erm it disclosu res
to be p ro v id e d electronically, th e sam e
difficulty does n o t exist if a n ac co u n t is
o p e n e d electronically. T hu s, th e B oard
believes th a t th is ten -d ay ex cep tion
sh o u ld n o t apply. O ne m ajor p u rp o se of
th e TISA is to req u ire clear a n d un ifo rm
disclo su re so th a t consum ers can m ake
m e aningful com pariso ns o f d epo sit
acco unts offered by fin an cial
in stitu tio n s before o p enin g an account.
T he Board believes th a t perm ittin g a
ten -d ay delay w o u ld serio usly d im in ish
th e c o n su m e r’s ability to com pare
ac co u n t term s an d , therefore, h in d e r an
ex p licit p u rp o se of th e TISA. T hus, th e
pro p o sed ru le req uires th a t ac co u n t
op en ing d isclosu res b e given before the
ac co u n t is o p e n e d or a service is
pro v id ed , w h e n a n ac co u n t is o p en e d
u sin g electron ic co m m un icatio n.
R eq u irem en t T h a t In fo rm a tio n be “Clear
a n d C o n sp icu o u s”
S ection 230.3(a) of R egulation DD
requ ires dep o sito ry in stitu tio n s to
p rese n t re q u ire d in fo rm atio n “ clearly
an d c o n sp icu o u sly .” U n d e r the
p ro p o sed rule, th e “ clear an d
c o n s p ic u o u s” req u irem en t ap p lies to
electron ic co m m u n icatio n . T h e Board
does n o t in te n d to discourage or
encourage specific ty pes of
technologies. Regardless of technology,
how ever, th e d isclosu res p ro v id e d by
electronic c o m m u n ic atio n m u st m eet
th e “ clear a n d c o n s p ic u o u s” standard.
W hile a dep o sito ry in stitu tio n is
generally n o t req u ired to e n su re th a t the
co n su m er has th e e q u ip m e n t to read th e
disclosu res, in som e circu m stan ces
in stitu tio n s w o u ld h av e the
resp o n sib ility of m aking sure th e p ro p er
eq u ip m e n t is in place. F or exam ple, if
financial services are offered th ro u g h
term in als in a n in s titu tio n ’s prem ises, or
th ro u g h kiosks located in p u b lic or
o th e r p laces (such as grocery stores), the

Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Proposed Rules
in stitu tio n m u st en su re th a t th e
e q u ip m e n t m eets th e clear an d
co n sp icu o u s sta n d a rd for TISA
d isclosures th a t are being p ro v id ed
electronically.
C o nsu m er A b ility to R eta in D isclosures
S ection 230.3(a) of R egulation DD
req u ires th a t w ritte n d isclosures be in a
form th e co n su m er m ay keep. T his
re q u ire m e n t w o u ld a p p ly to disclosu res
p ro v id e d by electron ic co m m un icatio n.
D epository in stitu tio n s w o u ld satisfy
th e rete n tio n req u irem en t if, for
exam ple, d isclosures can be p rin te d or
d o w n lo a d e d b y th e consum er. T he
req u irem en ts for electro nic deliv ery are
sim ilar to th e c u rren t p ap er
req u irem en ts, w h ere d ep ository
in stitu tio n s generally m u st m ail or
d eliv er th e in fo rm atio n to th e co n su m er
b u t n e e d n o t en su re th a t th e co n su m er
reads or retains it. T hu s, d ep ository
in stitu tio n s w o u ld n o t be re q u ire d to
m o n ito r an in d iv id u a l c o n s u m e r’s
ability to reta in th e inform ation, n o r to
take steps to fin d o u t w h e th e r th e
co n su m er h as in fact re ta in e d it. The
B oard an ticip ates th a t a d ep ository
in stitu tio n w o u ld info rm th e co nsum er
of any sp ecial te ch n ic al specifications
for receiv ing or reta in in g in form ation
before or at th e tim e a co n su m er agrees
to receive in fo rm atio n electronically.
As in th e case of th e “ clear an d
c o n s p ic u o u s” sta n d ard d isc u sse d above,
in circu m stan ces w h ere th e financial
in stitu tio n (or a n etw o rk in w h ic h th e
in stitu tio n is a m em ber) co ntrols the
e q u ip m e n t to b e u se d for a service—
su c h as term inals in in stitu tio n lobbies
or kiosks in sh o p p in g centers—the
in stitu tio n w o u ld h av e the
resp o n sib ility of en su rin g retainability.
M eth ods for fulfilling th is req u irem en t
c o u ld in c lu d e, for exam ple, p rin te rs
in c o rp o rated into te rm in als or a screen
m essage offering to tra n sm it th e
d isclo su re to th e c o n su m e r’s electronic
m a il or p o st office or o th er add ress
p ro v id ed th a t th e d eliv ery req u irem en ts
(d iscu ssed above) are satisfied.
C urrent N e e d fo r S afeguards C oncerning
th e E lectronic D elivery o f D isclosures
T oday, m o st consum ers receive
federal d isclo su res in p a p e r form. As
electron ic com m erce a n d electronic
ban kin g increase an d technological
advances take place, obtaining
d isclosures by electronic
c o m m u n ic atio n w ill likely becom e m ore
com m onplace. C urrently, how ev er, th e
u se of electronic c o m m u n ic atio n in the
delivery of financial services is still
evolving. In light o f th is evolu tion , it is
difficult to fully p re d ic t th e ex ten t to
w h ic h ad d itio n a l safeguards, if any, m ay
be n e e d e d to e n su re th at co nsum ers

receive th e sam e pro tectio n s th a t exist
for d isclosures in p a p e r form. T he B oard
expects th a t dep o sito ry in stitu tio n s a n d
o ther in stitu tio n s subject to R egulation
DD w ill p ro v id e sufficient d etails ab out
th e delivery of disclosures. T he B oard
p la n s to closely m o n ito r the
d ev e lo p m e n t of electro nic d eliv ery of
TISA disclosures a n d o th er inform ation,
a n d w ill ad d ress co m p lian ce or other
issu es th a t m ay arise as ap propriate.
Section 230.5 Subsequent D isclosures
5(c) N o tice fo r T im e A c c o u n ts O ne
M o nth or L ess T h a t R en ew
A u to m a tic a lly
S ectio n 266(a)(3) of th e TISA requires
in stitu tio n s to p rovide certain
disclosu res for rollover tim e acco un ts at
least 30 days before m atu rity. In
im p lem en tin g th is p ro v isio n in 1992,
th e Board looked to th e legislative
histo ry of th e TISA, w h ic h suggested
special ru les for sh ort-term tim e
accounts. T he Board d eterm in e d th at
th e p u rp o ses of th e legislation w o u ld
n o t b e serv ed by req u irin g adv an ce
disclosu res for rollover tim e accou nts
w ith m atu rities of one m o n th or less.
R egulation DD therefore d id n o t requ ire
disclosures to be p ro v id e d in adv ance of
m a tu rity for su ch tim e accounts.
H ow ever, u n d e r § 230.5(c) of the
reg ulatio n, if a term d isclo sed w h e n the
ac co u n t w as o p en e d is ch an g ed at
renew al, in stitu tio n s w ere re q u ire d to
se n d a n o tice describin g th e change
w ith in a reason ab le tim e after the
ren e w a l of th e account.
T he 1996 A ct elim in ates th e
re q u ire m e n t th a t in stitu tio n s p ro v id e
d isclosures in advance o f m a tu rity for
au to m atically ren e w a b le tim e accou nts
w ith a te rm of 30 days or less.
(Institutions w ill co n tin u e to p ro v id e
d isclosures w h e n th e se acco unts are
opened.) A ccordingly, th e B oard
pro p o ses to d elete § 230.5(c) a n d th e
corresp o n d in g p ro v isio n in th e official
staff com m entary, co m m en t 5(c)-l.
T he statu te elim in ates th ese
d isclosures for rollover tim e acco unts
w ith a m a tu rity of 30 days or less.
T echn ically, th e statu te c o u ld be rea d to
req u ire su b se q u en t disclosures for
rollover tim e accou nts w ith a m atu rity
of 31 days. For ease of com pliance, th e
Board pro p o ses to elim in ate su b se q u en t
d isclosures for rollo ver tim e acco unts
w ith a m a tu rity of “ one m o n th or less.”
T his ap p ro a ch w o u ld n o t req uire
su b se q u en t d isclo sures for accounts
w ith a m a tu rity of 31 days a n d is
c o n siste n t w ith o th er p ro v isio n s of
R egulation DD th a t in te rp re t one m o n th
to in c lu d e 31 days.

14535

Section 230.8 Advertising
8(e) E xe m p tio n fo r Certain
A d v e rtis e m e n ts
8(e)(2) In d o o r Signs
S ection 263(a) of th e TISA p rovides
th a t a reference to a specific in terest
rate, yield, or rate of earnings in an
ad v e rtise m en t triggers a d u ty to state
certain a d d itio n a l inform ation,
in c lu d in g th e a n n u a l percen tage yield.
In 1994, th e Congress a m en d e d section
263(c) of th e ad vertisin g ru les to pro v id e
th a t if a rate is d isp lay e d on a sign
(inclu din g a rate board) desig ned to be
v ie w e d o n ly from th e in terio r of an
in stitu tio n , th e d isclo su re req u irem en ts
of section 263 do n o t apply.
A further am e n d m e n t to section
263(c) of th e TISA co n tain e d in th e 1996
A ct ex p a n d s th e ex e m p tio n for signs on
th e prem ises of th e d ep o sito ry
in stitu tio n . U n d er th e B o ard ’s proposal,
all signs in sid e th e prem ises of an
in stitu tio n w o u ld be ex em p t from
ce rtain advertising d isclosures
(in clu d in g signs th a t face o u tdo ors a n d
th a t are in te n d e d to be v ie w e d from
ou tside th e prem ises). T he pro p o sal
w o u ld d elete th e reference in § 230.8(e)
to signs th a t face o u tsid e a n d the
co rresp o n d in g p ro v isio n in th e official
staff com m entary, co m m en t 8 (e)( 2 )(i) 2 .
A n y sign p o ste d o u tsid e a depository
in stitu tio n rem ain s covered by the
advertising pro v isio n s u n less th e sign
qualifies for som e o th er exem ption,
su c h as th e ex e m p tio n for b ro ad c ast or
electronic m edia.
S ection 230.8(e) of R egulation DD
exem pts ad v ertisem en ts m a d e th roug h
bro ad c ast or electronic m e d ia from
several of th e m a n d ato ry ad vertising
disclosures. Q uestions h av e arise n about
w h e th e r th e lim ite d ex c ep tio n for
bro ad cast m e d ia ap p lies to co m p u ter or
o th e r ad v ertisem en ts, su c h as tho se
p o ste d o n th e Internet. T he Board
believes th a t su ch ad v ertisem en ts are
n o t ex e m p t u n d e r th e b ro ad c ast or
electronic m e d ia prov ision. The
ratio n ale for b ro ad cast a n d electronic
m e d ia ex em p tio n s is th a t th e se m e d ia
have tim e or space co n stra in ts th a t m ake
it extrem ely b u rd e n so m e to p ro v id e th e
re q u ire d disclosures. A dvertisem en ts
p o ste d o n th e In tern et generally do n o t
have th e sam e tim e a n d space
constraints. S u ch ad v ertisem en ts w o u ld
rem a in subject to th e general advertising
ru les and, therefore, m u st co m p ly w ith
th e req u irem en ts of §§ 230.8(a), (b), (c),
a n d (d) of th is section.
A ppendix B to Part 230— M odel Clauses
and Sam ple Forms
T he B oard is n o t pro p o sin g any
am en d m e n ts to th e m o d el form s an d

14536

Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Proposed Rules

clauses in A p p e n d ix B. T he Board
believes th a t fin an cial in stitu tio n s can
ad a p t th e c u rren t form s a n d clauses in
A p p e n d ix B for electron ic use.
IV. Form o f Comment Letters
C om m ent letters sh o u ld refer to
Docket No. R -1003 and, w h e n possible,
sh o u ld u se a sta n d a rd typeface w ith a
ty p e size of 10 or 12 characters p e r inch.
T his w ill enable th e B oard to convert
th e te x t to m a ch in e-read ab le form
th ro u g h electron ic scann in g, a n d w ill
facilitate au to m ated retrieval of
com m en ts for review . A lso, if
acco m p an ie d b y a n original d o cu m en t
in p a p e r form, co m m ents m ay be
su b m itted on 3 V2 in c h or 5 V4 in c h
co m p u ter d iskettes in an y IBMcom patible D O S-based format.
V. Regulatory F lexibility A nalysis
In accordance w ith sectio n 3(a) of the
R egulatory F lex ib ility Act, th e B o ard ’s
office of th e S ecretary has rev ie w ed th e
p ro p o sed a m en d m e n ts to R egulation
DD. O verall, th e p ro p o se d am en d m e n ts
are n o t ex p ected to have an y significant
im p a c t on sm all entities. T h e p ro p o sed
ru le w o u ld relieve co m p lia n ce b u rd en .
T he p ro p o se d ru le w o u ld also give
d ep o sito ry in stitu tio n s flexibility in
p ro v id in g disclosu res. A final regulatory
flexibility analysis w ill be co n d u c te d
after c o n sid eratio n of com m ents
receiv ed d u rin g th e p u b lic com m ent
period.
VI. Paperw ork R eduction Act
In acco rdance w ith th e P ap erw o rk
R e duction A ct of 1995 (44 U.S.C. 3506;
5 CFR 1320 A p p e n d ix A .l), th e Board
rev ie w ed th e p ro p o se d rule u n d e r th e
a u th o rity delegated to th e B oard b y th e
Office of M anagem ent a n d Budget.
T he F ed eral Reserve h as n o data w ith
w h ic h to estim ate th e change in the
b u rd e n th a t w o u ld be th e re su lt of the
p ro p o se d ac cep tab ility of electronic
co m m u n icatio n s. D epository
in stitu tio n s w o u ld be able to u se
electronic co m m u n ic atio n to pro v id e

d isclosures a n d o th er inform atio n
req u ired by th is reg ulatio n ra th e r th a n
having to p rin t an d m ail th e in form ation
in p ap e r form. T he u se of electronic
co m m u n ic atio n in hom e ban k in g an d
fin an cial services m ay re d u c e th e
p ap e rw o rk b u rd e n on creditors an d
fin an cial in stitu tio n s or m erely m ay
red u c e th e d o llar cost.
T he F ed eral Reserve req uests
com m en ts from d eposito ry in stitu tio n s,
especially state m em b er banks, th a t w ill
h elp to estim ate th e n u m b e r an d b u rd en
of th e vario us d isclosures th a t w o u ld be
m a d e in th e first year th is ru le is
effective. C om m ents are in v ite d on: (a)
w h e th e r th e p ro p o se d rev ise d co llection
of in fo rm atio n is n ecessary for the
p ro p er p erform an ce of th e F ederal
R eserve’s fu nctions; in c lu d in g w h eth e r
th e in fo rm atio n h as p ractical utility; (b)
th e accuracy of th e F ed eral R eserve’s
estim ate of th e b u rd e n of th e p ro p o sed
rev ise d in fo rm atio n collection,
in c lu d in g th e cost of com pliance; (c)
w ays to en h a n ce th e quality, utility, an d
clarity of th e in fo rm atio n to be
collected; a n d (d) w ays to m in im iz e th e
b u rd e n of in fo rm atio n collection on
resp o n d e n ts, in c lu d in g th ro u g h th e u se
of au to m ated collectio n te ch n iq u e s or
o th er form s of in fo rm atio n technology.
C om m ents on th e collections of
in fo rm atio n sh o u ld be se n t to th e Office
of M anagem ent an d Budget, P aperw ork
R ed u ctio n P roject (7100-0271),
W ashington, DC 20503, w ith copies of
su c h co m m ents to be sent to M ary M.
M cL aughlin, Chief, F in an c ial R eports
S ection, D ivision of R esearch an d
Statistics, M ail Stop 97, B oard of
G overnors of th e F ederal Reserve
System , W ashington, DC 20551.
T he co llectio n of in form ation
req u irem en ts in th is p ro p o sed
reg u latio n are fo u n d th ro u g h o u t 12 CFR
p a rt 230 a n d in A p p en d ic es A an d B.
T his in fo rm atio n is m a n d ato ry (12
U.S.C. 4308) to assist co n su m ers in
com paring d ep o sit acco unts offered by
d ep o sito ry in stitu tio n s, p rin cip ally
th ro u g h th e d isclo su re of fees, a n n u a l
Number of
respondents

Current
Complete account disclosures (Upon request and new accounts) ...........................
Subsequent notices:
Change in te rm s ........................................................................................................
Prematurity n o tic e s....................................................................................................
Periodic statements ..........................................................................................................
Advertising ..........................................................................................................................

percentage y ield, in terest rate, a n d other
ac co u n t term s w h en e v er a consu m er
requ ests th e in fo rm atio n a n d before an
ac co u n t is opened. T h e regu lation also
requ ires th a t fees an d o th er in form ation
b e p ro v id e d on an y p erio d ic statem en t
th e in stitu tio n send s to th e consum er.
T he re sp o n d e n ts/rec o rd k eep e rs are forprofit fin an cial in stitu tio n s, in c lu d in g
sm all b u sin esses. Records, req u ired to
evidence co m p lian ce w ith the
regu lation , m u st be re ta in e d for tw entyfour m onths.
T he B oard also pro poses to ex ten d th e
R ecordkeeping a n d D isclosure
R equ irem ents in C on nection w ith
R egulation DD (OMB No. 7100-0271)
for th ree years. T he c u rren t estim ated
total a n n u a l b u rd e n for th is info rm atio n
collectio n is 1,478,395 h ours, as sh o w n
in th e to p h a lf of th e table below . T hese
am o u n ts reflect th e b u rd e n estim ate of
th e F ed eral Reserve System for th e 996
state m em b er bank s u n d e r its
sup ervision . T his regulatio n ap p lies to
all typ es of d epository in stitu tio n s
(except cre d it u n ion s), n o t ju st to state
m em b er banks. H ow ever, u n d e r
P ap erw o rk R ed u ctio n A ct regulations,
th e F ed eral Reserve o nly accou nts for
th e b u rd e n of th e p ap e rw o rk associated
w ith state m em b er banks. O th er
agencies ac co u n t for th e p ap e rw o rk
b u rd e n for th e in stitu tio n s th ey
supervise.
Both th e p ro p o se d ru les for in d o o r
lobby signs a n d e lim in atio n of
su b se q u en t d isclo su re req u irem en ts for
au to m atically ren e w a b le tim e accoun ts
w ith term s less th a n one m o n th w o u ld
decrease th e freq uency of resp o n se
slightly; th e se red u c tio n s are sh o w n in
th e b ottom h a lf of th e table. It is
estim a te d th a t th e total am o u n t of
a n n u a l b u rd e n after th e se tw o p ro p o sed
revision s w o u ld be 1,476,071 hours.
T here is estim ated to be n o associated
capital or start u p cost. T he F ederal
R eserve has n o t estim ated th e re to be
any an n u a l cost b u rd e n over th e a n n u a l
h o u r b u rden.
Estimated
annual fre­
quency

996

300

996
996
996
996

1,130
1,095
84,615
12

Estimated re­
sponse time

5 minutes
1
1
1
1

minute
minute
minute
hour

24,900
18,757
18,177
1,404,609
11,952
1,478,395

T o ta l...........................................
Proposed
Complete account disclosures (Upon request and new accounts) ...........................
Subsequent notices:
Change in terms ........................................................................................................

Eestimated
annual bur­
den hours

996

300

996

1,130

5 minutes

24,900

1 minute

18,757

14537

Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Proposed Rules
Estimated
annual fre­
quency

Number of
respondents
Prematurity n o tice s ....................................................................................................
Periodic statements ..........................................................................................................
Advertising ..........................................................................................................................

1,015
84,615
11

996
996
996

Estimated re­
sponse time

Eestimated
annual bur­
den hours

1 minute
1 minute
1 hour

T o ta l....................................................................

1,476,071
-2 ,3 2 4

Change ...........................................................

T he in itial d isclo su res concerning
co n su m ers’ rights an d resp o n sib ilities
for error reso lu tio n are available to the
public. T ransaction- or account-specific
disclosures are n o t p u b licly available
an d are co n fid en tial b etw e en the
depository in stitu tio n a n d the
consum er. Since th e F ederal Reserve
does n o t collect an y inform ation, no
issue of con fid en tiality n o rm ally arises.
However, th e in fo rm atio n m ay be
p ro tected from d isclo su re u n d e r the
exem p tio n s (b)(4), (6 ), a n d (8 ) of the
F reedom of Inform ation A ct (5 U.S.C.
552(b)). T he F ed eral Reserve m ay n o t
co n d u c t or sponsor, a n d an organization
is n o t req u ired to re sp o n d to, th is
in fo rm atio n co llectio n u n less it displays
a cu rren tly v alid OMB co n tro l num ber.
T he OMB control n u m b e r is 7100-0271.
List o f Subjects in 12 CFR Part 230
A dvertising, Banks, Banking,
C onsum er pro tectio n , F ed eral Reserve
System , R eporting a n d recordkeeping
req u irem en ts, T ru th in savings.
Text o f Proposed R evisions
C ertain co n v en tio n s have b een u se d
to h ig h lig h t th e p ro p o sed changes to
R egulation DD. N ew language is sh o w n
in sid e bold-faced arrows, w h ile
language th a t w o u ld b e rem o v ed is set
off w ith brackets.
For th e reaso n s set forth in the
pream ble, th e B oard proposes to am end,
12 CFR p art 230, as set forth below :
PART 230—TRUTH IN SAVINGS
(REGULATION DD)
1 . T he au th o rity citatio n for p a rt 230

co n tin u es to read as follows:
Authority: 12 U.S.C. 4301 et seq.

2. In § 230.3, th e follow ing
am en d m en ts w o u ld be m ade:
a. By designating th e tex t of parag rap h
(a) as p arag rap h (a)( 1 ) a n d ad d in g a
head in g to n ew ly desig n ated paragraph
(a)( 1 );
b. A n ew p arag rap h (a)(2) w o u ld be
added.
T he ad d itio n an d revisions w o u ld
read as follows:

16,849
1,404,609
10,956

§ 230.3

General disclosure requirements.

(a) F orm .—► ( ! ) General
r e q u ir e m e n ts .^ * * *
► ( 2 ) E lectronic com m unication-M .
T he term electronic co m m u n ica tio n
m ean s a m essage tran sm itted
electronically b etw een a co n su m er an d
a d ep o sito ry in stitu tio n in a form at th at
allow s v isu al text to be d isp lay ed on
eq u ip m en t s u c h as a p erso n al co m p u ter
m onitor. A d epository in stitu tio n a n d a
co n su m er m ay agree to se n d by
electronic co m m u n icatio n any
in fo rm atio n req u ired by §§ 230.4
th ro u g h 230.6 of th is part. Inform ation
sen t b y electronic co m m u n icatio n to a
co n su m er m u st com ply w ith p arag rap h
(a)( 1 ) of th is sectio n a n d an y ap p licab le
tim ing req u irem en ts c o n tain e d in th is

p a rt.^
*

*

*

*

*

3. S ection 230.5 w o u ld be am en d ed
by rem oving p arag rap h (c) an d
redesignating parag rap h (d) as n ew
p arag rap h (c):
§2 3 0.5

*

*

Subsequent disclosures.

*

*

*

[(c) N o tice fo r tim e a cco u n ts one
m o n th or less th a t re n ew autom atically.
F or tim e accounts w ith a m atu rity one
m o n th or less th a t ren e w au to m atically
at m aturity, in stitu tio n s sh all disclose
an y difference in th e term s of th e n ew
acco u n t as co m p ared to th e term s
req u ired to be disclo sed u n d e r
§ 230.4(b) of th is p a rt for th e existing
account, other th a n a change in the
in terest rate a n d corresp o n d in g change
in th e an n u a l percentage yield. The
notice shall be m ailed or d elivered
w ith in a reasonable tim e after the
ren ew al.]
4. S ection 230.8 w o u ld be a m en d e d
by revising parag rap h (e)( 2 )(i) to read as
follows:
§2 3 0.8

*

*

Advertising.

*

*

*

(e) E xem p tio n fo r certain
a d vertisem en ts. * * *
(2 ) In d o o r signs, (i) Signs in sid e the
prem ises of a d ep o sito ry in stitu tio n (or
th e prem ises of a d ep o sit broker) are n o t
subject to paragraphs (b), (c), (d) or (e)( 1 )

of this section [u n le ss th ey face o utside
th e prem ises a n d can reasonably be
view ed by a co n su m er o nly from
o u tsid e th e p rem ises],
*
*
*
*
*
5. In S u p p lem en t I to P art 230, in
§ 230.5—S u b seq u en t disclosures, u n d e r
p arag rap h (c), parag rap h 1 . w o u ld be
rem oved:
Supplement I to Part 230—Official Staff
Interpretations
*

*

§2 3 0.5

*

*

*

*

*

Subsequent disclosures

*

*

*

(c) N otice for tim e accounts one
m o n th or less th at ren ew au to m atically
[1. P roviding d isclosures w ith in a
reasonable tim e. G enerally, 10 calen d ar
days after an acco u n t ren ew s is a
reasonable tim e for p ro viding
disclosures. For tim e accounts shorter
th a n 10 days, d isclosures sh o u ld be
given p rio r to th e n ex t ren ew al date. For
exam ple, if a tim e acco u n t autom atically
renew s every 7 days, d isclosures about
an acco u n t th a t renew s on W ednesday,
D ecem ber 7, 1994, sh o u ld be given p rio r
to W ednesday, D ecem ber 14.]
*
*
*
*
*
6 . In S u p p lem en t I to Part 230, in
§ 230.8—A dvertising, u n d e r paragraph
(e)( 2 )(i), p arag rap h 2 . w o u ld be
rem oved.
*
*
*
*
*
§2 3 0.8
*

*

Advertising
*

*

*

(e)(2) In d o o r signs.
(e)(2)(i)
*

*

*

*

*

[ 2 . C onsum ers o u tsid e th e prem ises.
A d vertisem ents m ay be “ in d o o r sig n s”
even th o u g h th ey m ay be v iew ed by
consum ers from outside. A n exam ple is
a ban n er, in an in stitu tio n ’s glassenclosed b ran c h office, th a t is located
b e h in d a te lle r facing custom ers b u t is
readable by passersby.]
*
*
*
*
*

14538

Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Proposed Rules

By o rd er o f th e B oard of G o vernors of th e
F e d e ral Reserve System , M a rc h 1 2 ,1 9 9 8 .
W illiam W. W iles,
S ecreta ry o f th e Board.
[FR Doc. 9 8 -6 9 8 9 F iled 3 -2 4 -9 8 ; 8:45 am]

SUPPLEMENTARY INFORMATION:

I. Background

T he C o nsum er Leasing A ct (CLA), 15
U.S.C. 1667-1667e, w as en a cted into
law in 1976 as an am e n d m e n t to the
BILLING CODE 6 210 -01 -P
T ru th in L ending A ct (TILA), 15 U.S.C.
1601 e t seq. T h e B oard’s R egulation M
FEDERAL RESERVE SYSTEM
(12 CFR 213) im p lem en ts th e act. The
CLA requires lessors to p rov id e
12 CFR Part 213
consum ers w ith u n ifo rm cost a n d other
d isclosures abou t co n su m er lease
[Regulation M; Docket No. R -1 00 4 ]
tran sactio n s. T h e act generally ap p lies
Consumer Leasing
to co n su m er leases of p erso n a l pro p erty
in w h ic h th e co n tractu al obligation does
AGENCY: B oard of G overnors of the
n o t exceed $25,000 an d has a term of
F ederal Reserve System .
m ore th a n four m o nths. A n autom ob ile
ACTION: P ro p o sed rule.
lease is th e m o st co m m o n ty p e of
co n su m er lease covered b y the act.
SUMMARY: T he B oard is p u b lish in g for
As p art of th e Regulatory P lan ning
co m m en t a p ro p o se d ru le am en d in g
a n d R eview Program a n d its review of
R egulation M, w h ic h im p lem en ts the
regu lation s u n d e r sectio n 303 of the
C o nsum er Leasing Act. T h e act requires
Riegle C o m m u n ity D evelop m en t an d
lessors to p ro v id e co n su m ers w ith
R egulatory Im p ro v em en t A ct of 1994 (12
u n ifo rm cost a n d o th er d isclo su res
U.S.C. 4803), th e B oard d eterm in e d th at
a b o u t co n su m er lease tran sactio n s. T he
th e u se of electron ic c o m m u n ic atio n to
p ro p o sed ru le w o u ld allow lessors to
d eliver by electronic co m m u n ic atio n th e d eliver in fo rm atio n to con su m ers th a t is
req u ired by federal co n su m er financial
d isclosures req u ired by th e act and
regulation, if th e co n su m er agrees to
services an d fair le n d in g law s co u ld
su c h delivery. For p u rp o ses of th e
effectively red u c e regulatory
regu lation , an electronic co m m u n ic atio n co m p lian ce b u rd e n w ith o u t adversely
is a m essage tra n sm itted electronically
affecting co n su m er p rotectio ns. T hus,
th a t allow s v isu a l tex t to be d isp lay e d
th e B oard h as b ee n considerin g the
on e q u ip m e n t su c h as a m odem issu e a n d closely follow ing the
e q u ip p e d com pu ter. In ad d itio n , the
d ev e lo p m e n t of electronic
p ro p o sal co n tain s several tech n ic al
co m m u nication. For exam ple, in May
a m en d m e n ts th a t w o u ld be m a d e to th e
1996 th e B oard p ro p o sed to am en d
reg u latio n a n d com m entary.
R egulation E (Electronic F u n d
T ransfers) to p e rm it d isclosures to be
DATES: C om m ents sh o u ld b e receiv ed by
p ro v id ed electronically. In M arch 1997,
M ay 15, 1998.
th e B oard issu ed an a m en d m e n t to th e
ADDRESSES: C om m ents sh o u ld refer to
staff com m en tary to R egulation CC
Docket No. R -1004, an d m ay b e m ailed
to W illiam W. W iles, Secretary, B oard of (A vailability of F u n d s a n d C ollection of
Checks) th a t allo w ed financial
G overnors of th e F ed eral Reserve
in stitu tio n s to se n d notices
S ystem , 20 th Street a n d C o nstitu tion
electronically. (62 FR 13801, M arch 18,
A venue, N.W., W ashington, DC 20551.
1997.)
C om m ents also m ay b e d eliv ered to
Room B -2222 of th e Eccles B uilding
H aving co n sid ered th e com m ents
b e tw e en 8:45 a.m. an d 5:15 p.m .
receiv ed on th e R egulation E pro p o sal
w eekdays, or to th e g uard sta tio n in the
a n d o th er rulem aking s, th e B oard n o w
Eccles B uilding co u rty ard on 20th
p ro poses to am en d R egulation M to
Street, N.W. (betw een C o n stitu tio n
allow lessors to p ro v id e R egulation M
A venu e a n d C Street) at any tim e.
d isclosures electronically. A ny
C om m ents m ay be in sp e c te d in Room
electron ic co m m u n ic atio n w o u ld
M P -5 0 0 of th e M artin B uild in g b etw een rem a in subject to th e tim ing, format,
9:00 a.m. a n d 5:00 p.m . w eekdays,
a n d o th er req u irem en ts of th e act an d
ex cep t as p ro v id e d in 12 CFR 261.12 of
th e regulation. C oncurrently, th e Board
th e B oard’s R ules Regarding A vailability is issu in g sim ilar p ro p o sed ru les to
of Inform ation.
ad d ress electronic co m m u n ic atio n
FOR FURTHER INFORMATION CONTACT:
u n d e r R egulations DD (T ruth in
O brea P o in d ex ter or K yung Cho-M iller,
Savings), B (Equal C redit O pportunity),
a n d Z (T ruth in Lending), p u b lish e d
Staff A ttorneys, D ivision of C on su m er
a n d C o m m u nity Affairs, B oard of
elsew here in to d a y ’s Federal Register.
G overnors of th e F ederal Reserve
In ad d itio n , th e B oard h as issu ed an
System , at (202) 45 2-3 667 . F or users of
in terim ru le u n d e r R egulation E also
T elec o m m u n ic atio n s D evice for th e D eaf p u b lish e d elsew h ere in to d a y ’s Federal
Register so th a t financial in stitu tio n s
(TDD) only, D iane Jenkins at (202) 452­
3544.
can im p le m e n t system s to p ro v id e

E lectronic F u n d T ransfer A ct
d isclosures electronically.
II. Proposed Regulatory R evisions
T he CLA a n d R egulation M require
disclosu res to be p ro v id ed to co nsum ers
in w riting. U n d er R egulation M, th e
re q u ire m e n t th a t d isclosu res be in
w riting h as b ee n p re su m e d to requ ire
th a t lessors p ro v id e p a p e r docum ents.
H ow ever, u n d e r m an y law s th a t call for
in fo rm atio n to be in w riting,
in fo rm atio n in electronic form is
co n sid ered to be “w ritte n .” Inform ation
p ro d u ce d , stored, or co m m u n ic ate d by
c o m p u ter is also generally co n sid ered to
be a w ritin g a t least w h ere tex t is
involved.
P u rsu a n t to its a u th o rity u n d e r
section 187 of th e CLA, th e Board
p ro poses to am en d R egulation M to
p e rm it lessors to u se electronic
co m m u n ic atio n w h ere th e regulatio n
calls for in fo rm atio n to b e p ro v id e d in
w riting. F ew lessors cu rren tly
co n su m m a te lease agreem ents
electronically; how ever, as stan d ard s are
d ev elo p ed for establishing legal
agreem ents b y electronic
com m u n icatio n , m ore lease contracts
m ay be en tered into b y th a t m eans.
T he te rm “ electronic co m m u n ic a tio n ”
is lim ite d to a c o m m u n ic atio n th a t can
be d isp lay e d as v isu a l text. A n exam ple
is a n electron ic v isu a l tex t m essage th a t
is d isp lay e d on a screen (such as the
co n su m er’s co m p u ter m onitor).
C o m m un icatio ns by te lep h o n e
vo icem ail system s do n o t m eet the
defin itio n of “ electronic
co m m u n ic a tio n ” for p u rp o ses of th is
reg u latio n b ecau se th e y do n o t have the
feature generally asso ciated w ith a
w riting—v isu a l text.
Section 213.3— General D isclosure
Requirem ents
3(a) G eneral req u irem en ts
D efinition
S ection 213.3(a) w o u ld b e rev ise d to
ad d ress electro nic co m m u n icatio n s
u n d e r § 213.3(a)(5). E lectronic
c o m m u n ic atio n is a v isu a l text m essage
electron ically tra n sm itte d b e tw e en a
lessor a n d a c o n su m er’s h o m e co m p u ter
or other electro nic device u se d b y a
consum er.
A greem ents B etw een Lessors an d
C onsum ers
S ection 213.3(a)(5) perm its lessors to
sen d electronic d isclosures if the
co n su m er agrees. T here m ay be various
w ays th a t a lessor an d a co n su m er cou ld
agree to th e electro nic d eliv ery of
disclosures a n d oth er inform ation.
W h e th e r su c h a n agreem ent exists
b etw e en th e parties w o u ld be

Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Proposed Rules
d eterm in e d by ap p lica b le state law . T he
reg u la tio n w o u ld n o t p re c lu d e a lessor
an d a co n su m er from enterin g into an
agreem ent electronically, n o r does it
p rescrib e a form al m e c h a n ism for doing
so. T he B oard does believe, how ever,
th a t co n su m ers sh o u ld b e clearly
in fo rm ed w h e n th e y are co n sentin g to
th e delivery of CLA a n d R egulation M
d isclosures electronically.
D elivery R eq uirem en ts for E lectronic
C o m m u nication
R egulation M p ro v id es th a t a lessor
m ake d isclo sures to a consum er. The
re q u ire m e n t is satisfied w h e n th e
in stitu tio n en su res th a t th e disclosu res
w ill be p rese n ted to th e co n su m er in a
tim ely m an ner. E lectronic d isclosures
re m a in subject to th e form at, tim ing,
a n d oth er ap p lica b le req u irem en ts
u n d e r R egulation M.
T he “ Clear a n d C o n sp icu o u s” S tan d a rd
R egulation M requires lessors to
p re se n t re q u ire d in fo rm atio n “ clearly
a n d co n sp ic u o u sly ” in w riting. T he
“ clear an d c o n s p ic u o u s” req u irem en t
a p p lies to electron ic disclosures. The
B oard does n o t in te n d to discourage or
encourage specific ty pes of
technologies. Regardless of th e
technology, how ever, th e d isclo su res
p ro v id ed b y electron ic co m m u n ic atio n
m u st m e et th e “ clear an d c o n s p ic u o u s”
stan d ard . A lessor m u st satisfy this
req u irem en t, b u t is generally not
re q u ire d to e n su re th at th e co n su m er
h as th e e q u ip m e n t to read th e
disclosures.
C onsum er A bility to R etain D isclosures
R egulation M req uires th a t w ritte n
d isclosures be in a form th e co n su m er
m ay keep. T his re q u ire m e n t ap p lies to
d isclo su res p ro v id e d b y electronic
com m u n icatio n . Lessors satisfy th e
re te n tio n re q u ire m e n t if, for exam ple,
d isclosures can be p rin te d or
d o w n lo a d e d b y th e consum er. T hus,
lessors w o u ld n o t be re q u ire d to
m o n ito r a n in d iv id u a l c o n s u m e r’s
ability to reta in th e inform ation , n o r to
take steps to fin d o u t w h e th e r th e
co n su m er h as in fact re ta in e d it. The
B oard an ticip ate s that, w h ere
a p p ro p riate, a lessor w ill inform
c o nsum ers of an y sp ecial te c h n ic a l
specificatio ns for receiving or retain in g
in fo rm atio n before or at th e tim e a
co n su m er agrees to receive in fo rm atio n
electronically.
C u rrent N eed for Safeguards C oncerning
th e E lectronic D elivery of D isclosures
Today, m o st consu m ers receive
d isclosures in p a p e r form. As electronic
com m erce increases an d tech nolog y
advances take place, obtaining

d isclosures by electronic
c o m m u n ic atio n m ay likely becom e
m ore com m onplace. C om pliance an d
o ther issues w ill arise th a t suggest
fu rth er in terp retatio n s. C urrently,
how ever, th e u se of electronic
co m m u n ic atio n in th e d eliv ery of
fin an cial services is still evolving. T hus,
it is difficult to fully p re d ic t th e exten t
to w h ic h ad d itio n a l safeguards, if any,
m ay be n e e d e d to e n su re th a t con su m ers
receive th e sam e pro tectio n s th a t exist
for d isclosures in p ap e r form. T he Board
expects th a t lessors w ill p ro v id e
sufficient d etails ab o u t th e d eliv ery of
d isclosu res electronically. T he Board
p la n s to closely m o n ito r the
d ev e lo p m e n t of th e electronic delivery
of R egulation M disclosu res, an d w ill
ad d ress co m p lia n ce or o th e r issues th a t
m ay arise as ap prop riate.
S ection 213.4— C ontent of D isclosures
4(f)(8) L ease term
In S ep tem ber 1996, R egulation M w as
revised to requ ire, am ong o th e r things,
th a t lessors sh o w co nsum ers a
m ath em atical pro gressio n of h o w a
sc h e d u le d p ay m en t is d eriv e d in a
m otor v ehicle lease. In deriving a
sc h e d u le d p aym ent, th e “to tal of base
p erio d ic p a y m e n ts” is d iv id e d b y the
n u m b e r of lease p aym en ts. T h e cap tio n
in th e regu lation an d on th e m od el
form s refers to th e n u m b e r of lease
p ay m en ts as th e “ lease te rm .”
For leases w ith m o n th ly p aym ents,
ty p ically th e lease term a n d th e n u m b e r
of p ay m en ts are th e sam e. F or leases
w ith oth er p ay m en t arrangem ents, th e
n u m b e r of pay m en ts a n d th e lease te rm
ty p ically are n o t th e sam e, for exam ple,
sin gle-p aym ent leases. In reflecting th e
c o n su m e r’s legal o bligation to m ake one
p ay m e n t u n d e r a sin gle-p ay m ent lease,
th e figure disc lo se d u n d e r § 213.4(f)(8)
sh o u ld b e one, n o t the lease te rm of 24
m o n th s or 36 m o nths, for exam ple.
To avoid confusio n, references to the
“ lease te rm ” in § 213.4(f)(8) w o u ld be
c h an g ed to “lease p a y m e n ts” w ith
c o rresp o n d in g changes to th e m o d el
form s in a p p e n d ix A. D espite th e
p ro p o sed rev isio n to th e m o d e l forms,
lessors w o u ld c o n tin u e to u se the
existing form u n til th e su p p ly is
exhausted. If p ro p erly com pleted, th o se
form s co m p ly w ith th e req u irem en ts of
th e act a n d regu lation , pro tectin g lessors
from civil liab ility u n d e r sections 130 of
th e T ru th in L ending A ct a n d 185 of the
C onsum er Leasing Act.
T he d isclo su re of th e lease term is n o t
a re q u ire d disclosure. If th e y choose,
ho w ever, lessors m ay disclose th e lease
term am ong th e segregated disclosures
along w ith th e n u m b e r of lease
p aym ents, b u t sh o u ld n o te th a t the

14539

calcu latio n u n d e r § 213.4(f)(8) calls for
th e n u m b e r of paym ents.
Section 213.7—A dvertising
In A p ril 1997, th e B oard revised
R egulation M to im p lem en t
am en d m e n ts to th e act co n tain e d in the
E conom ic G row th a n d R egulatory
P aperw ork R e duction A ct of 1996,
w h ic h strea m lin ed th e ad vertisin g
d isclosures for lease transactio ns. (62 FR
15364, A p ril 1, 1997) U n d er th e act,
certain term s in a n ad v e rtise m en t w ill
trigger th e d isclo su re of a d d itio n a l
info rm ation. O ne of th e m is a statem en t
in a lease ad v e rtise m en t th a t n o initia l
p ay m en t is req uired , w h ic h triggers th e
d isclosure of a d d itio n a l inform ation.
T his “ triggering” term w as
in a d v erte n tly o m itted from
§ 213.7(d)(l)(ii), a n d is being added.
A ppendix A—M odel Forms
T he B oard is p ro p o sin g several
te ch n ic al changes to th e m o d el form s in
a p p e n d ix A. T he m o d el form s for opena n d clo sed -en d leases in a p p e n d ix A—
1
a n d A -2 w o u ld be rev ise d to change th e
reference u n d e r th e p ay m e n t ca lculation
from “ Lease term . T he n u m b e r of
m o n th s in y o u r lease.” to “Lease
paym ents. T h e n u m b e r of p ay m en ts in
y o u r le ase .” Page 2 of th e o p en -en d
m o d e l form w o u ld be rev ise d by ad d in g
“v a lu e ” after “ a c tu a l” in th e “ e n d of
term liab ility ” d isclo su re (a)(3), lin e 3.
M odel form A -3 for a fu rn itu re lease
w o u ld be rev ise d by ad d in g “ or
d eliv ery ” after th e h ea d in g “A m o u n t
d u e at lease signing.”
III. Proposed Commentary Provisions
Section 213.4—Content o f D isclosures
4(f) P a ym e n t C alculation
4(f)(7) T o tal o f B a se P eriodic P a ym en ts.
F or m o to r v ehicle leases, lessors are
re q u ire d u n d e r § 213.4(f) to p ro v id e a
m a th em atical progression of h o w
sc h e d u le d lease p ay m en ts are derived.
Som e lessors are co n c ern e d about
ex p o su re to civil liability b ecau se if one
d ivid es th e to tal of th e base perio d ic
pay m en ts d isclo sed u n d e r § 213.4(f)(7)
by the n u m b e r of pay m en ts in th e lease
d isclosed u n d e r § 213.4(f)(8) an d th e n
m u ltip lie s th e b ase p erio d ic p ay m en t
disc lo se d u n d e r § 213.4(f)(9) b y th e
n u m b e r of p ay m en ts in th e lease
d isclosed u n d e r § 213.4(f)(8), th e resu lt
is different b ecau se of rou nding.
T his an om aly m ay be av o id ed by
m aking ad ju stm e n ts to th e re n t charge.
H ow ever, som e lessors h av e req u e sted a
sm all to leran ce for th e total of base
p erio d ic pay m en ts disclosure. T hey
believe th a t a to leran ce of $1 w o u ld be
sufficient to rem e d y differences d u e to
rou nd ing .

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Federal Register/Vol. 63, No. 5 7 /Wednesday, March 25, 1998/Proposed Rules

In resp o n se to issues co ncerning
ro u n d in g , p ro p o sed co m m en t 4(f)(7)-l
w o u ld b e a d d e d to clarify th a t if the
p erio d ic p ay m en t calcu latio n u n d e r
§ 213.4(f) is calc u lated correctly, the
d isc lo se d to tal of base perio d ic
p ay m en ts is correct for d isclosu re
p u rp o ses even if it varies from th e base
p erio d ic pay m en ts m u ltip lie d by the
n u m b e r of pay m en ts in th e lease, w h e n
th e difference is solely d u e to rou nding.
4(n) F ees a n d T axes
S everal exam ples are p ro v id ed in
co m m en t 4 (n )-l to illu strate w h e n taxes
are disc lo se d u n d e r th is section. The
trea tm e n t of taxes p a id as a p art of
regularly sc h e d u le d pay m en ts is
unclear. T his co m m en t w o u ld be
rev ise d to clarify th a t taxes th a t are p art
of th e reg ularly sc h e d u le d p ay m en ts are
re q u ire d to be disc lo se d u n d e r
§ 213.4(n).
A ppendix A—M odel Forms
C om m ent 2 to A p p e n d ix A p rovides
exam ples of acceptable changes th a t
m ay b e m a d e to th e m o d e l forms. A t th e
req u e st of lessors, th e co m m en t w o u ld
be rev ise d to clarify th a t in a p p lic ab le
d isclosures m ay be deleted.
IV. Form o f Comment Letters
C om m ent letters sh o u ld refer to
D ocket No. R -1 004 an d , w h e n possible,
sh o u ld u se a sta n d ard typeface w ith a
ty p e size of 10 or 12 characters p e r inch.
T his w ill enable th e B oard to convert
th e text to m a ch in e-read ab le form
th ro u g h electronic scann in g, a n d w ill
facilitate au to m ated retriev al of
com m en ts for review . A lso, if
a c co m p an ie d b y a n original d o cu m en t
in p a p e r form, com m ents m ay be
su b m itte d on 3 V2 in c h or 5 V4 in c h
c o m p u ter diskettes in an y IBMcom patible D O S-based format.
V. Regulatory Flexibility A nalysis
In accordan ce w ith sectio n 3(a) of the
Regulatory F lexib ility A ct, th e B oard’s
office of th e S ecretary has rev ie w ed the
p ro p o se d am en d m e n ts to R egulation M.
O verall, th e p ro p o se d am en d m e n ts are
n o t expected to h av e an y significant

im p a c t on sm all entities. T he p ro p o sed
ru le w o u ld relieve co m p lian ce b u rden.
T he p ro p o sed ru le w o u ld also give
lessors flexibility in pro v id in g
disclosu res. A final regulatory flexibility
analysis w ill be co n d u c te d after
co n sid eratio n of com m ents received
d u rin g th e p u b lic com m ent period.
VI. Paperw ork R eduction Act
In accord an ce w ith sectio n 3506 of
th e P ap erw o rk R edu ctio n A ct of 1995
(44 U.S.C. Ch. 35; 5 CFR 1320 A p p en d ix
A .l), th e B oard rev ie w ed th e p ro p o sed
ru le u n d e r th e au th o rity delegated to the
B oard by th e Office of M anagem ent an d
Budget.
T he F ederal Reserve has n o d ata w ith
w h ic h to estim ate th e b u rd e n the
p ro p o se d rev ise d req u irem en ts w o u ld
im p o se on state m em b er banks. Lessors
w o u ld be able to u se electronic
co m m u n ic atio n to p ro v id e disclosures
a n d oth er in fo rm atio n req u ired b y th is
regulatio n rath e r th a n having to m ake
th e in fo rm atio n available in p a p e r form.
T he u se of electronic co m m u n ic atio n in
h o m e b an k in g a n d fin an cial services
m ay red u c e th e p ap e rw o rk b u rd e n of
lessors or m erely m ay red u c e th e dollar
cost.
T he F ederal Reserve requests
com m en ts from lessors, especially state
m em b er banks, th a t w ill h e lp to
estim ate th e n u m b e r an d b u rd e n of th e
v arious d isclosu res th a t w o u ld be m ade
in th e first year th is ru le is effective.
C om m ents are in v ite d on: (a) W hether
th e p ro p o se d rev ise d collection of
in fo rm atio n is n ecessary for th e p ro p er
perfo rm an ce of th e F ed eral R eserv e’s
functions; in c lu d in g w h e th e r the
in fo rm atio n h as p ractical utility; (b) the
accuracy of th e F ederal R eserve’s
estim ate of th e b u rd e n of th e p ro p o sed
rev ise d in fo rm atio n collection,
in c lu d in g th e cost of co m p liance; (c)
w ays to e n h a n ce th e quality, u tility , an d
clarity of th e in fo rm atio n to be
collected; a n d (d) w ays to m in im iz e the
b u rd e n of in fo rm atio n collectio n on
resp o n d e n ts, in c lu d in g th ro u g h th e use
of a u to m ated collectio n te ch n iq u e s or
o th er form s of in fo rm atio n technology.
Number of
respondents

Disclosures ........................................................................................................................
Advertising .........................................................................................................................

310
15

T o ta l.............................................................................................................................

C o nsum er lease in fo rm atio n in or
referred to by ad v ertisem en ts is
available to th e public. D isclosures of
th e costs, liabilities, a n d term s of

co n su m er lease tran sactio n s relating to
specific leases are n o t p u b licly
available. B ecause th e F ederal Reserve
does n o t co llect an y inform ation, no

C om m ents on th e collection of
in fo rm atio n sh o u ld be sent to th e Office
of M anagem ent a n d B udget, P aperw ork
R ed u ctio n Project (7100-0202),
W ashington, DC 20503, w ith copies of
su ch com m ents to be sent to M ary M.
M cL aughlin, Chief, F in an c ial R eports
Section, D ivision of R esearch an d
Statistics, M ail Stop 97, B oard of
G overnors of th e F ederal Reserve
System , W ashington, DC 20551.
T he co llectio n of in fo rm atio n
req u irem en ts in th is p ro p o sed revised
reg u latio n are fo u n d in 12 CFR 213.3,
213.4, 213.5, 213.7, 213.8, a n d a p p e n d ix
A. T his in fo rm atio n is m an d ato ry (15
U.S.C. 1667 e t seq.) to e n su re adequate
d isclo su re of basic term s, costs, an d
rights relatin g to services affecting
consum ers u sing certain hom e-b an king
services a n d co n su m ers receiving
certain disclo su res by electronic
com m u n icatio n . T he re sp o n d e n ts/
recordk eepers are for-profit, in clu d in g
sm all b u sin esses. Records, re q u ire d to
ev id en ce co m p lian ce w ith th e
regulation, m u st be re ta in e d for tw entyfour m on th s.
T he B oard also pro poses to ex ten d the
R ecordkeeping a n d D isclosure
R equ irem ents in C on nection w ith
R egulation M (OMB No. 7100-0202) for
th ree years. T h e c u rren t estim a te d total
an n u a l b u rd e n for th is inform atio n
collectio n is 11,179 ho urs, as sh o w n in
th e table below . T he p ro p o sed
clarifications of som e leasing term s are
n o t estim ated to affect th e p ap e rw o rk
b u rd en . T hese am o u n ts reflect the
b u rd e n estim ate of th e F ed eral Reserve
System for th e state m em b er banks
u n d e r its su p erv isio n , of w h ic h
relativ ely few engage in co n su m er
leasing. T his reg u latio n ap p lies to all
ty p es of lessors, n o t ju st state m em ber
banks. H ow ever, u n d e r P aperw ork
R e duction A ct regulations, th e F ederal
Reserve accou nts for th e b u rd e n of th e
p ap e rw o rk asso ciated w ith th e
regulatio n o nly for state m em b er banks.
O ther agencies ac co u n t for the
pap e rw o rk b u rd e n for th e in stitu tio n s
th e y supervise.
Estimated
annual fre­
quency
120
3

Estimated re­
sponse time
18 minutes
25 minutes

Estimated
annual bur­
den hours
11,160
19
11,179

issu e of co n fid en tiality u n d e r the
F reed o m of Info rm atio n A ct n o rm ally
arises. H ow ever, th e in fo rm atio n m ay be
pro tec te d from d isclo su re u n d e r the

Federal Register/Vol. 63, No. 5 7 /Wednesday, March 25, 1998/Proposed Rules
exem p tions (b)(4), (6), a n d (8) of the
F reed om of Info rm atio n A ct (5 U.S.C.
522 (b)). A n agency m ay n o t c o n d u c t or
sponsor, a n d a n organization is n o t
req u ired to re sp o n d to, an in form ation
collectio n u n le ss it d isplays a cu rren tly
v a lid OMB co n tro l n u m b er. T h e OMB
co n tro l n u m b e r for th e R ecordkeeping
a n d D isclosure R eq uirem en ts in
C o nn ection w ith R egulation M is 7100­
0202.
List o f Subjects in 12 CFR Part 213
A dvertising, F ederal Reserve System ,
R eporting an d recordkeepin g
requirem ents, T ru th in lending.
Text o f Proposed R evisions
C ertain co n v en tio n s h av e b ee n u se d
to hig h lig h t th e p ro p o se d changes to
R egulation M. N ew language is sh o w n
in sid e bold-faced arrow s, w h ile
language th a t w o u ld be rem o v ed is set
off w ith brackets.
F or th e reaso ns set forth in the
pream ble, th e B oard pro poses to am en d
R egulation M, 12 CFR p art 213, as set
forth below :

PART 213— CONSUMER LEASING
(REGULATION M)
1. T he a u th o rity citatio n for part 213
w o u ld co n tin u e to read as follows:
A uthority: 15 U.S.C. 1604.

2. S ectio n 213.3 w o u ld b e am en d e d
by ad d in g a n ew paragraph (a)(5) to read
as follow s:
§ 2 1 3.3

General disclosure requirem ents.

(a) G eneral requ irem en ts. * * *
► ( 5 ) E lectronic c o m m u n ic a tio n . For
p u rp o ses of th is regulation, th e term
electro n ic c o m m u n ic a tio n m eans a
m essage tra n sm itte d electron ically
b e tw e en a c o n su m er a n d a lessor in a
form at th a t allow s v isu a l tex t to be
d isp lay e d on e q u ip m e n t su c h as a
p erso n a l co m p u ter m onitor. A lessor
a n d a c o n su m er m ay agree to se n d by
electron ic co m m u n ic atio n the
d isclosures req u ired by th is regu lation
to be p ro v id e d in w riting. A ny
electronic co m m u n ic atio n m u st com ply
w ith p arag rap h (a) of th is section.-^
*
*
*
*
*
3. S ection 213.4 w o u ld be am en d e d
by revising parag rap h (f)(8) to read as
follows:

§ 213.4

*

*

14541

Content of disclosures.

*

*

*

(f) P a ym e n t ca lculation. * * *
(8) [Lease term . T he lease te rm w ith
a d escrip tio n su c h as “th e n u m b e r of
p erio d s of rep a y m en t in y o u r lease.”]
► L e a s e paym ents. T h e lease p ay m en ts
w ith a d escrip tio n su c h as “th e n u m b e r
of pay m en ts in y o u r lease.
*
*
*
*
*
4 . S ection 213.7 w o u ld b e am en d e d
by revising p arag rap h (d)(l)(ii) to read
as follows:
§ 2 1 3 .7

*

*

Advertising.

*

*

*

(d) A d v e rtis e m e n t o f term s th a t
require a d d itio n a l d isclosure.— (1)
Triggering term s. * * *
(ii) A statem en t of an y ca p ita liz ed cost
re d u c tio n or o th e r p ay m e n t ► o r th a t no
p ay m e n t is-^ re q u ire d ► , ^ p r i o r to or
at co n su m m a tio n ► o r b y delivery, if
deliv ery occurs after co n su m m a tio n .-^
[or th a t no p ay m e n t is required.]
*

*

*

*

*

5. A p p e n d ix A to p a rt 213 w o u ld be
a m e n d e d by revising A p p e n d ix A - l ,
A p p e n d ix A -2 , an d A p p e n d ix A -3 to
read as follows:
BILLING CODE 6 210 -01 -P

14542

Federal Register/Vol. 63, No. 5 7 /Wednesday, March 25, 1998/Proposed Rules

Appendix A -l Model Open-End or Finance Vehicle Lease Disclosures

Federal Consumer Leasing Act Disclosures
Date________________________
Lessor(s) ____________________________________________________
Amount Due at
Lease Signing
or Delivery
(Itemized below)*

$

Lessee(s) ______________

Monthly Payments

Other Charges (not part of your monthly
payment)

Your first monthly payment of $
is due on
. followed bv
payments of $
due on
the
of each month. The total of your
monthly payments is $
.

Disposition fee (if you do
nnl purchase the vehidel

Total of Payments
(The amount you will have
paid by the end of the lease)

£
$
You will owe an additional
amount if the actual value of
the vehicle is less than the
residual value.

* Itemization o f Amount Due at Lease Signing or Delivery
i.: ,
How the Amount Due at Lease Signing or Delivery will be paid:
Amount Dae At Lease Signing or Delivery:
Capitalized cost reduction
First monthly payment
Refundable security deposit
Title fees
Registration fees

$ .
.
.
.
.

Net trade-in allowance
Rebates and noncash credits
Amount to be paid in cash

$ ________________
________________
________________

Total

Total

$

Your monthly payment is determined as shown below:
) and any items
Gross capitalized cost. The agreed upon value of the vehicle ($_
you pay over the lease term (such as service contracts, insurance, and any outstanding prior credit
or lease balance).....................................................................................................................................................................
If you want an itemization of this amount, please check this box.

EH

Capitalized cost reduction. The amount of any net trade-in allowance, rebate, noncash credit, or cash you pay
that reduces the gross capitalized c o st.................................................................................................................................
Adjusted capitalized cost. The amount used in calculating your base monthly paym ent..........................................
Residua] value. The value of the vehicle at the end of the lease used in calculating your base monthly payment .
Depreciation and any amortized amounts. The amount charged for the vehicle's decline in value
through normal use and for other items paid over the lease te rm ...................................................................................
Rent charge. The amount charged in addition to the depreciation and any amortized am ounts...............................
Total of base monthly payments. The depreciation and any amortized amounts plus the rent c h arg e ..................
Lease payments. The number of payments in your le a se ...............................................................................................
Base monthly paym ent.........................................................................................................................................................
Monthly sales/use t a x ..........................................................................................................................................................
Total monthly payment .

+
+
=$'

Rent and other charges. The total amount of rent and other charges imposed in connection with your lease $ __________

Early Termination. You may have to pay a substantial charge if you end this lease early. The charge may be up to several
thousand dollars. The actual charge will depend on when the lease is terminated. The earlier you end the lease, the greater
this charge is likely to be.
Excessive Wear and Use. You may be charged for excessive wear based on our standards for normal use [and for mileage in excess
o f __________ miles per year at the rate o f _________per mile].
Purchase Option at End of Lease Term. [You have an option to purchase the vehicle at the end of the lease term for $ ____________
[and a purchase option fee of $ _________________ ].] [You do not have an option to purchase the vehicle at the end of the lease term.]
Other Important Terms. See your lease documents for additional information on early termination, purchase options and maintenance
responsibilities, warranties, late and default charges, insurance, and any security interest, if applicable.

Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Proposed Rules
Appendix A -l Model Open-End or Finance Vehicle Lease Disclosures

14543
Page 2 of 2

[The following provisions are the nonsegregated disclosures required under Regulation M.]

Year

Make

Description of Leased Property
Model
Body Style

Vehicle ID tt

Official Fees and Taxes. The total amount you will pay for official and license fees, registration, title, and taxes over the term of your lease, whether
included with your monthly payments or assessed otherwise: $ ________________
Insurance. The following types and amounts of insurance will be acquired in connection with this lease:

------------ We (lessor) will provide the insurance coverage quoted above for a total premium cost of $ ________________
------------ You (lessee) agree to provide insurance coverage in the amount and types indicated above.
End of Term Liability, (a) The residual value ($ _____________ ) of the vehicle is based on a reasonable, good faith estimate of the value of the vehicle at the
end of the lease term. If the actual value of the vehicle at that time is greater than the residual value, you will have no further liability under this lease, except for
other charges already incurred [and are entitled to a credit or refund of any surplus.] If the actual value of the vehicle is less than the residual value, you will be
liable for any difference up to $ _______________ (3 times the monthly payment). For any difference in excess of that amount, you will be liable only if:
1. Excessive use or damage [as described in paragraph___ ] [representing more than normal wear and use] resulted in an unusually low value at the end of
the term.
2. The matter is not otherwise resolved and we win a lawsuit against you seeking a higher payment.
3. You voluntarily agree with us after the end of the lease term to make a higher payment.
Should we bring a lawsuit against you, we must prove that our original estimate of the value of the leased property at the end of the lease term was reasonable and
was made in good faith. For example, we might prove that the actual value was less than the original estimated value, although the original estimate was reasonable,
because of an unanticipated decline in value for that type of vehicle. We must also pay your attorney's fees.
(b) If you disagree with the value we assign to the vehicle, you may obtain, at your own expense, from an independent third party agreeable to both of us, a
professional appraisal of the___________ value of the leased vehicle which could be realized at sale. The appraised value shall then be used as the actual value.
Standards for Wear and Use. The following standards are applicable for determining unreasonable or excess wear and use of the leased vehicle:

Maintenance.
[You are responsible for the following maintenance and servicing of the leased vehicle:
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ].
[We are responsible for the following maintenance and servicing of the leased vehicle:

_______________________________________________________________________________ ]
.
Warranties. The leased vehicle is subject to the following express warranties:

Early Termination and Default, (a) You may terminate this lease before the end of the lease term under the following conditions:

The charge for such early termination is:

(b) We may terminate this lease before the end of the lease term under the following conditions:

Upon such termination we shall be entitled to the following charge(s) for:

(c) To the extent these charges take into account the value of the vehicle at termination, if you disagree with the value we assign to the vehicle, you may obtain,
at your own expense, from an independent third party agreeable to both of us, a professional appraisal of th e_________________ value of the leased vehicle
which could be realized at sale. The appraised value shall then be used as the actual value.
Security Interest. We reserve a security interest of the following type in the property listed below to secure performance of your obligations under this lease:

Late Payments. The charge for late payments is:
Option to Purchase Leased Property Prior to the End o f the Lease. [You have an option to purchase the leased vehicle prior to the end of the term.
The price will be [$ __________________
/[the method of determining the price].] [You do not have an option to purchase the leased vehicle.]

14544

Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Proposed Rules

Appendix A-2 Model Closed-End or Net Vehicle Lease Disclosures

Federal Consumer Leasing Act Disclosures
Date
Lessor(s)
Amount Due at
Lease Signing
or Delivery
(Itemized below)*

Lessee(s)
Monthly Payments

Other Charges (not part of your monthly
payment)

Your first monthly payment of $
is due on
, followed by
payments of $
due on
the
of each month. The total of your
monthly payments is $
.

Disposition fee (if you do
not pnrchasp fhp vphiplpl

Total

Total of Paymenb
(The amount you will have
paid by the end of the lease)

$

S

* Itemization o f Amount Due at Lease Signing or Delivery
Amount Due At Lease Signing or Delivery:
How the Amount Due at Lease Signing or Delivery will be paid:
Capitalized cost reduction
First monthly payment
Refundable security deposit
Title fees
Registration fees

$

Total

$

Net trade-in allowance
Rebates and noncash credits
Amount to be paid in cash

$

Total

$

Your monthly payment is determined as shown below:
) and any items
Gross capitalized cost. The agreed upon value of the vehicle ($ .
you pay over the lease term (such as service contracts, insurance, and any outstanding prior credit
or lease balance)........................................................................................................................................................................................

$-

If you want an itemization of this amount, please check this box. CH
Capitalized cost reduction. The amount of any net trade-in allowance, rebate, noncash credit, or cash you pay
that reduces the gross capitalized c o s t...................................................................................................................................
Adjusted capitalized cost. The amount used in calculating your base monthly paym ent...........................................
Residual value. The value of the vehicle at the end of the lease used in calculating your base monthly payment .
Depreciation and any amortized amounts. The amount charged for the vehicle's decline in value
through normal use and for other items paid over the lease te rm ....................................................................................
Rent charge. The amount charged in addition to the depreciation and any amortized am ounts................................
Total of base monthly payments. The depreciation and any amortized amounts plus the rent c h arg e ...................
Lease payments. The number of payments in your le a se .................................................................................................
Base monthly paym ent...........................................................................................................................................................
Monthly sales/use t a x .............................................................................................................................................................
Total monthly payment .

+
'+
=$'

Early Termination. You may have to pay a substantial charge if you end this lease early. The charge may be up to several
thousand dollars. The actual charge will depend on when the lease is terminated. The earlier you end the lease, the greater
this charge is likely to be.
Excessive Wear and Use. You may be charged for excessive wear based on our standards for normal use [and for mileage in excess
o f __________ miles per year at the rate o f _________ per mile].
Purchase Option at End of Lease Term. [You have an option to purchase the vehicle at the end of the lease term for S ____________
[and a purchase option fee of $ __________________].] [You do not have an option to purchase the vehicle at the end of the lease term.]
Other Important Terms. See your lease documents for additional information on early termination, purchase options and maintenance
responsibilities, warranties, late and default charges, insurance, and any security interest, if applicable.

Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Proposed Rules
Appendix A-2 Model Closed-End or Net Vehicle Lease Disclosures

14545
Page 2 of 2

[The following provisions are the nonsegregated disclosures required under Regulation M.]

Year

Make

Description o f Leased Property
Body Style
Model

Vehicle ID tt

Official Fees and Taxes. The total amount you will pay for official and license fees, registration, title, and taxes over the term of your lease, whether
included with your monthly payments or assessed otherwise: $ _________________

Insurance. The following types and amounts of insurance will be acquired in connection with this lease:

------------- We (lessor) will provide the insurance coverage quoted above for a total premium cost of $ --------------------------------------- You (lessee) agree to provide insurance coverage in the amount and types indicated above.

Standards for Wear and Use. The following standards are applicable for determining unreasonable or excess wear and use of the leased vehicle:

Maintenance.
[You are responsible for the following maintenance and servicing of the leased vehicle:

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ ].
[We are responsible for the following maintenance and servicing of the leased vehicle:

____________________________________________________________________________________ ]
•
Warranties. The leased vehicle is subject to the following express warranties:

Early Termination and Default, (a) You may terminate this lease before the end of the lease term under the following conditions:
The charge for such early termination is:

(b) We may terminate this lease before the end of the lease term under the following conditions:

Upon such termination we shall be entitled to the following charge(s) for:

(c) To the extent these charges take into account the value of the vehicle at termination, if you disagree with the value we assign to the vehicle, you may obtain,
at your own expense, from an independent third party agreeable to both of us, a professional appraisal of th e ___________________value of the leased vehicle
which could be realized at sale. The appraised value shall then be used as the actual value.

Security Interest. We reserve a security interest of the following type in the property listed below to secure performance of your obligations under this lease:

Late Payments. The charge for late payments is: ___________________________________________________________________________________________
Option to Purchase Leased Property Prior to the End of the Lease. [You have an option to purchase the leased vehicle prior to the end of the term.
The price will be [$ _______________________ /[the method of determining the price].] [You do not have an option to purchase the leased vehicle.]

•

14546

Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Proposed Rules

Appendix A-3 Model Furniture Lease D isclosures

FEDERAL CONSUMER LEASING ACT DISCLOSURE STATEMENT
D ate_______________________
Lessor(s)______________________________________________________

Item

Amount Due at Lease Signing
or Delivery
First monthly payment
$
Refundable security deposit $
Delivery/Installation fee
$
$
Total
$

Color

Lessee(s) _______________________________

Jescription of Leased Propt rty
Stock #

Monthly Payrnents
Your first mont lly payment of $
is due on
, followed by
due on
paymen s of $
the
cf each month. The total of your
monthly paymei ts is $
.

Quantity

Mfg.

Other Charges (not part of
Pick-up fee

$
$
Total $

Total of Payments
(The amount you
will have paid by
the end of the lease)
$

Purchase Option at End of I .ease Term. fYou have an ootion to purchase the leased oroDertv at the end of the lease term for $
[with a purchase option fee of $
].l fYou do not have an option to purchase the leased property at the end of the lease term.]
Other Important Terms. See your lease documents for additional information on early termination, purchase options and maintenance
responsibilities, warranties, late and default charges, insurance, and any security interest, if applicable.
[The following provisions are the nonsegregated disclosures required under Regulation M.]

Official Fees and Taxes. The total amount you will pay for official fees, and taxes over the term of your lease, whether included with your monthly
payments or assessed otherwise: $ _______________ .
Insurance. The following types and amounts of insurance will be acquired in connection with this lease: __________________________________

_____ We (lessor) will provide the insurance coverage quoted above for a total premium cost of $ ________________ .
_____ You (lessee) agree to provide insurance coverage in the amount and types indicated above.
Standards for Wear and Use. The following standards are applicable for determining unreasonable or excess wear and use of the leased property:

Maintenance.
[You are responsible for the following maintenance and servicing of the leased property:

__________________________________________________________ _____________________ •]
[We are responsible for the following maintenance and servicing of the leased property:

___________________________________________________________ ______________ ■
]
Warranties. The leased property is subject to the following express warranties:
Early Termination and Default, (a) You may terminate this lease before the end of the lease term under the following conditions:

The charge for such early termination is :__________________________________________
(b) We may terminate this lease before the end of the lease term under the following conditions:
Upon such termination we shall be entitled to the following charge(s) fo r:_________________

14547

Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Proposed Rules
Appendix A-3 Model Furniture Lease Disclosures (continued)

Page 2 of 2

Early Termination and Default, (continued)
(c) To the extent these charges take into account the value of the leased property at the end of the lease term, if you disagree with the value we
assign to the property, you may obtain, at your own expense, from an independent third party agreeable to both of us, a professional appraisal of the
value of the property which could be realized at sale. The appraised value shall then be used as the actual value.
Security Interest. We reserve a security interest of the following type in the property listed below to secure performance of your obligations under this lease:

Late Payments. The charge for late payments is: ______________________________________________________________________

______ .

Purchase Option Prior to the End of the Lease Term.
[You have an option to purchase the leased property prior to the end of the term. The price will be [$ ________ ]/the method of determining the price].]
[You do not have an option to purchase the leased property.]

BILLING CODE 6 210 -01 -C

14548

Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Proposed Rules

6. In S u p p lem en t I to P art 213—
O fficial Staff C om m entary to R egulation
M, u n d e r S ection 213.4— C o n ten t of
D isclosures, th e follow ing am en d m e n ts
w o u ld b e m ade:

FEDERAL RESERVE SYSTEM

a. A n e w p ara g ra p h h ea d in g “4(f)(7)
T o tal o f b ase p erio d ic p a y m e n ts ” w o u ld
be a d d e d in n u m e rica l ord er a n d a n ew
p arag rap h 1. w o u ld b e a d d e d
im m ed iate ly b elo w th e n e w heading.

Truth in Lending

b. U n d er (4)(n) Fees a n d taxes,
p arag rap h l.ii. w o u ld be revised.
T he a d d itio n a n d rev isio n w o u ld read
as follows:
Supplem ent I to Part 213— O fficial Staff
C omm entary to R egulation M
*
*
*
*
*
S ectio n 213.4— C o n ten t o f D isclosures

*

*

*

*

*

► 4 ( f ) ( 7 ) T otal of b ase p e rio d ic p aym ents.
1. A c c u ra c y o f disclosure. L essors are
d e em e d to b e in c o m p lian c e w ith
§ 213.4(f)(7) o f th e re g u la tio n if d u e to
ro u n d in g in a m a n n e r th e lesso r arrives a t the
b ase p e rio d ic p a y m e n t, th e a m o u n t d isc lo sed
u n d e r § 213.4(f)(7), th e to tal of b ase p e rio d ic
p a y m e n ts, differs from th e base p e rio d ic
p a y m e n t d isc lo sed u n d e r § 213.4(f)(9),
m u ltip lie d by th e n u m b e r of p a y m e n ts u n d e r
th e lease d isc lo sed u n d e r § 2 1 3 .4(f)(8).

*

*

*

*

*

4(n) F ees a n d taxes.
1. T rea tm e n t o f certain taxes. * * *
ii. T axes th a t are p a rt of regu larly
s c h e d u le d p a y m e n ts are refle cte d in th e
d isc lo su re u n d e r §§ 213.4(c) ► a n d
213.4 ( n ) - ^ a n d ite m iz e d u n d e r § 213.4(f)(10).

*

*

*

*

*

7. In S u p p le m e n t I to P art 213, u n d e r
A p p e n d ix A—M odel Form s, parag rap h
2.v. w o u ld be rev ise d as follows:
*
*
*
*
*
A ppendix A— M odel Forms
*
*
*
*
*
2 . E xa m p le s o f a ccepta b le changes. * * *
v. D eleting ► o r b lo cking o u t-^
in ap p lica b le d isc lo su res [by blo ck in g out],
filling in “N /A ” (not ap p licab le) or “ 0 ,”
cro ssin g out, leavin g blan k s, check in g a bo x
for a p p lic ab le item s, o r circlin g ap p lic ab le
item s (this s h o u ld facilitate u se of
m u ltip u rp o se s ta n d a rd f o r m s [ . ] ) ^ . ^

*

*

*

*

*

By o rd e r of th e B oard of G overnors of th e
F e d eral R eserve System , M arch 1 2 ,1 9 9 8 .
W illiam W. W iles,
S ecreta ry o f th e Board.
[FR Doc. 9 8 -6 9 9 0 F ile d 3 -2 4 -9 8 ; 8:45 am]
BILLING CODE 6 210 -01 -P

12 CFR Part 226
[Regulation Z; Docket No. R -1005]

Board of G overnors of th e
F ederal Reserve System .
ACTION: P ro posed rule.
AGENCY:

T he B oard is p u b lish in g for
co m m en t a p ro p o se d ru le am en d in g
R egulation Z, w h ic h im p lem en ts the
T ru th in L ending Act. T he p ro p o sal
w o u ld p e rm it creditors to u se electronic
c o m m u n ic atio n (for exam ple,
c o m m u n ic atio n via perso n al co m p u ter
a n d m odem ) to p ro v id e d isclo sures
re q u ire d by th e act an d reg ulatio n, if the
co n su m er agrees to su c h delivery.
DATES: C om m ents m u st be received by
M ay 15, 1998.
ADDRESSES: C om m ents sh o u ld refer to
D ocket No. R—
1005, a n d m ay be m ailed
to W illiam W. W iles, Secretary, B oard of
G overnors of th e F ederal Reserve
System , 20th Street an d C o nstitution
A venue, N.W., W ashington, DC 20551.
C om m ents also m ay be d eliv ere d to
Room B -22 22 of th e Eccles B uilding
b e tw e en 8:45 a.m. an d 5:15 p.m .
w eekday s, or to th e guard station in th e
Eccles B u ilding co u rty ard on 20th
Street, N.W. (betw een C o n stitu tio n
A v en u e a n d C Street) at an y tim e.
C om m ents m ay be in sp e c te d in Room
M P -5 0 0 of th e M artin B uilding b etw een
9:00 a.m. a n d 5:00 p.m . w eekdays,
except as p ro v id ed in 12 CFR 261.12 of
th e B o ard’s Rules R egarding A vailability
of Inform ation.
SUMMARY:

FOR FURTHER INFORMATION CONTACT:

M ichael H entrel, O brea P oind ex ter, or
P am ela M orris B lum enthal, Staff
A ttorneys, D ivision of C on su m er an d
C o m m u n ity Affairs, at (202) 4 5 2 -3 667
or (202) 452 -24 12. For th e h earing
im p a ire d only, T eleco m m u n icatio n s
D evice for th e D eaf (TDD), con tact Diane
Jenkins, at (202) 452-3544.
SUPPLEMENTARY INFORMATION:

I. Background
T he p u rp o se of th e T ru th in L ending
A ct (TILA), 15 U.S.C. 1601 et seq., is to
p ro m o te th e in fo rm ed u se of con su m er
cre d it by req u irin g d isclosu res ab out its
term s a n d cost. T he act requires
creditors to d isclo se th e cost of credit as
a d o llar am o u n t (the finance charge) an d
as an a n n u a l percentag e rate (the APR).
U niform ity in cre d ito rs’ d isclo su res is
in te n d e d to assist co n su m ers in
co m p ariso n shop ping. T h e TILA
req u ires a d d itio n a l d isclo su res for loans
secu red by c o n su m e rs’ ho m es an d
perm its co n su m ers to resc in d certain

tran sa ctio n s th a t invo lv e th e ir p rin c ip a l
dw ellings. T he act is im p le m e n te d by
th e B oard ’s R egulation Z (12 CFR Part
226).
As p a rt of th e Regulatory P lan n in g
an d R eview Program a n d its review of
regu lation s u n d e r sectio n 303 of the
Riegle C om m un ity D ev elopm ent an d
R egulatory Im p ro v e m e n t A ct of 1994 (12
U.S.C. 4803), th e B oard d e te rm in e d th a t
th e u se of electro nic co m m u n ic atio n for
d elivery of in fo rm atio n to co nsum ers
th a t is req u ired by federal co n su m er
fin an cial services a n d fair le n d in g law s
c o u ld effectively red u c e regulatory
c o m p lian ce b u rd e n w ith o u t ad versely
affecting co n su m er protections. T hus,
th e B oard has b ee n co nsid ering th e
issue a n d closely follow ing the
d ev e lo p m e n t of electronic
com m u n icatio n . For exam ple in May
1996, th e B oard p ro p o se d to am en d
R egulation E (Electronic F u n d
T ransfers) to p e rm it d isclo sures to be
p ro v id ed electronically. In M arch 1997,
th e B oard issu ed an am en d m e n t to the
staff co m m en tary to R egulation CC
(A vailability of F u n d s a n d C ollection of
Checks) th a t allo w ed financial
in stitu tio n s to sen d n otices
electronically. (62 FR 13801, M arch 18,
1997.)
H aving co n sid ered th e com m ents
receiv ed o n th e R egulation E p ro p o sal
an d o th er rulem aking s, th e B oard no w
pro po ses to am e n d R egulation Z to
allow credito rs to p ro v id e R egulation Z
d isclosures electronically; su ch
d isclosures w o u ld rem a in subject to any
app lica b le tim ing, form at, a n d other
req u irem en ts of th e act a n d the
regulation. C oncurrently, th e B oard is
issuing sim ilar p ro p o sed revisions to
address electro nic co m m u n ic atio n
u n d e r R egulations DD (T ruth in
Savings), B (Equal C redit O pportunity),
a n d M (C onsum er Leasing), p u b lish e d
elsew here in to d a y ’s Federal Register.
In ad d itio n , th e B oard has issu ed an
in terim ru le u n d e r R egulation E, also
p u b lish e d elsew here in to d a y ’s Federal
Register so th a t financial in stitu tio n s
can im p le m e n t system s to p ro v id e
E lectronic F u n d T ransfer A ct
d isclosures electronically.
II. Proposed Regulatory R evisions
T he TILA a n d R egulation Z require
several disclo su res to be p ro v id ed to
co n su m ers in w riting. T h e req u irem en t
th a t disclosu res be in w ritin g has b een
p re su m e d to req u ire th a t creditors
p ro v id e p a p e r d ocum en ts. H ow ever,
u n d e r m an y law s th a t call for
in fo rm atio n to be in w riting,
in fo rm atio n in electro nic form is
co n sid ered to be “ w ritte n .” Inform ation
p ro d u ce d , stored, or co m m u n ic ate d by
co m p u ter is also generally co n sid ered to

Federal Register/Vol. 63, No. 5 7 /Wednesday, March 25, 1998/Proposed Rules
be a w ritin g at least w h ere v isu a l text is
involved.
T herefore, p u rsu a n t to its a u th o rity
u n d e r sectio n 105 of th e TILA, th e
B oard p ro p o ses to am en d R egulation Z
to p e rm it credito rs to u se electronic
c o m m u n ic atio n w h ere th e reg u latio n
calls for in fo rm atio n to be p ro v id e d in
w riting. T h e te rm “ electronic
c o m m u n ic a tio n ” is lim ite d to a
c o m m u n ic atio n th a t can b e d isp lay e d as
v isu a l text. A n ex am ple is a n electronic
v isu al tex t m essage th a t is d isp lay e d on
a screen (su ch as th e c o n s u m e r’s
co m p u ter m onitor). C o m m u nications by
te le p h o n e v o icem ail system s do n o t
m e et th e d efin itio n of “ electronic
c o m m u n ic a tio n ” for p u rp o ses of th is
reg u latio n b ecau se th e y do n o t hav e th e
feature generally associated w ith a
w riting—v isu a l text.
S ection 226.2(a)(27) w o u ld b e rev ised
to in c lu d e th e d efin itio n of electronic
c o m m u n ic atio n for p u rp o ses of
R egulation Z. U n d e r th e definitio n,
electron ic c o m m u n ic atio n is a v isu al
tex t m essage electro n ically tra n sm itted
b e tw e en a cre d ito r an d a c o n su m e r’s
h o m e co m p u te r or o th er electronic
device u se d by a co nsum er. Sections
226.5, 226.17 an d 226.31 w o u ld be
rev ise d to ad d re ss electronic
com m u n icatio n . T hese sections co n tain
general d isclo su re req u irem en ts for
o p en -e n d credit, clo sed -en d credit, a n d
certain h o m e se cu red loans referred to
as “HOEPA lo a n s.”
A g ree m en ts B etw een Creditors a n d
C o nsum ers
S ections 226.5(a)(5), 226.17(a)(3), an d
226.31(b)(2) w o u ld p erm it creditors to
se n d electron ic d isclo su res if th e
co n su m er agrees. T here m ay b e various
w ays th a t a cre d ito r a n d a co n su m er
c o u ld agree to th e electronic d eliv ery of
d isclo su res an d o th er inform ation.
W h eth er su c h an agreem en t exists
b e tw e en th e p arties w o u ld be
d e te rm in e d b y ap p licab le state law. The
reg u latio n w o u ld n o t p re c lu d e a cred itor
an d a co n su m er from en terin g in to an
agreem ent electro nically, n o r does it
p rescrib e a form al m e c h a n ism for doing
so. T he B oard does believe, how ever,
th a t co n su m ers sh o u ld be clearly
in form ed w h e n they are co n sen ting to
th e delivery of TILA d isclo su res an d
o th er in fo rm atio n electronically.
D elivery R eq u irem en ts fo r E lectronic
C om m unica tio n
R egulation Z p ro v id es th a t an
in stitu tio n “ fu rn is h ,” “p ro v id e ,”
“ s e n d ,” “ d e liv er,” or “ m a il”
in fo rm atio n to a consum er. G enerally,
th e deliv ery req u irem en t an ticip ates
th a t a cre d ito r w ill d eliv er the
in fo rm atio n —ty p ically b y m ail— to an

ad d ress design ated by th e consum er.
F or a p a p e r com m u n icatio n , a credito r
w o u ld n o t satisfy th a t req u irem en t by
m aking d isclo sures “ av ailab le” to
consum ers, for exam ple, at a cre d ito r’s
office or other location. T he Board
believes th a t co n su m ers receiving
d isclosures by electronic
c o m m u n ic atio n sh o u ld h av e p ro tectio n s
regarding d eliv ery sim ila r to those
afforded co n su m ers receiving
d isclosures in p ap e r form. S im ply
po sting in fo rm atio n on a n In tern et site
w ith o u t som e a p p ro p riate n otice a n d
in stru c tio n s abou t h o w th e co n su m er
m ay ob tain th e re q u ire d in form ation
w o u ld n o t satisfy th e requirem en t.
T he req u irem en t to se n d d isclo sures
to a co n su m er w o u ld be satisfied w h e n
th e in stitu tio n e n su re s th a t th e
d isclosures w ill b e d isp lay e d in a tim ely
m an ner. For exam ple, u n d e r R egulation
Z, o p en -e n d cre d it in itia l disclosures
g enerally m u st be p ro v id e d before the
first tran sa ctio n u n d e r th e plan. A ssum e
th a t a co n su m er u ses a p erso n al
co m p u ter to a p p ly for a p la n an d
co n sen ts to th e electron ic d eliv ery of th e
in itia l disclosu res. If th e disclosures
au to m atically a p p e ar on th e co m p u ter
screen before th e co n su m er com m its to
th e p la n (in acco rd an ce w ith th e form at,
tim ing ru les a n d an y o th er req u irem en ts
o f th e act a n d regulation), th e cred itor
w o u ld satisfy th e re q u ire m e n t to
p ro v id e (deliver or transm it) d isclo sures
to th e consum er.
A s a p ractical m atter, th e re m ay be
little d istin ctio n b etw e en se n d in g or
deliv ering electron ic d isclosures an d
m aking th e m “ availab le.” C reditors
h av e flexibility in h o w th e y m ay d eliver
electron ic d isclo sures to consum ers,
in clu d in g , b u t n o t lim ite d to, the
follow ing exam ples. T h ey m ay sen d
d isclosures to a co n su m er-design ated
electron ic m ail ad d ress or th e y m ay
designate a lo catio n o n a w eb site w h ere
th e co n su m er en ters a p erso n al
id e n tific atio n n u m b e r or o th e r id en tifier
to access re q u ire d inform ation. In th e
scenario d escrib ed above, assu m e th at
th e co n su m er ap p lies for a credit plan,
receives th e in itia l disclo su res at th a t
tim e, an d agrees to receive all
R egulation Z d isclosu res electronically.
S u b seq u en t d isclosu res sent to the
desig n ated ad d ress or p la ce d at a
d esig nated lo catio n (for exam ple,
p erio d ic statem ents or change-in-term s
notices) w o u ld satisfy th e delivery
req u irem en ts of th e regulation.
E lectronic c o m m u n ic atio n w o u ld
rem ain subject to an y tim in g or o ther
ap p licab le req u irem en ts u n d e r
R egulation Z. For exam ple, a n electronic
change in term s n o tice re q u ire d by
§ 226.9(c) of R egulation Z m u st still be
p ro v id ed at least fifteen days in ad vance

14549

of th e change. T he B oard solicits
co m m en t on w h e th e r fu rth e r g u id an ce
is n e e d e d on h o w to com ply w th the
tim ing req u irem en ts w h e n a n o tice is
p o ste d on an In tern et w ebsite.
Section 226.5a—Credit and Charge
Card A pplications and Solicitations
T he act a n d reg u latio n req u ire cred it
a n d charge card issuers to p ro v id e credit
d isclosures in certain ap p lica tio n s an d
solicitatio ns to o p en cre d it a n d charge
card accounts. F orm at an d co n ten t
req u irem en ts differ for ap p lica tio n s or
solicitatio ns se n t in d irec t m ail
cam paigns a n d for th o se m a d e available
to th e general p u b lic su c h as in “takeo n e s” a n d catalogs or m agazines.
D isclosures ac co m p an ying d irec t m ail
ap p lica tio n s a n d solicitations m u st be
p rese n ted in a tab u lar format.
D isclosures in a take-one also m ay be
p re se n te d in a table w ith th e sam e
co n ten t as for d irec t m ail, b u t th e act
a n d reg u latio n p e rm it alternatives as to
form at a n d content. T he APR d isclo sed
in a d irec t m a il so licitation m u st be
accurate w ith in 60 days of m ailing; in
a take-one, w ith in 30 days of p rinting.
C onsum ers co u ld o btain an
electron ically se n t cre d it or charge card
ap p lic a tio n in m u c h th e sam e w ay as
eith er o p en in g a d irect-m ail p ie ce or
b ro w sin g th ro u g h a m agazine. U n d e r the
pro p o sal, if a card issu e r se n d s an
ap p lic a tio n or so licitation to a co n su m er
by electronic m ean s th a t alert th e
co n su m er th a t th e ap p lic a tio n or
solicitatio n has arrived, su c h as
electron ic m ail, th e card issu er w o u ld
follow th e d irect-m ail ru les u n d e r
§ 226.5a. If a n issu er m erely m akes an
ap p lic a tio n or so licitatio n p u b licly
available, su c h as by postin g it o n an
In tern et site, th e issu er w o u ld follow th e
“ tak e-o n e” rules. T he B oard believes
th a t in th e context of electronic
co m m u n icatio n s, “ p rin tin g ” is the
eq u iv alen t of u p d atin g a site o n th e
Internet, for exam ple. T h us, w h ere th e
“tak e-o n e” ru les ap p ly , con sum ers
w o u ld v ie w APRs th a t are accurate
w ith in 30 days of th e card iss u e r’s m ost
rec en t u p d a te of th e In tern et site. W here
th e direct-m ail ru les ap ply , th e APRs
d isclosed w o u ld be accurate w ith in 60
days of th e sen ding of th e electronic
ap p lic a tio n or solicitation. T h e B oard
requ ests co m m en t o n an y com pliance
difficulties th is a p p ro a c h m ay pose, an d
p o ssib le suggestions for th e ir reso lu tion.
Section 226.17(g)—M ail or Telephone
Orders—D elay in D isclosures
S ection 226.17(g) allow s cre d it to be
offered via m ail, telep h o n e, or other
electronic m ean s a n d full TILA
d isclosures to be d eferred as long as a
c ertain n u m b e r of d isclosu res are “m ade

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Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Proposed Rules

available in w ritte n form .” T h e ratio nale
u n d e rly in g th e deferral is th at, in som e
instan ces, th e cre d ito r c a n n o t p ro v id e
disclo su res in th e form re q u ire d b y th e
reg u la tio n becau se of th e lack of face to
face or d irec t in te ra c tio n w ith th e
con su m er. B ecause lo an p ro d u cts
offered b y electronic co m m u n ic atio n
(for exam ple, th o se offered o n th e
Internet) do n o t a p p e a r to p ose th e sam e
difficulty, th e B oard believes th a t th is
deferral sh o u ld n o t a p p ly to electronic
disclosures. T he B oard believes th at
p erm ittin g a deferral w o u ld n o t
effectuate th e p u rp o se of th e TILA to
p ro v id e co n su m ers w ith in fo rm atio n
a b o u t cre d it term s p rio r to being
obligated. T hus, th e p ro p o sed rule
p ro v id es th a t specific d isclo sures m u st
be p ro v id ed before co n su m m a tio n of the
transaction.
R e q u irem en t T h a t In fo rm a tio n Be
“Clear a n d C o n sp icu o u s”
T he act a n d R egulation Z req u ire
cred ito rs to p re se n t req u ired
in fo rm atio n “ clearly a n d
co n sp ic u o u sly .” U n d er th e p ro p o sed
ru le, th e “ clear a n d c o n sp ic u o u s”
re q u ire m e n t ap p lies to electronic
co m m u n ic atio n . T he B oard does n o t
in te n d to discourage or encourage
specific ty p es o f technologies.
R egardless o f technology, how ev er, the
disclo su res p ro v id e d b y electronic
co m m u n ic atio n m u st m eet th e “ clear
a n d c o n s p ic u o u s” stan d ard . W h ile a
cre d ito r is generally n o t re q u ire d to
en su re th a t th e co n su m er has the
eq u ip m e n t to rea d th e d isclo sures, in
so m e circu m stan ces a cre d ito r w o u ld
h av e th e resp o n sib ility of m ak in g sure
th e p ro p e r e q u ip m e n t is in place. For
exam ple, to u se electro nic d isclo sures
for c re d it offered th ro u g h te rm in als in a
c re d ito r’s lobby, or th ro u g h kiosks
lo c ate d in p u b lic or o th er places, th e
cre d ito r m u st en su re th a t th e e q u ip m e n t
m eets th e clear a n d co n sp icu o u s
sta n d a rd for TILA d isclosu res th a t are
bein g p ro v id e d electronically.
C o n su m er A b ility to R etain D isclosures
R egulation Z req u ires th a t m an y of its
w ritte n d isclo su res be in a form th a t the
co n su m er m ay keep. T his req u irem en t
w o u ld ap p ly to d isclo sures p ro v id e d by
electron ic co m m u n icatio n . C reditors
w o u ld satisfy th e re te n tio n req u irem en t
if, for exam ple, d isclosures can be
p rin te d or d o w n lo a d e d b y the
consu m er. T h e req u irem en ts for
electro nic deliv ery sh o u ld be sim ilar to
th e c u rre n t p a p e r req u irem en ts, w here
creditors generally m u st m a il or deliver
th e in fo rm atio n to th e co n su m er b u t
n e e d n o t en su re th a t th e co n su m er reads
or retains it. T hu s, cred itors w o u ld not
be re q u ire d to m o n ito r an in d iv id u a l

c o n su m e r’s ability to reta in the
inform ation, n o r to take steps to find o u t
w h e th e r th e co n su m er h as in fact
re ta in e d it. T he B oard an ticip ates that,
w h ere ap p ro p riate, a credito r w o u ld
p ro v id e sp ecial tech n ic al specifications
for receiv ing or retain in g in form ation
before or at th e tim e a co n su m er agrees
to receive in fo rm atio n electronically.
As in th e case of th e “ clear an d
c o n s p ic u o u s” sta n d a rd d isc u sse d above,
in circu m stan ces w h ere th e cre d ito r (or
a n etw o rk of w h ic h th e cre d ito r is a
m em ber) controls th e e q u ip m e n t to be
u se d for th e service— su c h as term in als
in in stitu tio n lobbies or kiosks in
sh o p p in g centers—th e cre d ito r w o u ld
h av e th e resp o n sib ility of en su rin g
retainab ility. P ro v id e d th a t th e delivery
req u irem en ts (d iscussed above) are
satisfied, m e th o d s for fulfilling this
re q u irem en t c o u ld in c lu d e, for exam ple,
p rin te rs in c o rp o rated in to te rm in als or a
screen m essage offering to tra n sm it the
disclo su re to th e c o n su m e r’s electronic
m ail or p o st office address.
S ignature R eq u irem en ts U nder
R egulation Z
T here are tw o sig nature req u irem en ts
u n d e r R egulation Z. U n d er § 226.4(d)
co n su m ers m ay elect to accep t credit
life in su ra n c e b y signing or in itialin g an
affirm ative w ritte n req u e st after
receiving d isc lo su re ab out the
in su ran ce. U n d e r § 226.23 (and th e
corresp o n d in g m o d e l form s an d official
staff com m entary) co nsum ers m ay
can cel certain h o m e-secu red loans or
w aiv e th is righ t by p ro v id in g a w ritte n
signed n o tice to th e creditor. T he Board
in d ic a te d in th e M ay 1996 R egulation E
pro p o sal th a t an y electronic
au th e n tic a tio n m e th o d sh o u ld pro v id e
th e sam e assu ra n ce as a sig natu re in a
p ap er-b ased system , a n d cited security
codes a n d digital signatures as exam ples
o f au th e n tic a tio n devices th a t m ight
m eet th e requ irem ents. T he B oard is
in tereste d in learn in g a b o u t o th e r w ays
in w h ic h au th e n tic a tio n in a n electronic
e n v iro n m en t m ig h t take th e p lace of th e
c o n s u m e r’s signature.
C urrent N e e d fo r S afeguards C oncerning
th e E lectronic D elivery o f D isclosures
T oday, m o st co nsum ers receive
federal d isclosu res in p ap e r form. As
electronic com m erce an d electronic
b anking increase an d technological
a d vances take place, o btaining
d isclosures b y electronic
c o m m u n ic atio n w ill likely becom e m ore
com m on place. C urrently, how ever, the
u se of electronic c o m m u n ic atio n in the
delivery of financial services is still
evolving. T h us, it is difficult to fully
p re d ic t th e exten t to w h ic h ad d itio n a l
safeguards, if any, m ay be n e e d e d to

en su re th a t co nsum ers receive th e sam e
p ro tectio n s th a t exist for d isclo sures in
p a p e r form. T h e B oard expects th a t
creditors subject to th e TILA an d
R egulation Z w ill p ro v id e sufficient
details ab out th e d eliv ery of disclosures.
T he B oard p lan s to closely m o n ito r th e
d ev e lo p m e n t of electronic d eliv ery of
TILA d isclo sures a n d other inform ation,
an d w ill ad d ress co m p lia n ce or other
issu es th a t m ay arise as ap pro priate.
III. Form o f Comment Letters
C o m m en t letters sh o u ld refer to
Docket No. R -1 00 5 and, w h e n possible,
sh o u ld u se a sta n d a rd typeface w ith a
ty p e size of 10 or 12 ch aracters p e r inch.
T his w ill enable th e B oard to convert
th e tex t to m a ch in e-read ab le form
th ro u g h electro nic scanning, a n d w ill
facilitate au to m ated retrieval of
com m en ts for review . A lso, if
acco m p an ie d b y an original d o cu m en t
in p ap e r form, co m m en ts m ay be
su b m itte d o n 3 V2 in c h or 5 V4 in c h
c o m p u ter d iskettes in an y IBMcom patible D O S-based format.
IV. Regulatory Flexibility A nalysis
In accordance w ith sectio n 3(a) of the
R egulatory F lexibility Act, th e B oard’s
Office of th e Secretary h as rev ie w ed th e
p ro p o se d am en d m e n ts to R egulation Z.
O verall, th e p ro p o se d am en d m e n ts are
n o t ex p ected to h av e an y significant
im p a c t o n sm all entities. T h e p ro p o sed
ru le w o u ld relieve co m p lian ce b u rd e n
b y giving cred itors flexibility in
p ro v id in g disclosures. A final regulatory
flexibility analy sis w ill be c o n d u c te d
after co n sid eratio n of co m m en ts
receiv ed d u rin g th e p u b lic com m en t
period.
V. Paperw ork R eduction Act
In accord an ce w ith se ctio n 3506 of
th e P ap erw o rk R edu ctio n A ct of 1995
(44 U.S.C. Ch. 35; 5 CFR P art 1320
A p p e n d ix A .l), th e B oard rev ie w ed th e
p ro p o sed rev isio n s u n d e r th e auth o rity
deleg ated to th e B oard by th e Office of
M anag em ent a n d Budget.
T he F ederal Reserve h as no d ata w ith
w h ic h to estim ate th e b u rd e n th e
p ro p o se d rev ise d req u irem en ts w o u ld
im p o se on state m em b er banks.
C reditors w o u ld be able to use
electronic co m m u n ic atio n to pro v id e
d isclo su res a n d other inform atio n
re q u ire d b y th is reg u latio n rath e r th a n
having to p rin t an d m ail th e in form ation
in p a p e r form. T he use o f electronic
c o m m u n ic atio n in h o m e b ank ing a n d
financial services m ay red u c e th e
p ap e rw o rk b u rd e n o n creditors a n d
financial in stitu tio n s or m erely m ay
red u c e th e d o llar cost.
T he F ed eral Reserve req uests
com m en ts from creditors, especially

Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Proposed Rules
state m em b er banks, th a t w ill h elp to
estim ate th e n u m b e r a n d b u rd e n of th e
various d isclosu res th a t w o u ld b e m ade
in th e first year th is ru le is effective.
C om m ents are in v ite d on: (a) W h ether
th e p ro p o sed rev ise d co llectio n of
inform ation is n ecessary for th e p ro p er
perfo rm an ce of th e F ed eral R eserve’s
fun ctio ns, in c lu d in g w h e th e r the
in fo rm atio n has p ractical utility; (b) th e
accuracy of th e F ed eral R eserve’s
estim ate of th e b u rd e n of th e p ro p o sed
revised in fo rm atio n collection,
in c lu d in g th e cost of com pliance; (c)
w ays to e n h a n ce th e quality, u tility , an d
clarity of th e in fo rm atio n to be
collected; a n d (d) w ays to m in im iz e th e
b u rd e n of in fo rm atio n co llectio n on
resp o n d e n ts, in c lu d in g th ro u g h th e u se
of au to m ated collection te ch n iq u e s or
o th er form s of in fo rm atio n technology.
C om m ents o n th e co llectio n of
in fo rm atio n sh o u ld be se n t to th e Office
of M anagem ent a n d Budget, P aperw ork
R ed u ctio n Project (7100-0199),

W ashington, DC 20503, w ith copies of
su c h com m ents to be se n t to M ary M.
M cL aughlin, Chief, F in an c ial R eports
S ection, D ivision of R esearch an d
Statistics, M ail Stop 97, B oard of
G overnors of th e F ederal Reserve
System , W ash ing to n, DC 20551.
T he co llectio n of in fo rm atio n
req u irem en ts in th is p ro p o se d revised
reg u latio n are fo u n d th ro u g h o u t 12 CFR
P art 226 a n d in A p p en d ic es F, G, H, J,
K, a n d L. T his in fo rm atio n is m a n d ato ry
(15 U.S.C. 1604(a)) to en su re the
d isclo su re of certain cre d it costs an d
term s to con sum ers, at or before the
tim e co n su m ers en ter into a co n su m er
cre d it tran sa ctio n a n d w h e n the
availability of co n su m er cre d it on
p articu la r term s is advertised. The
p u rp o se of th e d isclosures is to
encourage co m p etitio n am ong various
cre d it sources th ro u g h in form ed
co m p ariso n -sh o p p in g b y consum ers.
T he re sp o n d e n ts/re c o rd k e e p e rs are forprofit fin an cial in stitu tio n s, in c lu d in g
Number of
respondents

Open-end credit:
Initial terms .................................................................................................................
Change in terms .................................................................................
............
Periodic Statements .........................................................................................................
Error resolution ...........................................................................
Credit and charge card accounts:
Advance disclosures ..............................................................
........
Renewal notice ................................................................
Insurance notice ........................................................................................................
Home equity plans:
Advance disclosure ...................................................................................................
..........
Change in terms ..............................................................................
Closed-end credit disclosures ......................................................
.......
Advertising ............................................................................................
..........
T o ta l.............................................................................................................................

14551

sm all b usinesses. C reditors are also
re q u ire d to reta in records as ev id en ce of
co m p lia n ce for tw en ty -fou r m onths.
T he B oard also p ro p o ses to e x ten d th e
R ecordkeeping an d D isclosure
R equirem ents in C o n n ectio n w ith
R egulation Z (OMB No. 7100-0199) for
th ree years. T he c u rren t estim a te d total
an n u a l b u rd e n for th is info rm atio n
co llectio n is 1,878,846 h o u rs, as sh o w n
in th e tab le below . T hese am o u n ts
reflect th e b u rd e n estim ate of the
F ederal Reserve S ystem for th e 996 state
m em ber ban k s u n d e r its superv ision.
T his reg u latio n ap p lies to all typ es of
creditors, n o t ju st state m em b er banks.
H ow ever, u n d e r P ap erw o rk R e d uction
A ct regu lation s, th e F ederal Reserve
accou nts for th e b u rd e n of the
p ap e rw o rk asso ciated w ith th e
reg u latio n o nly for state m em b er banks.
O ther agencies ac co u n t for th e
pap e rw o rk b u rd e n for th e in stitu tio n s
th e y supervise.
Estimated
annual fre­
quency

Estimated re­
sponse time

Estimated
annual bur­
den hours

996
996
996
996

1,150
2,500
86,250
8

2.5 minutes
1.0 minute
45.0 seconds
15.0 minutes

47,725
41,500
1,073,813
1,992

996
996
996

29,750
10,700
60

10.0 seconds
5.0 seconds
15.0 seconds

82,308
14,802
249

996
996
996
996

120
3
5,750
3

2.0 minutes
2.0 minutes
6.4 minutes
30.0 minutes

3,984
100
610,880
1,493
1,878,846

14552

Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Proposed Rules

G eneral d isclo sures of cre d it term s
th a t a p p e ar in adv ertisem en ts or takeone a p p lica tio n s are available to the
pu blic. S ince th e F ederal Reserve does
n o t collect an y info rm ation, n o issu e of
co n fid e n tia lity n o rm ally arises.
H ow ever, th e in fo rm atio n m ay be
pro tec te d from d isclo su re u n d e r th e
exem p tio n s (b)(4), (6), a n d (8) of th e
F reed o m of Info rm atio n A ct (5 U.S.C.
522(b)). T ransactio n- or account-specific
disclo su res a n d billin g error allegations
are n o t p u b licly available a n d are
co n fid e n tia l b e tw e en th e cre d ito r a n d
th e consu m er. A n agency m ay n o t
c o n d u c t or sponsor, a n d an organization
is n o t req u ired to re sp o n d to, an
in fo rm atio n co llectio n u n le ss it disp lays
a cu rren tly v a lid OMB co n tro l num ber.
T he OMB con trol n u m b e r for th e
R ecordkeeping a n d D isclosure
R eq uirem ents in C on nectio n w ith
R egulation Z is 7100—
0199.
List o f Subjects in 12 CFR Part 226
A dvertising, F ed eral Reserve System ,
M ortgages, R eporting a n d record keep in g
req u irem en ts, T ru th in lending.
Text o f Proposed R evisions
C ertain co n v en tio n s have b ee n u se d
to h ig h lig h t th e p ro p o se d changes to
R egulation Z. N ew language is sh o w n
in sid e b old-faced arrow s, w h ile
language th a t w o u ld be rem o v e d is set
off w ith brackets.
F or th e reason s set fo rth in th e
pream ble, th e B oard pro p o ses to am en d
12 CFR p art 226 as follows:
PART 226— TRUTH IN LENDING
(REGULATION Z)
1. T he a u th o rity citatio n for p a rt 226
c o n tin u es to rea d as follows:
Authority: 12 U.S.C. 3806; 15 U.S.C. 1604
a n d 1637(c)(5).

2. S ectio n 226.2 w o u ld b e am en d e d
by ad d in g a n e w p ara g ra p h (a) (2 7) to
rea d as follows:
§ 2 2 6 .2 Definitions and rules of
construction.

(a) D efinitions. * * *
(27) E lectronic co m m u n ic a tio n m eans
a m essage tra n sm itte d electron ically
b etw e en a co n su m er an d a cre d ito r in a
form at th a t allo w s v isu a l text to be
d isp la y e d on e q u ip m e n t su c h as a
perso n a l c o m p u ter m onitor.
*
*
*
*
*
► 3 . S ection 226.5 w o u ld be am en d e d
by ad d in g a n e w p arag rap h (a)(5) as
fo llo w s:-^
§ 2 2 6.5

General disclosure requirem ents.

(a) Form o f d isclosures. * * *
► ( 5 ) E lectronic c o m m u n ic a tio n . A
cre d ito r a n d a c o n su m er m ay agree to

se n d by electron ic co m m u n ic atio n , as
th a t te rm is d efin e d in § 226.2(a)(27),
an y in fo rm atio n req u ired b y th is su b p art
to be p ro v id ed in w riting. Inform ation
se n t by electronic c o m m u n ic atio n to a
co n su m er m u st co m p ly w ith parag rap h
(a)(1) o f th is section a n d an y ap p licab le
tim in g req u irem en ts co n tain e d in this
su b p a rt.-^1
4. S ection 226.17 w o u ld be am en d e d
as follows:
a. By ad d in g a n e w parag rap h (a)(3);
and
b. By revising paragraph (g)
in tro d u c to ry text.
T he rev isio n a n d a d d itio n w o u ld read
as follows:
§ 226.17

General disclosure requirem ents.

(a) Form o f disclosures. * * *
► ( 3 ) E lectronic c o m m u n ic a tio n . A
cre d ito r an d a co n su m er m ay agree to
se n d b y electronic co m m u n ic atio n , as
th a t te rm is d efin e d in § 226.2(a)(27),
an y in fo rm atio n req u ired by th is su bpart
to be p ro v id e d in w riting. Inform ation
se n t b y electro nic c o m m u n ic atio n to a
co n su m er m u st co m p ly w ith paragraph
(a)(1) of th is sectio n an d an y applicab le
tim in g req u irem en ts c o n ta in e d in this
su b p a rt.^ 1
*
*
*
*
*
(g) M ail or te lep h o n e orders— d e la y in
disclosures. If a cred itor receives a
p u rch a se ord er or a req u e st for an
ex ten sio n o f cre d it by m ail, telep h o n e,
or an y o th er w ritte n [or electric]
co m m u n ic atio n , ► e x c l u d i n g electronic
co m m u n ic atio n as d isc u sse d in
paragraph (a)(3) of th is s e c t i o n , ^
w ith o u t face-to-face or d irect te lep h o n e
so licitation , th e cre d ito r m ay d elay the
d isclosures u n til th e d u e d ate of th e first
pay m en t, if th e follow ing inform ation
for rep rese n ta tiv e am o u n ts or ranges of
cre d it is m ade available in w ritte n form
to th e co n su m er or to th e p u b lic before
th e actu al p u rc h a se ord er or request:
*
*
*
*
*
5. S ection 226.31 w o u ld be am en d e d
b y redesig nating p arag rap h (b) as
parag rap h (b)(1) an d ad d in g a n ew
parag rap h (b)(2) as to read as follows:
§226.31

*

General rules.

*
*
*
*
( b ) ^ ( l ) - ^ Form o f disclosures. * * *
► ( 2 ) E lectronic c o m m u n ic a tio n . A
cre d ito r a n d a co n su m er m ay agree to
se n d by electro n ic co m m u n icatio n , as
th a t te rm is defin ed in § 226.2(a)(27),
an y in fo rm atio n re q u ire d by th is su b p a rt
to be p ro v id e d in w riting. Inform ation
se n t b y electronic c o m m u n ic atio n to a
c o n su m er m u st co m p ly w ith th is
p arag rap h (b) a n d an y app lica b le tim ing
req u irem en ts co n tain e d in this
s u b p a rt.^
*
*
*
*
*

By o rd e r o f th e B oard of G overnors of th e
F ed eral Reserve System , M arch 12, 1998.
W illiam W. W iles,
S ecreta ry o f th e Board.
[FR Doc. 9 8 -6 9 9 1 F ile d 3 -2 4 -9 8 ; 8:45 am]
BILLING CODE 6 210 -01 -P

FEDERAL RESERVE SYSTEM
12 CFR Part 202
[Regulation B; Docket No. R -1 00 6 ]

Equal Credit Opportunity
B oard of G overnors of the
F ederal Reserve System .
ACTION: P ro p o se d rule.
AGENCY:

T he B oard is p u b lish in g for
co m m en t a p ro p o se d ru le am end in g
R egulation B, w h ic h im p lem en ts the
E qual C redit O p p o rtu n ity Act. The
pro p o sal w o u ld p e rm it creditors to use
electron ic c o m m u n ic atio n (for exam ple,
c o m m u n ic atio n v ia p erso n a l co m p u ter
a n d m odem ) to p ro v id e d isclosures
req u ired by th e act an d reg u latio n if th e
co n su m er agrees to su c h delivery.
DATES: C om m ents m u st be received by
M ay 15, 1998.
ADDRESSES: C om m ents sh o u ld refer to
D ocket No. R -1006, a n d m a y b e m ailed
to W illiam W. W iles, Secretary, B oard of
G overnors of th e F ederal Reserve
System , 20th S treet a n d C o nstitu tion
A venue, N.W ., W ashing ton , DC 20551.
C om m ents also m ay be d eliv ered to
Room B -222 2 of th e Eccles B uilding
b etw e en 8:45 a.m. a n d 5:15 p.m .
w eekdays, or to th e g u ard station in th e
Eccles B uild in g co u rty ard on 20th
S treet, N.W. (betw een C o n stitu tio n
A venu e a n d C Street) at an y tim e.
C om m ents m ay b e in sp e cted in Room
M P -5 0 0 of th e M artin B u ilding betw een
9:00 a.m. an d 5:00 p.m . w eekdays,
ex cep t as p ro v id e d in 12 CFR 261.12 of
th e B oard ’s R ules Regarding A vailability
of Inform ation.
SUMMARY:

FOR FURTHER INFORMATION CONTACT:

M ichael H entrel or N atalie E. Taylor,
Staff A ttorneys, D ivision of C onsum er
an d C om m unity A ffairs, at (202) 452­
3667 or (202) 452 -24 12. For th e hearing
im p aired only, T elecom m un icatio ns
D evice for th e D eaf (TDD), contact D iane
Jenkins, at (202) 452-3544.
SUPPLEMENTARY INFORMATION:

I. Background
T he E qual C redit O p p o rtu n ity A ct
(ECOA) (15 U.S.C. 1691 e t seq.) m akes
it u n la w fu l for cred itors to discrim in ate
in any asp ec t of a cre d it tran sa ctio n on
th e b asis of sex, race, color, religion,
n atio n al origin, m arital status, age
(provided th e ap p lic a n t h as th e capacity

Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Proposed Rules
to contract), b ecau se all or p art of an
a p p lic a n t’s in co m e derives from pu blic
assistance, or becau se a n a p p lic a n t has
in good faith ex ercised an y righ t u n d e r
th e C o nsum er C redit P ro tectio n Act.
T he act is im p le m e n te d b y th e B oard’s
R egulation B (12 CFR p a rt 202).
As p art of th e R egulatory P lan n in g
a n d R eview Program a n d its rev iew of
regulatio ns u n d e r sectio n 303 of th e
Riegle C o m m u n ity D evelop m en t an d
Regulatory Im p ro v em en t A ct of 1994 (12
U.S.C. 4803), th e B oard d eterm in e d th at
th e u se of electron ic co m m u n ic atio n for
deliv ery of in fo rm atio n to con su m ers
th a t is re q u ire d b y federal co n su m er
fin an cial services a n d fair le n d in g law s
co u ld effectively red u c e regulatory
co m p lia n ce b u rd e n w ith o u t adversely
affecting co n su m er protections. T hus,
th e Board has b ee n co nsid ering th e
issu e an d closely follow ing th e
d ev e lo p m e n t of electronic
co m m u n icatio n . For exam ple, in M ay
1996, th e B oard p ro p o se d to am en d
R egulation E (Electronic F u n d
T ransfers) to p erm it disclo su res to be
p ro v id e d electronically. In M arch 1997,
th e B oard issu e d a n a m e n d m e n t to the
staff com m en tary to R egulation CC
(A vailability of F u n d s a n d C ollection of
Checks) th a t allo w ed financial
in stitu tio n s to se n d notices
electronically. (62 FR 13801, M arch 18,
1997.)
H aving co n sid ered com m ents
receiv ed o n th e R egulation E propo sal
a n d o th er rulem aking s, th e B oard n o w
pro po ses to am e n d R egulation B to
allow creditors to p ro v id e R egulation B
d isclosures electronically; su c h
d isclosures w o u ld rem a in subject to any
app lica b le tim ing, form at, a n d oth er
req u irem en ts of th e act a n d the
regulation. C on cu rrently , th e B oard is
issuing sim ilar p ro p o sed revisions to
ad d ress electro nic co m m u n ic atio n
u n d e r R egulations DD (T ruth in
Savings), Z (T ruth in Lending), an d M
(C onsum er Leasing), p u b lish e d
elsew here in to d a y ’s Federal Register.
In ad d itio n , th e Board h as issu ed an
in terim ru le u n d e r R egulation E also
p u b lish e d elsew here in to d a y ’s Federal
Register so th a t financial in stitu tio n s
c a n im p le m e n t system s to p ro v id e
E lectronic F u n d T ransfer A ct
d isclosures electronically.
II. Proposed Regulatory R evisions
T he ECOA an d R egulation B req u ire
c ertain disclo su res to be p ro v id e d to
a p p lica n ts in w riting. U n d e r R egulation
B, th e regulatory re q u ire m e n t th at
d isclosures be in w ritin g h as been
p resu m e d to req u ire th a t creditors
p ro v id e p a p e r d o cu m ents. U n d e r m an y
law s th at call for in fo rm atio n to be in
w riting, in fo rm atio n in electro n ic form

is c o n sid ered to be “w ritte n .”
In form ation p ro d u ce d , stored, or
co m m u n ic ate d by co m p u ter is also
generally co n sid ered to b e a w riting at
least w h ere v isu a l tex t is involved.
Therefore, p u rs u a n t to its a u th o rity
u n d e r sectio n 703(a)(1) of th e ECOA, the
B oard p ro p o ses to am en d R egulation B
to p erm it credito rs to u se electronic
c o m m u n ic atio n w h ere th e regulation
calls for in fo rm atio n to be p ro v id e d in
w riting. T he term “ electronic
co m m u n ic a tio n ” is lim ite d to a
c o m m u n ic atio n th a t can be d isp lay e d as
v isu a l text. A n exam ple is a n electronic
v isu a l tex t m essage th a t is d isp lay e d on
a screen (such as th e c o n s u m e r’s
co m p u ter m onitor). C o m m un icatio ns by
te le p h o n e v oicem ail system s do n o t
m eet th e d efin itio n of “ electronic
c o m m u n ic a tio n ” for p u rp o ses o f this
reg u latio n b ecau se th e y do n o t h av e the
feature g enerally associated w ith a
w riting—v isu al text.
Section 202.5 R ules Concerning Taking
o f A pplications
A n ew sub sectio n (f) w o u ld be ad d e d
to § 202.5 to ad d ress electronic
com m u n icatio n . “E lectronic
c o m m u n ic a tio n ” is a v isu a l text
m essage electro n ically tran sm itted
b etw een a cred itor a n d a n a p p lic a n t’s
h o m e co m p u ter or other electronic
d evice u se d by an ap p lican t. (U nder th e
ECOA an d R egulation B, th e term
“ a p p lic a n t” in c lu d e s an y p e rso n w ho
req u ests or w h o has received an d
ex ten sio n of cre d it from a creditor, an d
an y p erso n w h o is or m ay becom e
co n tractu ally liable regarding an
ex ten sio n of credit. In th is notice, the
te rm is u se d in th is context.)
A g ree m en ts B etw een F in a ncia l
In stitu tio n s a n d C onsum ers
S ection 202.5(f) w o u ld p e rm it
creditors to se n d electronic disclosures
if th e co n su m er agrees. T h ere m ay be
various w ays th a t a cre d ito r an d an
a p p lic a n t agree to th e electronic
delivery o f d isclosures a n d oth er
inform ation. W h e th e r su c h an
agreem ent exists b etw e en th e parties
w o u ld be d eterm in e d by ap p licab le state
law. T he reg u latio n w o u ld n o t p rec lu d e
a cre d ito r a n d a n a p p lic a n t from
entering in to a n agreem ent
electronically, n o r does it p rescrib e a
form al m e ch a n ism for doing so. The
B oard does believe, h ow ever, th at
co n su m ers sh o u ld be clearly in form ed
w h e n th e y are co n sen tin g to th e
d eliv ery of ECOA a n d R egulation B
d isclosures a n d o th er inform atio n
electronically.

14553

D elivery R eq u irem en ts fo r E lectronic
C om m un ica tio n
R egulation B requires th a t a cred itor
“p ro v id e ,” “ give,” “ d e liv er,” or “m a il”
in fo rm atio n to an ap p lica n t, or “n o tify ”
a n a p p lic a n t o f ce rtain inform ation.
G enerally, th e d elivery req u irem en t
an ticip ates th a t a cre d ito r w ill d eliver
th e in fo rm atio n —ty p ically by m ail—to
a n ad d ress d esig n ated by th e app lican t.
For a p ap e r co m m u n ic atio n , a credito r
w o u ld n o t satisfy th a t re q u ire m e n t by
m aking d isclosures “ av ailab le” to
ap p lica n ts, for exam ple, at a c re d ito r’s
office or o th er location. T he Board
believes th a t con su m ers receiving
d isclosures by electronic
co m m u n ic atio n sh o u ld have p ro tections
regarding d eliv ery sim ila r to th ose
afforded co n su m ers receiving
d isclosures in p ap e r form. S im p ly
p o stin g in fo rm atio n to a n In tern et site,
how ever, w ith o u t som e ap p ro p riate
n otice an d in stru c tio n s ab out h o w th e
a p p lic a n t m ay obtain th e req u ired
in fo rm atio n w o u ld n o t satisfy the
requirem en t.
As a p ractical m atter, th e re m ay be
little d istin c tio n b etw e en sen d in g or
deliv erin g electronic d isclosures a n d
m aking th e m “ available.” C reditors
w o u ld h av e flexibility in h o w th e y m ay
d eliv er electron ic d isclosu res to
ap p lican ts, in c lu d in g , b u t n o t lim ite d to
th e follow ing exam ples. T hey m ay sen d
disclosures to a co nsu m er-d esignated
electronic m ail ad d ress or th e y m ay
designate a lo catio n o n a w eb site w h ere
th e a p p lic a n t enters a p erso n al
id e n tific atio n n u m b e r or o th er id en tifier
to access re q u ire d inform ation. A ssum e
th a t an ap p lic a n t ap p lies for a cred it
p la n a n d agrees to receiv e all ECOA an d
R egulation B d isclo sures electronically.
S u b seq u en t d isclo sures, su c h as adverse
action notices, se n t (or delivered) to the
desig n ated ad d ress or p la ce d at a
desig nated lo catio n w o u ld generally
satisfy th e delivery req u irem en ts of th e
regulation.
E lectronic co m m u n ic atio n w o u ld
rem a in subject to any tim ing or other
app lica b le req u irem en ts u n d e r
R egulation B. For exam ple, n o tice of
action req u ired by § 202.9(a)(1) of
R egulation B m u st still be p ro v id ed
w ith in th irty days after receiving a
co m p leted ap p licatio n . T he Board
solicits co m m en t on w h e th e r further
g u id an ce is n e e d e d o n h o w to com ply
w ith th e tim in g req u irem en ts w h e n a
n otice is p o ste d o n a n In tern et w ebsite.
R eq u irem en t T h a t In fo rm a tio n be “Clear
a n d C o n sp icu o u s”
C urrently, R egulation B does n o t
expressly req u ire credito rs to p rese n t
req u ired in fo rm atio n in a clear a n d

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Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Proposed Rules

co n sp icu o u s form at. O n th e other h an d ,
R egulations CC (A vailability of F unds),
DD (T ruth in Savings), E (Electronic
F u n d T ransfers), M (C onsum er Leasing),
a n d Z (T ruth in Lending) all req u ire th a t
in fo rm atio n be p ro v id e d in a clear an d
co n sp icu o u s (or rea d ily u nd erstan d ab le)
form at. A ccordingly, the B oard believes
it m ay be d esirab le to a p p ly th is sam e
sta n d a rd to in fo rm atio n p ro v id e d by
electron ic co m m u n ic atio n u n d e r
R egulation B to en su re th a t info rm ation
is u n d ersta n d ab le. T he B oard requests
co m m en t on w h e th e r R egulation B
sh o u ld be a m e n d e d to a p p ly this
req u irem en t to d isclosures p ro v id ed
electronically.
A p p lic a n t’s A b ility to R etain D isclosures
C urrently, o nly th e n o tice in
§ 202.9(a)(3)(i)(B) of R egulation B n eed
be p ro v id e d in a form th e a p p lic a n t m ay
retain. A s in th e case of th e clear a n d
co n sp icu o u s re q u ire m e n t d isc u sse d
above, R egulations CC (A vailability of
F u nds), DD (T ruth in Savings), E
(Electronic F u n d T ransfers), M
(C onsum er Leasing), an d Z (T ruth in
Lending) all req u ire th a t in fo rm atio n be
p ro v id e d in a form th a t th e co n su m er
m ay keep. B ecause th e rete n tio n
re q u ire m e n t for w ritte n d isclo su res
(in clu d in g electron ic com m un icatio n)
exists for those reg ulation s, it seem s
ap p ro p riate to a p p ly a com parable
sta n d a rd to R egulation B. T he B oard
requests co m m en t o n w h e th e r th is
re te n tio n req u irem en t sh o u ld be
e x ten d e d to electro n ic co m m u n ic atio n
u n d e r R egulation B.
C reditors w o u ld satisfy th e rete n tio n
req u irem en t if, for exam ple, d isclo sures
ca n be p rin te d or d o w n lo a d e d b y th e
ap p lica n t. T h us, creditors w o u ld n o t be
re q u ire d to m o n ito r an in d iv id u a l
ap p lic a n t’s ability to reta in the
in form ation , n o r to take steps to find out
w h e th e r th e a p p lic a n t has in fact
reta in e d it. T h e B oard an ticip ate s that,
w h ere ap p ro p riate, a cre d ito r w o u ld
in fo rm th e a p p lic a n t of sp ecial tech n ic al
specification s for receivin g or retain in g
in fo rm atio n before or at th e tim e an
a p p lic a n t agrees to receive in fo rm atio n
electronically.
H ow ever, in circu m stan ces w h ere th e
cre d ito r (or a n etw o rk in w h ic h the
cre d ito r is a m em ber) controls the
e q u ip m e n t to be u se d for th e service—
su c h as te rm in als in in stitu tio n lobbies
or k iosks in p u b lic or o th er p laces— the
cre d ito r w o u ld hav e th e resp o n sib ility
of en su rin g retainability . P ro v id e d that
th e delivery req u irem en ts (d iscussed
above) are satisfied, m e th o d s for
fulfilling th is re q u ire m e n t c o u ld
in c lu d e, for exam ple, p rin te rs
in c o rp o rated into te rm in als or a screen
m essage offering to tra n sm it th e

d isclo su re to th e a p p lic a n t’s electronic
m ail or p o st office address.
C o n su m er R eq u ests fo r In fo rm a tio n
U n d e r R egulation B, a p p lica n ts are
en titled to receive certain info rm atio n
u p o n w ritte n request. For exam ple,
§ 202.5a requires a cred itor to p ro v id e—
eith er au to m atically or u p o n th e
a p p lic a n t’s w ritte n req uest— a cop y of
th e ap p ra isal rep o rt u se d in co n n ectio n
w ith a n ap p lic a tio n for a loan secu red
b y a lien on a dw elling. W here the
cre d ito r p ro v id es ap p ra isal rep o rts only
u p o n request, th e cre d ito r m u st notify
th e a p p lic a n t of th e rig ht to req u e st an
ap p ra isal a n d w h e th e r th e a p p lic a n t’s
req u e st m u st be in w riting. S ection
202.9(a)(3)(ii) allow s a cred itor to
disclose o rally a b u sin e ss a p p lic a n t’s
rig h t to a statem en t of specific reasons
for adverse action; ho w ever, th e cred itor
m u st p ro v id e th e reasons in w riting
w ith in a sp ecified tim e p erio d after
receiving th e a p p lic a n t’s w ritte n req uest
for th e reasons. T he p ro p o sed ru le
w o u ld p erm it all co n su m er requests
req u ired to be in w ritin g to b e sen t
electronically.
C urrent N e e d fo r Safeguards C oncerning
th e E lectronic D elivery o f D isclosures
T oday, m o st co n su m ers receive
federal d isclo su res in p ap e r form. As
electro nic com m erce an d electronic
ban kin g in crease an d technological
advances take p lace, obtaining
d isclosures by electronic
c o m m u n ic a tio n w ill likely becom e m ore
com m onplace. C urrently, how ev er, the
use of electron ic c o m m u n ic atio n in the
delivery of financial services is still
evolving. T h us, it is difficult to fully
p re d ic t th e ex ten t to w h ic h a d d itio n a l
safeguards, if any, m ay be n e e d e d to
e n su re th a t co n su m ers receive th e sam e
p ro tectio n s th a t exist for d isclosu res in
p a p e r form. T he B oard expects th at
creditors subject to R egulation B w ill
p ro v id e sufficien t d etails a b o u t th e
delivery of disclosures. T he B oard p lan s
to closely m o n ito r th e d ev e lo p m e n t of
electronic delivery of d isclosures an d
o th e r inform atio n, a n d w ill address
co m p lian ce or o th er issues th a t m ay
arise as app ropriate.
III. Form o f Comment Letters
C om m ent letters sh o u ld refer to
D ocket No. R -1 006 an d , w h e n possible,
sh o u ld u se a sta n d ard typeface w ith a
ty p e size of 10 or 12 characters p e r inch.
T his w ill enable th e B oard to convert
th e text to m a ch in e-read ab le form
th ro u g h electron ic scann in g, an d w ill
facilitate a u to m ated retrieval of
com m ents for review . A lso, if
a c co m p an ie d b y an original d o cu m en t
in p ap e r form , com m ents m ay be

su b m itte d on 3Vz in c h or 5Vi in c h
co m p u ter d iskettes in an y IBMcom patible D O S-based format.
IV. Regulatory Flexibility A nalysis
In acco rdance w ith sectio n 3(a) of the
Regulatory F lexibility Act, th e B oard ’s
Office of th e Secretary h as rev iew ed the
p ro p o sed am en d m e n ts to R egulation B.
O verall, th e p ro p o se d am en d m e n ts are
n o t ex p ected to h ave an y significant
im p act o n sm all en tities. T he p ro p o sed
ru le w o u ld relieve co m p lian ce b u rd en
b y giving cred itors flexibility in
p ro v id in g disclosures. A final regulatory
flexibility analy sis w ill be c o n d u c te d
after c o n sid eratio n of co m m en ts
receiv ed d u rin g th e p u b lic com m ent
period.
V. Paperw ork R eduction Act
In accordance w ith sectio n 3506 of
th e P ap erw o rk R ed u ctio n A ct of 1995
(44 U.S.C. Ch. 35; 5 CFR p art 1320
A p p e n d ix A .l), th e B oard rev ie w ed th e
p ro p o se d rev isions u n d e r th e au th o rity
delegated to th e B oard b y th e Office of
M anag em ent a n d Budget.
T he F ederal Reserve h as no d ata w ith
w h ic h to estim ate th e b u rd e n the
p ro p o se d rev ise d req u irem en ts w o u ld
im p o se on state m em b er banks.
C reditors w o u ld be able to use
electronic co m m u n ic atio n to provide
disclosures a n d oth er info rm ation
re q u ire d b y th is reg ulatio n rath e r th a n
having to p rin t a n d m ail th e in form ation
in p ap e r form. T h e u se of electronic
co m m u n ic atio n in h o m e b an k in g a n d
fin an cial services m ay red u c e th e
pap e rw o rk b u rd e n on cred itors an d
financial in stitu tio n s or m erely m ay
red u c e th e d o llar cost.
T he F ed eral Reserve req uests
com m en ts from creditors, especially
state m em b er banks, th a t w ill h elp to
estim ate th e n u m b e r a n d b u rd e n of the
various d isclo su res th a t w o u ld be m ade
in th e first year th is ru le is effective.
C om m ents are in v ite d on: (a) W hether
th e p ro p o se d rev ise d co llectio n of
in fo rm atio n is n ecessary for th e p ro p er
perfo rm an ce of th e F ederal R eserve’s
fu nctions; in c lu d in g w h e th e r the
in fo rm atio n h a s p ractical utility; (b) the
accu racy of th e F ederal R eserve’s
estim ate of th e b u rd e n of th e p ro p o sed
revised in fo rm atio n collection,
in c lu d in g th e cost of com pliance; (c)
w ays to en h a n c e th e quality, u tility , a n d
clarity of th e in fo rm atio n to be
collected; a n d (d) w ays to m in im iz e th e
b u rd e n of in fo rm atio n co llection on
resp o n d e n ts, in c lu d in g th ro u g h th e use
of au to m ated collectio n te ch n iq u e s or
o th er form s of in fo rm atio n technology.
C om m ents o n th e collectio n of
in fo rm atio n sh o u ld be se n t to th e Office
of M an ag em ent an d Budget, P aperw ork

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Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Proposed Rules
R ed u ctio n Project (7100-0201),
W ash ing to n, DC 20503, w ith copies of
su c h com m en ts to be sent to M ary M.
M cL aughlin, Chief, F in an c ial R eports
S ection, D ivision of R esearch a n d
Statistics, M ail Stop 97, B oard of
G overnors of th e F ederal Reserve
System , W ashington, DC 20551.
T he co llectio n of in fo rm atio n
req u irem en ts in th is p ro p o sed
reg u la tio n are fo u n d in 12 CFR 202.5,
202.9, 202.12, 202.13, a n d A p p en d ic es
B a n d C. T his in fo rm atio n is m a n d ato ry
(15 U.S.C. 1691b(a)(l) a n d P u b lic Law
10 4-2 08, § 2302(a)) to e n su re th a t credit
is m a d e available to all cre d itw o rth y
custo m ers w ith o u t d isc rim in a tio n on

th e b asis of race, color, religion, n atio n al
origin, sex, m arital status, age (provided
th e ap p lic a n t has th e cap acity to
contract), re c e ip t of p u b lic assistance, or
th e fact th a t th e a p p lic a n t has in good
faith ex ercised an y rig ht u n d e r the
C onsu m er C redit P ro tectio n A ct (15
U.S.C. 1600 et. seq.). T he re sp o n d e n ts/
reco rd k eep ers are for-profit financial
in stitu tio n s, in c lu d in g sm all businesses.
C reditors are req u ired to reta in records
for tw elve to tw enty-five m o n th s as
evidence of com pliance.
T he B oard also p rop oses to e x ten d the
R ecordkeeping a n d D isclosure
R eq uirem en ts in C o n n ectio n w ith
R egulation B (OMB No. 7100-0201) for
Number of
respondents

Notification ..........................................................................................................................
Credit history reporting .....................................................................................................
Monitoring ...........................................................................................................................
Appraisal:
Appraisal report upon re q u e st.................................................................................
Notice of right to appraisal .......................................................................................
Self-testing:
Recordkeeping of test ..............................................................................................
Recordkeeping of corrective a c tio n .........................................................................

th ree years. T he c u rren t estim a te d total
a n n u a l b u rd e n for th is inform ation
co llectio n is 125,177 ho urs, as sh o w n in
th e table below . T h ese am o u n ts reflect
th e b u rd e n estim ate of th e F ederal
R eserve S ystem for th e 996 state
m em b er ban k s u n d e r its supervision.
T his reg u latio n ap p lies to all ty pes of
creditors, n o t ju st state m em ber banks.
H ow ever, u n d e r P ap erw o rk R eduction
A ct regulations, the F ed eral Reserve
accoun ts for th e b u rd e n o f the
p ap e rw o rk asso ciated w ith the
regulation o nly for state m em b er banks.
O ther agencies ac co u n t for th e
p ap e rw o rk b u rd e n for th e in stitu tio n s
th e y supervise.
Estimated
annual fre­
quency

Estimated re­
sponse time

Estimated
annual bur­
den hours

996
996
996

1,715
850
360

2.50 minutes
2.00 minutes
.50 minute

71,173
28,220
2,988

996
996

190
1,650

5.00 minutes
.25 minute

15,770
6,848

125,177

Total .................................................................................................

Since th e F ederal Reserve does n o t
collect any inform ation, no issu e of
con fid en tiality n o rm ally arises.
H ow ever, th e in fo rm atio n m ay be
pro tected from d isclo su re u n d e r the
ex em p tio n s (b)(4), (6), a n d (8) of the
F reedom of Inform ation A ct (5 U.S.C.
522 (b)). T he adverse action disclosure
is co n fid en tial b etw een th e in stitu tio n
an d th e co n su m er involved.
A n agency m ay n o t c o n d u c t or
sponsor, an d an organization is n o t
req u ired to resp o n d to, an inform ation
collection u n less it d isplays a cu rren tly
valid OMB control num ber. T he OMB
co n tro l n u m b e r for th e R ecordkeeping
an d D isclosure R equirem ents in
C onnection w ith R egulation B is 7100­
0201.
List o f Subjects in 12 CFR Part 202
Aged, Banks, banking, Civil rights,
Credit, F ederal Reserve System , M arital
status d iscrim in atio n , P enalties,
Religious discrim in atio n , R eporting an d
reco rd k eep in g req u irem en ts, Sex
d iscrim ination.
Text o f Proposed R evisions
Certain co n v en tio n s have b een u sed
to hig h lig h t th e p ro p o sed changes to
R egulation B. N ew language is sh o w n
in sid e bold-faced arrows.

For th e reasons set forth in the
pream ble, th e Board p roposes to am en d
12 CFR p art 202 as set forth below:
PART 202— EQUAL CREDIT
OPPORTUNITY (REGULATION B)
1. T he au th o rity citatio n for p art 202
co n tin u es to read as follows:
Authority: 15 U.S.C. 1691-1691f.

2. S ection 202.5 w o u ld b e am en d ed
by ad d in g a n ew p arag rap h (f) to read
as follows:
§ 2 02.5 Rules concerning taking of
applications.

*

*

*

*

*

► ( f ) E lectronic co m m u n ica tio n
m eans a m essage tran sm itted
electronically b etw e en an a p p lica n t an d
a creditor in a form at th a t allow s v isu al
text to be d isp lay ed on e q u ip m en t su ch
as a perso n al co m p u ter m onitor. A
creditor a n d an ap p lica n t m ay agree to
se n d by electronic co m m u n icatio n an y
in fo rm atio n req u ired b y §§ 202.5a,
202.9, or 202.13(b), in acco rd an ce w ith
ap p licab le tim ing requirem ents.
D isclosures p ro v id ed by electronic
co m m u n icatio n shall be clear an d
co n sp icu o u s an d in a form th a t the
ap p lica n t m ay k eep .* ^

90
88

1 2 hours
1 8 hours

45
11

By o rd er of th e B oard o f G overnors of the
F ederal Reserve System , M arch 1 2 ,1 9 9 8 .
W illiam W. W iles,
S ecreta ry o f th e Board.
[FR Doc. 9 8 -6 9 9 2 F iled 3 -2 4 -9 8 ; 8:45 am]
BILLING CODE 6 210 -01 -P

FEDERAL RESERVE SYSTEM
12 CFR Part 205
[Regulation E; Docket No. R -1007]

Electronic Fund Transfers
Board o f G overnors of the
F ederal Reserve System .
ACTION: P ro p o sed rule; tech n ical
am en d m en ts.

AGENCY:

T he Board is p u b lish in g for
co m m en t a p ro p o sed ru le to elim in ate
th e ex ten d ed tim e p erio d s in R egulation
E for investigating claim s involving
point-of-sale (POS) d ebit card and
foreign-initiated transactions.
R egulation E im p lem en ts th e E lectronic
F u n d T ransfer Act. F in an cial
in stitu tio n s generally h av e u p to 10
b u sin ess days to p ro v isio n ally credit an
acco u n t a n d u p to 45 calen d ar days to
com plete an investigation of an alleged
error. For POS an d foreign transactions,
financial in stitu tio n s h av e u p to 20
b u sin ess days u n d e r th e reg u latio n to
SUMMARY:

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Federal Register/Vol. 63, No. 5 7 / Wednesday, March 25, 1998/Proposed Rules

p ro v isio n a lly cre d it an ac c o u n t an d u p
to 90 cale n d ar days to co m plete th e
in vestigation of a n alleged error. T he
Board believes th a t techn olo gical
im p ro v e m en ts in p ay m en t system s
sh o u ld p e rm it co n su m er claim s of error
to be investigated m o re qu ick ly th a n in
th e past, an d p ro p o ses to am e n d the
reg u latio n accordingly. T he p ro p o sed
ru le also co n tain s a tech n ical
a m e n d m e n t to a m o d el form to
h arm o n ize it w ith th e regulation.
DATES: C om m ents m u st b e receiv ed on
o r before M ay 15 ,1 9 9 8 .
ADDRESSES: C om m ents sh o u ld refer to
D ocket No. R -1007, an d m ay be m ailed
to W illiam W. W iles, Secretary, B oard of
G overnors of th e F ederal Reserve
System , 20th Street an d C o n stitu tio n
A v en ue, N.W ., W ashing ton , DC 20551.
C om m ents also m ay be d eliv ere d to
Room B -22 22 of th e Eccles B uilding
b etw e en 8:45 a.m. a n d 5:15 p.m .
w eekdays, or to th e g u ard statio n in th e
Eccles B uildin g C ou rty ard o n 20th
Street, N.W. (betw een C o n stitu tio n
A v en u e an d C Street) at an y tim e.
E xcept as p ro v id e d in th e B o a rd ’s Rules
R egarding A vailability of Inform ation
(12 CFR 261.12), com m ents w ill be
available for in sp e c tio n an d copying by
m em bers of th e p u b lic in th e F reedom
of Inform ation Office, Room M P -5 0 0 of
th e M artin B uilding, b e tw e en 9:00 a.m.
a n d 5:00 p.m . w eekdays.

ac co u n t statem ents; lim itatio ns on
c o n su m er liab ility for u n a u th o riz e d
transfers; p ro ce d u re s for error
resolu tion; a n d certain rights related to
p rea u th o riz e d EFTs.
II. Proposed Regulatory R evisions
Error R eso lu tio n — P O S T ran sa ction s

T he EFTA req u ires a financial
in stitu tio n to investigate a n d resolve a
co n su m e r’s claim of error—for an
u n a u th o riz e d EFT, for exam ple— w ith in
sp ecified tim e lim its. W ith in 10
b u sin e ss days after receiving n o tice of
a n alleged error a n in stitu tio n m u st
eith er resolve th e claim or p ro v isio n ally
cred it th e c o n s u m e r’s ac co u n t w h ile
co n tin u in g to investigate. In th e latter
case, th e in stitu tio n m u st resolve the
claim no later th a n 45 c a le n d ar days
after receiv in g notice.
For POS a n d foreign transactio ns,
R egulation E p ro v id es longer tim e
periods; it allow s 20 b u sin e ss days to
resolve a claim of an error (or to
p ro v isio n a lly cre d it an ac c o u n t if the
in v estig atio n takes longer), a n d 90
ca le n d ar days to com plete the
investigation. T he ru le allow s issuers to
avoid h av ing to p ro v isio n a lly cre d it an
ac co u n t before th e inv estig atio n is
com plete. T he longer p erio d s w ere
ad o p ted b y th e B oard in 1982 for foreign
tran saction s; an d w ere a d o p te d in 1984
for POS tran sactio n s, along w ith
am en d m e n ts to R egulation E to cover
FOR FURTHER INFORMATION CONTACT:
pap er-b ased debit card transactio ns.
O brea O. P oind ex ter, Staff A ttorney, or
John C. W ood, S enior A ttorn ey, D ivision Initially, th e B oard p ro p o sed to have the
long er tim e p erio d s for resolving claim s
of C onsum er a n d C o m m u n ity Affairs,
of error a p p ly o nly to p ap er-b ased d eb it
B oard o f G overnors o f th e F ederal
card tran sactio n s (at m e rc h a n t locations)
Reserve System , at (202) 4 5 2 -2 4 1 2 or
th a t d id n o t inv olv e electronic
(202) 45 2-3 667 . For u sers of
T elec o m m u n ic atio n s D evice for th e Deaf term inals. A fter p u b lic com m ent, the
B oard a d o p ted a final ru le th a t ap p lie d
(TDD) only, co n tac t D iane Jenkins at
th e ex te n d e d tim e fram es to all POS
(202) 4 52-3544.
tran saction s. T h e a d o p tio n of a uniform
SUPPLEMENTARY INFORMATION:
ru le av o id ed th e co m p lex ity of having
I. Background
th e tim ing ru les d e p e n d o n h o w th e
T he E lectro nic F u n d T ransfer A ct
p a rtic u la r EFT w as in itia ted , w h ic h
(EFTA), 15 U.S.C. 1693 e t seq., en acted
w o u ld have b e e n confusing to
in 1978, p ro v id es a basic fram ew ork
co n su m ers a n d b u rd e n so m e to
establishing th e rights, liabilities, a n d
in stitu tio n s. M oreover, at th a t tim e only
resp o n sib ilities of p articip a n ts in
a sm all p o rtio n of th e POS d ebit card
electronic fu n d transfer (EFT) system s.
tran sa ctio n s in v olved electronic
T he B o ard’s R egulation E (12 CFR P art
term inals.
T he u se of electronic te rm in als for all
205) im p lem en ts th e act. T ypes of
transfers covered by th e act an d
ty p es of POS debit card tran sa ctio n s is
reg u latio n in c lu d e transfers in itia ted
n o w com m onplace. D ebit card
th ro u g h an au to m ated teller m ach in e
tran sa ctio n s u sin g person al
id e n tific atio n n u m b e rs (PINs) at grocery
(ATM), point-of-sale (POS) term inal,
stores a n d o th er m e rc h a n t locations
au to m ated clearinghouse, te le p h o n e
(referred to as P IN -protected) h av e b een
bill-p a y m e n t system , or h o m e b an kin g
program . T h e ru les p rescrib e restrictio ns th e m o st co m m o n ty p e of debit card
on th e u n so lic ite d issu an ce of ATM
tran sa ctio n in th e U n ited States. In the
p a st few years, how ever, there has been
cards a n d o th er access devices;
d isclo su re of term s a n d co n d itio n s of an an in crease in th e use at POS term inals
EFT service; d o c u m en ta tio n of EFTs by
of d ebit card s th a t can be u se d w ith o u t
a PIN (com m only referred to as check
m ean s of te rm in a l receipts a n d perio d ic

cards). B esides m aking th e m available
u p o n request, m a n y in stitu tio n s have
au to m atically re p la ce d th e ir cu sto m e rs’
existing P IN -protected cards w ith cards
th a t can be u se d w ith a PIN or w ith o u t
a PIN d ep e n d in g on w h ere the
tran sa ctio n takes place.
T his d ev e lo p m e n t h as raise d concerns
about th e p o te n tia lly greater co n su m er
ex p o su re to losses in th e absence of PIN
protectio n. O n S eptem ber 24, 1997, th e
S ub co m m ittee on F in an cial In stitution s
a n d C on su m er C redit of th e H ouse
C om m ittee o n B anking a n d F in an c ial
Services h e ld a hearin g o n tw o b ills to
am en d th e EFTA in c o n n e ctio n w ith the
u se of ch eck cards. T he bills w o u ld
lim it c o n su m er liability for ch eck cards,
restric t u n so lic ite d issu an ce of th e cards
in su b stitu tio n for P IN -protected cards,
a d d disclosures, a n d req u ire in stitu tio n s
to p ro v isio n ally recred it acco unts
sooner w h ile investigating claim s of
u n a u th o riz e d u se or o th e r errors.
W ith regard to th e investigation of
claim s of error, legislation w as
in tro d u c e d th a t w o u ld require
in stitu tio n s to re c re d it a c o n su m e r’s
ac co u n t w ith in th ree b u sin e ss days of
no tice of th e claim of error. A n in d u stry
rep rese n ta tiv e of a card association
testified th a t sta n d ard s w ere v o lu n tarily
being a d o p te d to req u ire m em ber
in stitu tio n s to p ro v isio n ally credit
accou nts involving th e u se of a check
card w ith in five b u sin e ss days.
T he B oard believes th a t tech n ic al
im p ro v em en ts in th e p ay m en t system
sh o u ld p e rm it co n su m er claim s
invo lving POS tran sa ctio n s to be
inv estigated m ore qu ick ly for
tran sa ctio n s at POS; th e sam e m ay be
tru e for foreign tran sa ctio n s as w ell.
T estim o n y at th e S eptem b er 1997
congressional hearing su p p o rts th at
conclusio n. T he B oard believes that,
esp ecially in th e co n tex t of accou nts
th a t can be accessed w ith o u t PIN
p ro tec tio n (p oten tially increasing
co n su m er ex p o su re to losses), th e
im p o rta n ce of m o re p ro m p t recrediting
of c o n su m e rs’ fu n d s p en d in g
investigatio n m ay o u tw eig h the
co m p lian ce b u rd en , if any, associated
w ith th is change. T herefore, th e Board
propo ses to elim in ate th e ex ten d e d tim e
perio d s for POS a n d foreign
tran sactio n s. T he B oard solicits specific
co m m en t o n w h e th e r rem ov al of th e
special ru le w o u ld im p o se an u n d u e
b u rden.
Error R eso lu tio n — N e w A c c o u n ts
In th e course of th e B o ard’s rev iew of
R egulation E, fin an cial in stitu tio n s
suggested a change in th e error
reso lu tio n req u irem en ts w h e n a n ew
ac co u n t is involved. T he p roblem arises
w h e n in d iv id u a ls o p en an ac co u n t w ith

Federal Register/Vol. 63, No. 5 7 /Wednesday, March 25, 1998/Proposed Rules
th e in te n t to defraud. S u ch in d iv id u a ls
m ay o p en an account, im m ed iate ly
w ith d ra w all or a large p o rtio n of the
fu n d s th ro u g h ARMS, a n d file a claim
w ith th e fin an cial in stitu tio n d isp u tin g
th e ATM transactio ns. O ften th e y
receive p ro v isio n a l cre d it b ecause of th e
fin an cial in s titu tio n ’s ina b ility to
research th e claim (such as by obtaining
p h o to g rap h ic evid en ce from a
n o n p ro p rie ta ry ATM) w ith in te n
b u sin e ss days of a claim . A t th a t point,
th e in d iv id u a l im m ed iately w ith d raw s
th e fun ds th a t w ere p ro v isio n a lly
cre d ite d a n d aban d o n s th e account.
In stitu tio n s b eliev e d th a t h avin g m ore
tim e to investigate errors in volving n e w
accoun ts w o u ld enable th e m to lim it
th e ir losses a n d co n tro l th is ty p e of
fraud.
T he B oard p ro p o se d in M ay 1996 to
am e n d R egulation E, p u rs u a n t to its
sectio n 904(c) au th o rity to p ro v id e for
ad ju stm e n ts a n d ex ception s in the
regu lation , to ex ten d th e errorreso lu tio n tim e p erio d s for n ew
accounts. T he p ro p o sal w o u ld have
allo w ed 20 b u sin e ss days for resolving
a n error before an in stitu tio n is req u ired
to p ro v isio n a lly credit, a n d a n o utside
lim it of 90 cale n d ar days for resolving
th e claim . T he B oard so licited co m m en t
o n th e exten sion s of tim e, on th e 30-day
defin itio n for n e w acco unts, a n d on
w h e th e r c o n su m er p ro tec tio n s relating
to error reso lu tio n w o u ld be adversely
affected.
C om m ents o n th e p ro p o sed ru le, from
fin an cial in stitu tio n s an d trad e
associations, w ere generally favorable.
H ow ever, in light o f th e p ro p o se d ru le
to red u c e th e tim e for reso lv ing errors
involving POS a n d foreign tran saction s,
th e Board is deferring final ac tio n u n til
ac tio n is taken o n th e POS a n d foreign
tran sa ctio n proposal.
T ech n ica l A m e n d m e n t to Error
R eso lu tio n N o tice
R egulation E req uires fin ancial
in stitu tio n s to investigate a n d resolve
errors alleged by con su m ers, eith er
w ith in 10 b u sin e ss days after receiving
th e c o n su m e r’s n o tice of error or w ith in
45 ca le n d ar days after receiving the
notice, p ro v id ed th e in stitu tio n
p ro v isio n ally cred its th e c o n su m e r’s
ac co u n t w ith in 10 b u sin e ss days. U p on
co m p letio n of th e investigation, the
in stitu tio n m u st n otify th e co n su m er of
its findings. P rio r to th e 1996 revision
of R egulation E, th e in stitu tio n h a d an
a d d itio n a l th ree days to n otify the
co n su m er o n ly if th e in stitu tio n fo u n d
th a t an error d id n o t occur a n d w as
op erating u n d e r th e 45-day rule. If th e
in stitu tio n fo u n d th a t a n error d id
occur, th e in stitu tio n w as req u ired to
no tify th e co n su m er no later th a n the

te n th b u sin e ss day or th e 4 5 th calen d ar
day, as applicable.
In th e 1996 revision, th e Board
a m e n d e d th e error reso lu tio n
p ro ce d u re s (§ 205.11) to allow
in stitu tio n s th e th ree a d d itio n a l days to
no tify th e co n su m er in all cases.
H ow ever, th e m o d el error reso lu tio n
n o tice (A pp end ix A, p arag rap h A -3)
w as n o t rev ise d at th a t tim e to conform
to th e am e n d m e n t to § 205.11. T he text
of th e m o d e l n o tice is being a m e n d e d to
conform it to § 205.11 as am ended.
III. Form o f Comment Letters
C om m ent letters sh o u ld refer to
D ocket No. R -1007. T he B oard requests
th a t, w h e n possible, co m m en ts be
p re p a re d u sin g a sta n d a rd typeface w ith
a ty p e size of 10 or 12 characters p er
inch. T his w ill en ab le th e B oard to
co n v ert th e tex t into m ach in e-read ab le
form th ro u g h electro nic scanning, an d
w ill facilitate a u to m ated retriev al of
com m ents for review . C om m ents m ay
also be su b m itte d on co m p u ter
diskettes, u sin g eith er th e 3.5" or 5.25"
size, in an y D O S -com patible format.
C om m ents on co m p u ter d isk ettes m u st
be acco m p an ie d by a p a p e r version.
IV. Regulatory Flexibility A nalysis
In acco rdance w ith sectio n 3(a) of the
Regulatory F lexibility A ct, th e B oard’s
office o f th e S ecretary h as rev ie w ed th e
p ro p o sed am en d m e n ts to R egulation E.
T he B oard believes th a t th e p ro p o sal to
sh o rten th e tim e p e rio d for investigating
errors alleged in point-of-sale d eb it card
tran sa ctio n s w ill p ro v id e in creased
co n su m er p ro tec tio n w ith o u t any
increase in regulatory b u rd en . The
c u rre n t ex c ep tio n to th e statutory
req u irem en t of 10 b u sin e ss days for
su c h inv estig atio ns w as im p le m e n te d at
a tim e w h e n p ap er-b ased tran sactio n s
w ere m ore com m on. T h e B oard believes
th a t su c h tran sa ctio n s are u n co m m o n
today, b e y o n d th e in itia l d ep o sit of
tran sa ctio n in fo rm atio n w h e n
d ep o sito ry in stitu tio n s a n d th ird -p arty
processo rs co n v ert an y paper-b ased
in fo rm atio n to electronic form. The
B oard specifically solicits co m m en t on
extent of any difficulty th a t th is change
m ig h t w arrant.
V. Paperw ork R eduction Act
In accord an ce w ith sectio n 3506 of
th e P ap erw o rk R ed u ctio n A ct of 1995
(44 U.S.C. Ch. 35; 5 CFR p art 1320
A p p e n d ix A .l), th e B oard rev ie w ed th e
in terim ru le u n d e r th e au th o rity
deleg ated to th e B oard by th e Office of
M anagem ent a n d Budget.
T he F ed eral Reserve h as n o d ata w ith
w h ic h to estim ate th e b u rd e n th e
p ro p o sed rev ise d req u irem en ts w o u ld
im p ose on state m em ber banks. Issuers

14557

w o u ld be able to u se electronic
co m m u n ic atio n to p ro v id e disclosures
a n d o th er in fo rm atio n req u ired by th is
reg u latio n rath e r th a n hav in g to p rin t
a n d m a il th e in fo rm atio n in p a p e r form.
T he u se of electron ic co m m u n ic atio n
m ay red u c e th e p ap e rw o rk b u rd e n of
fin an cial in stitu tio n s or m erely m ay
red u c e th e d o llar cost.
T he F ed eral Reserve req uests
com m en ts from issuers, esp ecially state
m em b er banks, th a t w ill h elp to
estim ate th e n u m b e r a n d b u rd e n of th e
v arious d isclo sures th a t w o u ld be m ad e
in th e first year th is in te rim reg ulation
is effective. C om m ents are in v ite d on:
(a) W h eth er th e p ro p o sed revised
collectio n of in fo rm atio n is necessary
for th e p ro p er p erfo rm ance of th e
F ederal R eserve’s function s; in c lu d in g
w h e th e r th e in fo rm atio n has practical
u tility; (b) th e accuracy of th e F ed eral
R eserve’s estim ate of th e b u rd e n of th e
p ro p o sed rev ise d inform atio n
collection, in c lu d in g th e cost of
com pliance; (c) w ays to en h a n ce th e
quality, u tility , a n d clarity of the
in fo rm atio n to be collected; an d (d)
w ays to m in im iz e th e b u rd e n of
in fo rm atio n co llection on resp o n d e n ts,
in clu d in g th ro u g h th e u se of au to m ated
collectio n te ch n iq u e s or o th er form s of
in fo rm atio n technology. C om m ents on
th e collection of in fo rm atio n sh o u ld be
se n t to th e Office of M anagem en t an d
Budget, P aperw ork R ed u ctio n Project
(7100-0200), W ashington, DC 20503,
w ith copies of su c h co m m ents se n t to
M ary M. M cLaughlin, Chief, F in an c ial
R eports S ection, D ivision o f R esearch
a n d S tatistics, M ail S top 97, B oard of
G overnors of th e F ed eral Reserve
System , W ashington, DC 20551.
T he co llectio n of info rm atio n
req u irem en ts in th is in terim regu lation
are fou n d th ro u g h o u t 12 CFR P art 205
an d in A p p e n d ix A. T his in fo rm atio n is
m an d ato ry (15 U.S.C. 1693 et seq.) to
ensu re ad eq u ate d isclo su re of basic
term s, costs, a n d rights relatin g to
electronic fu n d tran sfer (EFT) services
p ro v id ed to consum ers. T he
re sp o n d e n ts/rec o rd k eep e rs are for-profit
fin an cial in stitu tio n s, in c lu d in g sm all
businesses. In stitu tio n s are also req u ired
to reta in record s for 24 m o n th s as
ev id en ce of com pliance.
T he B oard also pro p o ses to ex ten d the
R ecordkeeping an d D isclosure
R eq uirem ents in C on nectio n w ith
R egulation E (OMB No. 7100-0200) for
th ree years. T he c u rren t estim ated total
a n n u a l b u rd e n for th is inform ation
co llectio n is 462,839 ho urs, as sh o w n in
th e table below . T hese am o u n ts reflect
th e b u rd e n estim ate o f th e F ederal
Reserve S ystem for th e 851 state
m em b er ban k s estim ated to be covered
b y R egulation E. T his reg u latio n ap p lies

14558

Federal Register/Vol. 63, No. 5 7 /Wednesday, March 25, 1998/Proposed Rules

to all ty pes of issuers, n o t ju st state
m em b er banks. H ow ever, u n d e r
P ap erw o rk R ed u ctio n A ct regulations,

th e F ed eral Reserve acco unts for th e
b u rd e n of th e p ap e rw o rk asso ciated
w ith th e reg u latio n o nly for state

m em b er banks. O th er agencies ac co u n t
for the p ap e rw o rk b u rd e n for the
in stitu tio n s th e y supervise.

Number of
respondents
Initial Disclosures:
Initial terms .................................................................................................................
Change in te rm s ........................................................................................................
Transaction disclosures:
Terminal re c e ip ts.......................................................................................................
Deposit verifications ..................................................................................................
Periodic disclosures..........................................................................................................
Error resolution rules ........................................................................................................

Estimated
annual fre­
quency

Estimated re­
sponse time

851
851

250
340

2.50 m in utes....
1.00 minute .....

8,865
4,822

851
851
851
851

71,990
420
12,800
8

0.25 minute .....
1.50 m in utes....
1.00 minute .....
30.00 minutes ...

255,265
8,936
181,547
3,404
462,839

T o ta l.............................................................................................................................

S ince th e F ed eral Reserve does n o t
collect any inform ation, no issu e of
con fid e n tia lity n o rm ally arises.
H ow ever, th e in fo rm atio n m ay be
p ro tec te d from d isclo su re u n d e r the
ex em p tio n s (b)(4), (6), a n d (8) of th e
F reed o m of Info rm ation A ct (5 U.S.C.
522(b)). T he d isclo su res an d
in fo rm atio n abo ut error allegations are
co n fid e n tia l b e tw e en th e in stitu tio n an d
th e consum er. A n agency m ay n o t
c o n d u c t or sponsor, an d a n organization
is n o t re q u ire d to re sp o n d to, an
in fo rm atio n co llectio n u n le ss it displays
a cu rren tly v a lid OMB co n tro l n um ber.
T he OMB con tro l n u m b e r for th e
R ecordkeeping a n d D isclosure
R equ irem ents in C on nection w ith
R egulation E is 7100-0200.
List o f Subjects in 12 CFR Part 205
C o nsum er pro tectio n , E lectronic fu n d
transfers, F ederal Reserve System ,
R eporting a n d reco rdk eeping
requirem ents.
Text o f Proposed R evisions
C ertain c o n v e n tio n s h av e b e e n u se d
to h ig h lig h t th e p ro p o se d changes to
R egulation E. N ew language is sh o w n
in sid e b old-faced arrow s, w h ile
language th a t w o u ld be rem o v ed is set
off w ith brackets.
P u rsu a n t to th e a u th o rity gran ted in
sectio ns 904 (a) a n d (c) o f th e E lectronic

F u n d T ransfer Act, 15 U.S.C. 1693b (a)
an d (c), a n d for th e reaso ns set forth in
th e pream ble, th e B oard p rop oses to
am e n d R egulation E, 12 CFR p art 205,
as set forth below :
PART 205— ELECTRONIC FUND
TRANSFERS (REGULATION E)
1. T he a u th o rity citatio n for p art 205
c o n tin u es to rea d as follows:
Authority: 15 U.S.C. 1693-1693r.
§205.11

[Am ended]

2. S ectio n 205.11 w o u ld be am en d e d
by rem oving p arag rap h (c)(3) an d
redesign ating p arag rap h (c)(4) as
p arag rap h (c)(3).
3. In A p p e n d ix A to P art 205, in A—
3 MODEL FORMS FOR ERROR
RESOLUTION NOTICE (§§ 205.7(b)(10)
a n d 205.8(b)), th e u n d e sig n a te d secon d
a n d th ird p arag rap h s follow ing
p ara g ra p h (a)(3) w o u ld be rev ise d to
read as follows:
A ppendix A to Part 2 0 5 — M odel
D isclosure Clauses and Forms
*
*
*
*
*
A -3 —MODEL FORMS FOR ERROR
RESOLUTION NOTICE (§§205.7(b](10) AND
205.8(b))

(a) Initial and annual error resolution
notice (§§205.7(b)(l0) and 205.8(b))
*
*
*
*
*

Estimated
annual bur­
den hours

W e w ill ► d e t e r m i n e w h e th e r an error
o c c u r r e d ^ [tell y ou th e resu lts of our
investigation] w ith in 10 b u sin e ss days
after w e h ea r from y o u a n d w ill correct
any error p rom ptly . If w e n e e d m ore
tim e, how ever, w e m ay take u p to 45
days to inv estig ate y o u r c o m p lain t or
question. If w e d ec id e to do th is, w e
w ill cre d it y o u r ac co u n t w ith in 10
b u sin ess days for th e am o u n t you th in k
is in error, so th a t yo u w ill have th e u se
of th e m o n e y d u rin g th e tim e it takes u s
to co m p lete ou r investigation. If w e ask
y o u to p u t y o u r co m p lain t or q u estio n
in w ritin g a n d w e do n o t receive it
w ith in 10 b u sin e ss days, w e m ay n o t
credit y o u r account.
► W e w ill te ll y ou th e resu lts of our
investigatio n w ith in th ree b u sin ess days
after co m p letin g i t .- ^ If w e decid e th at
th e re w as no error, ► t h i s w ill
i n c l u d e d [we w ill se n d you] a w ritte n
ex p lan a tio n [w ithin th ree b u sin e ss days
after w e fin ish o u r investigation]. Y ou
m ay ask for cop ies of th e d o cu m en ts
th a t w e u s e d in o ur investigation.
*
*
*
*
*
By o rd e r o f th e B oard o f G overnors o f th e
F ed eral R eserve System , M arch 12, 1998.
W illiam W. W iles,
S ecreta ry o f th e Board.
[FR Doc. 9 8 -6 9 9 3 F iled 3 -2 4 -9 8 ; 8:45 am]
BILLING CODE 6210 -0 1 -P


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