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Federal Reserve Bank of Dallas
2200 N. PEARL ST.
DALLAS, TX 75201-2272

December 29, 2003
Notice 03-70
TO: The Chief Executive Officer of each
financial institution and bank holding company
in the Eleventh Federal Reserve District
SUBJECT
Proposed Amendments to Regulation B
(Equal Credit Opportunity); Regulation E (Electronic Fund Transfers);
Regulation M (Consumer Leasing); Regulation Z
(Truth in Lending); Regulation DD (Truth in Savings)
DETAILS
The Board has requested public comments on a proposal to amend Regulation B,
which implements the Equal Credit Opportunity Act, and the staff commentary to the regulation.
Regulation B would be revised to define more specifically the standard for providing “clear and
conspicuous” disclosures and to provide a more uniform standard among the Board’s
regulations. The staff commentary would be revised to include examples of how to meet this
standard. Comments should refer to Docket No. R–1168.
The Board has requested public comment on a proposal to amend Regulation E,
which implements the Electronic Fund Transfers Act, and the staff commentary to the regulation.
Regulation E would be revised to require disclosures to be “clear and conspicuous’’ and to
define more specifically the standard to provide a more uniform standard among the Board’s
regulations. Comments should refer to Docket No. R–1169.
The Board has also proposed to amend Regulation M, which implements the
Consumer Leasing Act, and the staff commentary to the regulation. Regulation M would be
revised to define more specifically the standard for providing “clear and conspicuous’’
disclosures and to provide a more uniform standard among the Board’s regulations. Comments
should refer to Docket No. R-1170.

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.

-2The Board has also requested public comment on a proposal to amend Regulation Z,
which implements the Truth in Lending Act, and the staff commentary to the regulation.
Regulation Z would be revised to define more specifically the standard for providing “clear and
conspicuous’’ disclosures and to provide a more uniform standard among the Board’s
regulations. The staff commentary would be revised to include examples of how to meet this
standard.
Also, the Board has requested comment on a proposal to add an interpretative rule of
construction to state that the word “amount’’ represents a numerical amount throughout
Regulation Z. The proposed updates to the staff commentary also provide guidance on
consumers’ exercise of the right to rescind certain home-secured loans. In addition, the proposal
includes several technical revisions to the staff commentary. Comments should refer to Docket
No. R–1167.
Finally, the Board has requested public comment on a proposal to amend Regulation
DD, which implements the Truth in Savings Act, and the staff commentary to the regulation.
Regulation DD would be revised to define more specifically the standard for providing “clear
and conspicuous’’ disclosures and to provide a more uniform standard among the Board’s
regulations. The staff commentary would be revised to include examples of how to meet this
standard. Comments should refer to Docket No. R-1171.
The revisions to Regulations B, E, M, Z, and DD are intended to help ensure that
consumers receive noticeable and understandable information that is required by law in
connection with obtaining consumer financial products and services. In addition, consistency
among the regulations should facilitate compliance by institutions.
All comments must be received on or before January 30, 2004. Please address
comments to Jennifer J. Johnson, Secretary, Board of Governors of the Federal Reserve System,
20th Street and Constitution Avenue, N.W., Washington, DC 20551. Also, you may mail
comments electronically to regs.comments@federalreserve.gov.
ATTACHMENTS
Copies of the Board’s notices as they appear on pages 68786–802, Vol. 68, No. 237 of
the Federal Register dated December 10, 2003, are attached.
MORE INFORMATION
For more information, please contact Eugene Coy, Banking Supervision Department,
at (214) 922-6201. Paper copies of this notice or previous Federal Reserve Bank notices can be
printed from our web site at www.dallasfed.org/banking/notices/index.html.

68786

Proposed Rules

Federal Register
Vol. 68, No. 237
Wednesday, December 10, 2003

This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.

FEDERAL RESERVE SYSTEM
12 CFR Part 202
[Regulation B; Docket No. R–1168]

Equal Credit Opportunity

I. Background

SUMMARY: The Board is proposing to
amend Regulation B, which implements
the Equal Credit Opportunity Act, and
the staff commentary to the regulation.
Regulation B would be revised to define
more specifically the standard for
providing ‘‘clear and conspicuous’’
disclosures, and to provide a more
uniform standard among the Board’s
regulations. The staff commentary
would be revised to include examples of
how to meet this standard. Similar
proposed revisions to Regulations E, M,
Z and DD appear elsewhere in today’s
Federal Register. These revisions are
intended to help ensure that consumers
receive noticeable and understandable
information that is required by law in
connection with obtaining consumer
financial products and services. In
addition, consistency among the
regulations should facilitate compliance
by institutions.
DATES: Comments must be received on
or before January 30, 2004.
ADDRESSES: Comments should refer to
Docket No. R–1168 and should be
mailed to Jennifer J. Johnson, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue, NW., Washington,
DC 20551. However, because paper mail
in the Washington area and at the Board
of Governors is subject to delay, please
consider submitting your comments by
e-mail to
regs.comments@federalreserve.gov, or
faxing them to the Office of the
Secretary at (202) 452–3819 or 452–
3102. Members of the public may
inspect comments in Room MP–500 of
the Martin Building between 9 a.m. and
5 p.m. on weekdays pursuant to

19:02 Dec 09, 2003

FOR FURTHER INFORMATION CONTACT:
Minh-Duc Le, Senior Attorney, and
David A. Stein, Counsel, Division of
Consumer and Community Affairs,
Board of Governors of the Federal
Reserve System, at (202) 452–3667 or
452–2412; for users of
Telecommunications Device for the Deaf
(‘‘TDD’’) only, contact (202) 263–4869.
SUPPLEMENTARY INFORMATION:

Board of Governors of the
Federal Reserve System.
ACTION: Proposed rule.
AGENCY:

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§ 261.12, except as provided in § 261.14,
of the Board’s Rules Regarding
Availability of Information, 12 CFR
261.12 and 261.14.

Jkt 203001

The Equal Credit Opportunity Act
(ECOA), 15 U.S.C. 1691–1691f, makes it
unlawful for a creditor to discriminate
against an applicant in any aspect of a
credit transaction on the basis of the
applicant’s national origin, marital
status, religion, sex, color, race, age
(provided the applicant has the capacity
to contract), receipt of public assistance
benefits, or the good faith exercise of a
right under the Consumer Credit
Protection Act (15 U.S.C. 1601 et seq.).
In addition to a general prohibition
against discrimination, the regulation
contains specific rules concerning: the
taking and evaluation of credit
applications, how credit history
information is reported on accounts
used by spouses, procedures and notices
for credit denials and other adverse
action, and limitations on requiring
signatures of persons other than the
applicant on credit documents. The act
also excepts certain types of credit (such
as securities credit) from some
requirements, and provides model forms
for optional use by creditors. The ECOA
is implemented by the Board’s
Regulation B (12 CFR part 202). An
official staff commentary interprets the
requirements of Regulation B (12 CFR
part 202 (Supp. I)).
II. Proposed Revisions
Section 202.2—Definitions
2(bb) Clear and Conspicuous
The ECOA does not address a
standard for the form of disclosures.
Regulation B, however, requires
creditors to disclose information
provided in writing in a clear and
conspicuous manner. See § 202.4(d).
Guidance on how creditors may comply
with the clear and conspicuous standard

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is contained in the staff commentary.
See comment 4(d)–1.
Consumer financial services and fair
lending laws and the Board regulations
that implement them contain similar but
not identical standards for providing
disclosures that consumers will notice
and understand. Generally, disclosures
must be ‘‘clear and conspicuous’’ under
Regulations B (Equal Credit
Opportunity), M (Consumer Leasing),
Regulation P (Privacy of Consumer
Financial Information), Z (Truth in
Lending) and DD (Truth in Savings),
and ‘‘clear and readily understandable’’
under Regulation E (Electronic Fund
Transfers). In interpreting the ‘‘clear and
conspicuous’’ standard, the staff
commentaries to Regulations B, M and
Z provide that disclosures must be ‘‘in
a reasonably understandable’’ form;
similarly, under Regulation DD
disclosures must be in a format that
allows consumers ‘‘to readily
understand the terms of their account.’’
For purposes of the disclosures
provided with credit card solicitations
and applications, the commentary to
Regulation Z provides more specifically
that those disclosures must also be
‘‘readily noticeable to the consumer.’’ In
contrast, the Board’s Regulation P
(Privacy of Consumer Financial
Information) defines the ‘‘clear and
conspicuous’’ standard to mean that a
disclosure is ‘‘reasonably
understandable and designed to call
attention to the nature and significance
of the information’’ in the disclosure. 12
CFR 216.3(b)(1). Regulation P also
provides examples of how to satisfy the
standard. 12 CFR 216.3(b)(2).
The Board believes that the recently
implemented standard in Regulation P
(65 FR 35162, June 1, 2000), articulates
with greater precision than the other
regulations the concepts underlying the
duty to provide disclosures that
consumers will notice and understand.
Therefore, to provide consistent
guidance on the clear and conspicuous
standard among its regulations, the
Board is proposing to amend Regulation
B by adding a definition of ‘‘clear and
conspicuous’’ in § 202.2(bb), consistent
with the ‘‘clear and conspicuous’’
definition in Regulation P. The staff
commentary to Regulation B also would
be revised to add comments 2(bb)–1 and
–2, consistent with Regulation P’s
examples of how to meet the clear and
conspicuous standard. Similar proposed

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Federal Register / Vol. 68, No. 237 / Wednesday, December 10, 2003 / Proposed Rules
revisions to Regulations E, M, Z and DD
appear elsewhere in today’s Federal
Register. These revisions are intended
to help ensure that consumers receive
noticeable and understandable
information that is required by law in
connection with obtaining consumer
financial products and services. In
addition, consistency among the
regulations should facilitate compliance
by institutions.
Comment 2(bb)–3 would be added to
clarify that the ‘‘clear and conspicuous’’
standard does not prohibit adding other
terms to the federally required
disclosures (such as contractual
provisions or state-required
disclosures); nor does it prohibit
sending promotional material with the
disclosures. Proposed comment 2(bb)–3
also would clarify, however, that the
presence of other information may be a
factor in determining whether the ‘‘clear
and conspicuous’’ standard is met.
Generally, segregating federally
mandated disclosures from other
information is more likely to satisfy the
clear and conspicuous standard.
The Board also proposes to adopt for
Regulations B, E, M, Z and DD, guidance
concerning type-sizes that are deemed
to meet the ‘‘clear and conspicuous’’
standard and those that would likely be
too small (this guidance currently
applies only to credit card solicitations
and applications under Regulation Z).
See proposed comment 2(bb)–2(ii).
The proposal does not add special
format requirements to the regulation
where none currently exist.
Accordingly, even though the revisions
clarify that type size can be one factor
to consider in determining whether a
disclosure is conspicuous, the proposal
would not add a specific type-size
requirement.
To eliminate redundancy with
proposed § 202.2(bb) and its
accompanying commentary, the Board
also proposes to revise comment 4(d)–
1. Guidance regarding the ‘‘clear and
conspicuous’’ standard for disclosures
transmitted by electronic
communication will be considered in
the context of rulemakings dealing
specifically with electronic delivery of
disclosures.
III. Form of Comment Letters
Comment letters should refer to
Docket No. R–1168 and, when possible,
should use a standard typeface with a
font size of 10 or 12; this will enable the
Board to convert text submitted in paper
form to machine-readable form through
electronic scanning, and will facilitate
automated retrieval of comments for
review. Comments may be mailed

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19:02 Dec 09, 2003

Jkt 203001

electronically to
regs.comments@federalreserve.gov.
IV. Solicitation of Comments Regarding
the Use of ‘‘Plain Language’’
Section 722 of the Gramm-LeachBliley Act of 1999 requires the Board to
use ‘‘plain language’’ in all proposed
and final rules published after January
1, 2000. The Board invites comments on
whether the proposed rules are clearly
stated and effectively organized, and
how the Board might make the proposed
text easier to understand.
V. Initial Regulatory Flexibility
Analysis
In accordance with section 3(a) of the
Regulatory Flexibility Act, the Board
has reviewed the proposed amendments
to Regulation B. The proposed
amendments are not expected to have
any significant impact on small entities.
A final regulatory flexibility analysis
will be conducted after consideration of
comments received during the public
comment period.
VI. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3506;
5 CFR 1320 Appendix A.1), the Board
reviewed the rule under the authority
delegated to the Board by the Office of
Management and Budget. The Federal
Reserve may not conduct or sponsor,
and an organization is not required to
respond to, this information collection
unless it displays a currently valid OMB
control number. The OMB control
number is 7100–0201.
The collection of information that is
revised by this rulemaking is found in
12 CFR part 202. This collection is
mandatory to evidence compliance with
the requirements of 15 U.S.C.
1691b(a)(1) and Pub. L. 104–208,
§ 2302(a), and also to ensure that credit
is made available to all creditworthy
customers without discrimination on
the basis of race, color, religion, national
origin, sex, marital status, age (provided
the applicant has the capacity to
contract), receipt of public assistance
income, or the fact that the applicant
has in good faith exercised any right
under the Consumer Credit Protection
Act (15 U.S.C. 1600 et seq.).
Regulation B applies to all types of
creditors, not just state member banks.
However, under the Paperwork
Reduction Act, the Federal Reserve
accounts for the burden of the
paperwork associated with the
regulation only for entities that are
supervised by the Federal Reserve.
Appendix A of Regulation B defines
these creditors as state member banks,
branches and agencies of foreign banks

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68787

(other than federal branches, federal
agencies, and insured state branches of
foreign banks), commercial lending
companies owned or controlled by
foreign banks, and organizations
operating under section 25 or 25A of the
Federal Reserve Act. Other agencies
account for the paperwork burden for
the institutions they supervise.
Creditors are required to retain records
for 12 to 25 months as evidence of
compliance.
The proposed revisions would
provide creditors with a more uniform
definition of providing ‘‘clear and
conspicuous’’ disclosures and examples
of how to satisfy the clear and
conspicuous standard. While the
proposal would amend Regulation B
and the staff commentary, it is expected
that these revisions would not increase
the paperwork burden of creditors. The
estimated annual burden for entities
supervised by the Federal Reserve is
approximately 175,711 hours for the
1,312 creditors that are ‘‘respondents’’
for purposes of the Paperwork
Reduction Act.
Because the records would be
maintained at state member banks and
the notices are not provided to the
Federal Reserve, no issue of
confidentiality arises under the
Freedom of Information Act.
Comments on the collection of
information should be sent to the Office
of Management and Budget, Paperwork
Reduction Project (7100–0201),
Washington, DC 20503, with copies of
such comments sent to Cynthia Ayouch,
Federal Reserve Board Clearance
Officer, Division of Research and
Statistics, Mail Stop 41, Board of
Governors of the Federal Reserve
System, Washington, DC 20551.
Text of Proposed Revisions
Certain conventions have been used
to highlight the proposed revisions.
New language is shown inside boldfaced arrows while language that would
be deleted is set off with bold-faced
brackets.
List of Subjects in 12 CFR Part 202
Aged, Banks, banking, Civil rights,
Consumer protections, Credit,
Discrimination, Federal Reserve System,
Marital status discrimination, Penalties,
Religious discrimination, Reporting and
record keeping requirements, Sex
discrimination.
For the reasons set forth in the
preamble, the Board proposes to amend
Regulation B, 12 CFR part 202, as set
forth below:

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68788

Federal Register / Vol. 68, No. 237 / Wednesday, December 10, 2003 / Proposed Rules

PART 202—EQUAL CREDIT
OPPORTUNITY (REGULATION B)
1. The authority citation for part 202
continues to read as follows:
Authority: 15 U.S.C. 1691–1691f.

2. Section 202.2 is amended by
adding a new paragraph (bb) to read as
follows:
§ 202.2

Definitions.

For the purposes of this regulation,
unless the context indicates otherwise,
the following definitions apply.
*
*
*
*
*
(bb) Clear and conspicuous means
that a disclosure is reasonably
understandable and designed to call
attention to the nature and significance
of the information in the disclosure.
*
*
*
*
*
3. In Supplement I to Part 202:
a. Under Section 202.2 Definitions, a
new paragraph title 2(bb) Clear and
conspicuous is added, and new
paragraphs (bb) 1. through (bb) 3. are
added.
b. Under Section 202.4—General
Rules, under 4(d) Form of Disclosures,
paragraph 1. is revised.
Supplement I to Part 202—Official Staff
Interpretations
*

*

*

Section 202.2

*

*

*

*

*

Definitions

*

*

19:02 Dec 09, 2003

*

*

*

*

*

Section 202.4—General Rules

*

*

*

*

*

4(d) Form of Disclosures
1. Clear and conspicuous. See § 202.2(bb)
and accompanying comments.
[This standard requires that disclosures be
presented in a reasonably understandable
format in a way that does not obscure the
required information. No minimum type size
is mandated, but the disclosures must be
legible, whether typewritten, handwritten, or
printed by computer.]

*

*

*

*

*

By order of the Board of Governors of the
Federal Reserve System.
Dated: November 25, 2003.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 03–29942 Filed 12–9–03; 8:45 am]
BILLING CODE 6210–01–P

2(bb) Clear and Conspicuous
1. Reasonably understandable. Examples
of disclosures that are reasonably
understandable include disclosures that:
i. Present the information in the disclosure
in clear, concise sentences, paragraphs, and
sections;
ii. Use short explanatory sentences or
bullet lists whenever possible;
iii. Use definite, concrete, everyday words
and active voice whenever possible;
iv. Avoid multiple negatives;
v. Avoid legal and highly technical
business terminology whenever possible; and
vi. Avoid explanations that are imprecise
and readily subject to different
interpretations.
2. Designed to call attention. Examples of
disclosures that are designed to call attention
to the nature and significance of the
information include disclosures that:
i. Use a plain-language heading to call
attention to the disclosure;
ii. Use a typeface and type size that are
easy to read. Disclosures in 12-point type
generally meet this standard. Disclosures
printed in less than 12-point type do not
automatically violate the standard; however,
disclosures in less than 8-point type would
likely be too small to satisfy the standard;
iii. Provide wide margins and ample line
spacing;
iv. Use boldface or italics for key words;
and

VerDate jul<14>2003

v. In a document that combines disclosures
with other information, use distinctive type
size, style, and graphic devices, such as
shading or sidebars, to call attention to the
disclosures.
3. Other information. Except as otherwise
provided, the clear and conspicuous standard
does not prohibit adding to the required
disclosures such items as contractual
provisions, explanations of contract terms,
state disclosures, and translations; or sending
promotional material with the required
disclosures. However, the presence of this
other information may be a factor in
determining whether the clear and
conspicuous standard is met.

Jkt 203001

FEDERAL RESERVE SYSTEM
12 CFR Part 205
[Regulation E; Docket No. R–1169]

Electronic Fund Transfers
AGENCY: Board of Governors of the
Federal Reserve System.
ACTION: Proposed rule.
SUMMARY: The Board is proposing to
amend Regulation E, which implements
the Electronic Fund Transfers Act, and
the staff commentary to the regulation.
Regulation E would be revised to
require disclosures to be ‘‘clear and
conspicuous’’ and to define more
specifically the standard to provide a
more uniform standard among the
Board’s regulations. The staff
commentary would be revised to
include examples of how to meet this
standard. Similar proposed revisions to
Regulations B, M, Z and DD appear
elsewhere in today’s Federal Register.
These revisions are intended to help
ensure that consumers receive
noticeable and understandable
information that is required by law in

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connection with obtaining consumer
financial products and services. In
addition, consistency among the
regulations should facilitate compliance
by institutions.
DATES: Comments must be received on
or before January 30, 2004.
ADDRESSES: Comments should refer to
Docket No. R–1169 and should be
mailed to Jennifer J. Johnson, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue, NW., Washington,
DC 20551. However, because paper mail
in the Washington area and at the Board
of Governors is subject to delay, please
consider submitting your comments by
e-mail to
regs.comments@federalreserve.gov, or
faxing them to the Office of the
Secretary at (202) 452–3819 or 452–
3102. Members of the public may
inspect comments in Room MP–500 of
the Martin Building between 9 a.m. and
5 p.m. on weekdays pursuant to
§ 261.12, except as provided in § 261.14,
of the Board’s Rules Regarding
Availability of Information, 12 CFR
261.12 and 261.14.
FOR FURTHER INFORMATION CONTACT:
Daniel Lonergan, Counsel, and Ky TranTrong, Senior Attorney, Division of
Consumer and Community Affairs,
Board of Governors of the Federal
Reserve System, at (202) 452–3667 or
452–2412; for users of
Telecommunications Device for the Deaf
(‘‘TDD’’) only, contact (202) 263–4869.
SUPPLEMENTARY INFORMATION:
I. Background
The purpose of the Electronic Fund
Transfers Act (EFTA), 15 U.S.C. 1693 et
seq., is to provide a basic framework for
establishing the rights, liabilities, and
responsibilities of participants in
electronic fund transfer (EFT) systems.
The types of transfers covered by the act
and regulation include transfers
initiated through an automated teller
machine (ATM), point-of-sale (POS)
terminal, automated clearinghouse
(ACH), telephone bill-payment plan, or
remote banking program. The act and
regulation require disclosure of terms
and conditions of an EFT service;
documentation of electronic transfers by
means of terminal receipts and periodic
account statements; limitations on
consumer liability for unauthorized
transfers; procedures for error
resolution; and certain rights related to
preauthorized EFTs. Further, the act and
regulation prescribe restrictions on the
unsolicited issuance of ATM cards and
other access devices. The EFTA is
implemented by the Board’s Regulation
E (12 CFR part 205). An Official Staff

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Federal Register / Vol. 68, No. 237 / Wednesday, December 10, 2003 / Proposed Rules
Commentary interprets the requirements
of Regulation E (12 CFR part 205 (Supp.
I)).
II. Proposed Revisions
Section 205.2—Definitions
2(n) Clear and Conspicuous
Section 905(a) of the EFTA requires
that disclosures be provided to
consumers in readily understandable
language. See 15 U.S.C. 1693c(a). The
EFTA also requires that certain
information about EFTs be ‘‘clearly’’ set
forth on periodic statements and
receipts from an electronic terminal. See
15 U.S.C. 1693d(a) and (c). This
standard is implemented as ‘‘clear and
readily understandable’’ in Regulation
E. See § 205.4(a)(1).
Consumer financial services and fair
lending laws and the Board regulations
that implement them contain similar but
not identical standards for providing
disclosures that consumers will notice
and understand. Generally, disclosures
must be ‘‘clear and conspicuous’’ under
Regulations B (Equal Credit
Opportunity), M (Consumer Leasing),
Regulation P (Privacy of Consumer
Financial Information), Z (Truth in
Lending) and DD (Truth in Savings),
and ‘‘clear and readily understandable’’
under Regulation E (Electronic Fund
Transfers). In interpreting the ‘‘clear and
conspicuous’’ standard, the staff
commentaries to Regulations B, M and
Z provide that disclosures must be ‘‘in
a reasonably understandable’’ form;
similarly, under Regulation DD
disclosures must be in a format that
allows consumers ‘‘to readily
understand the terms of their account.’’
For purposes of the disclosures
provided with credit card solicitations
and applications, the commentary to
Regulation Z provides more specifically
that those disclosures must also be
‘‘readily noticeable to the consumer.’’ In
contrast, the Board’s Regulation P
(Privacy of Consumer Financial
Information) defines the ‘‘clear and
conspicuous’’ standard to mean that a
disclosure is ‘‘reasonably
understandable and designed to call
attention to the nature and significance
of the information’’ in the disclosure. 12
CFR 216.3(b)(1). Regulation P also
provides a series of examples of how to
satisfy the standard. 12 CFR 216.3(b)(2).
For the reasons set forth below and
pursuant to its authority under sections
904(a) and 904(c) of the EFTA, the
Board proposes to conform the general
disclosure standard under Regulation E
to ‘‘clear and conspicuous.’’ Further, to
provide consistent guidance on the clear
and conspicuous standard among its
regulations, the Board is proposing to

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amend Regulation E by adding a
definition for clear and conspicuous in
§ 205.2(n), consistent with the ‘‘clear
and conspicuous’’ definition in
Regulation P. The Board believes that
the recently implemented standard in
Regulation P (65 FR 35162, June 1,
2000), articulates with greater precision
than the other regulations the concepts
underlying the duty to provide
disclosures that consumers will notice
and understand. The staff commentary
to Regulation E also would be revised to
add comments 2(n)-1 and -2, consistent
with Regulation P’s examples of how to
meet the clear and conspicuous
standard. Similar proposed revisions to
Regulations B, M, Z and DD appear
elsewhere in today’s Federal Register.
These revisions are intended to help
ensure that consumers receive
noticeable and understandable
information that is required by law in
connection with obtaining consumer
financial products and services. In
addition, consistency among the
regulations should facilitate compliance
by institutions.
Additional information may
accompany disclosures required under
Regulation E. See § 205.4(b). Comment
2(n)–3 further clarifies that the ‘‘clear
and conspicuous’’ standard does not
prohibit adding other items to the
federally required disclosures (such as
contractual provisions or state-required
disclosures); nor does it prohibit
sending promotional material with the
disclosures. Proposed comment 2(n)–3
would clarify, however, that the
presence of other information may be a
factor in determining whether the ‘‘clear
and conspicuous’’ standard is met.
Generally, segregating federally
mandated disclosures from other
information is more likely to satisfy the
clear and conspicuous standard. A new
comment 4(b)–1 would be added to
cross reference guidance in proposed
comment 2(n)–3.
The Board also proposes to adopt for
Regulations B, E, M, Z and DD, guidance
concerning type-sizes that are deemed
to meet the ‘‘clear and conspicuous’’
standard and those that would likely be
too small (this guidance currently
applies only to credit card solicitations
and applications under Regulation Z).
See proposed comment 2(n)–2(ii).
The proposal does not add special
format requirements to the regulation
where none currently exist.
Accordingly, even though the revisions
clarify that type size can be one factor
to consider in determining whether a
disclosure is conspicuous, the proposal
would not add a specific type-size
requirement.

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Section 205.4—General Disclosure
Requirements; Jointly Offered Services
4(a)(1) Form of Disclosures
Under Section 905(a) of the EFTA, the
terms and conditions of electronic fund
transfers (EFTs) involving a consumer’s
account must be disclosed in ‘‘readily
understandable’’ language. See 15
U.S.C. 1693c(a). The EFTA also requires
that certain information about EFTs be
‘‘clearly’’ set forth on periodic
statements and receipts from an
electronic terminal. See 15 U.S.C.
1693d(a) and (c). These standards have
been implemented as a general
disclosure standard of ‘‘clear and
readily understandable.’’ See
§ 205.4(a)(1). The Board proposes to
revise that standard to ‘‘clear and
conspicuous.’’
Regarding the standard of ‘‘clear’’
disclosures, the Board believes there is
not a significant distinction between the
term ‘‘readily understandable’’ as
currently contained in section 905(a) of
the EFTA and § 205.4(a)(1) of Regulation
E and the term ‘‘reasonably
understandable’’ as found in the
guidance on the ‘‘clear’’ standard in
other consumer protection regulations
and in proposed § 205.2(n), and with the
proposed revision, no substantive
difference is intended. Regarding the
standard of ‘‘conspicuous’’ disclosures,
the Board believes that disclosures
provided under the EFTA, like those
provided under the other consumer
financial services laws administered by
the Board, should not only be clear, but
also conspicuous, that is, noticeable to
consumers to be effective.
The Board is authorized to prescribe
regulations that contain provisions that
in the judgment of the Board are
necessary or proper to effectuate the
purposes of the EFTA. See 15 U.S.C.
1693b(a) and (c). Thus, the proposed
revisions would ensure that consumers
receive disclosures of the terms and
conditions of EFTs involving their
account in a form that allows them to
effectively exercise their rights under
the EFTA and Regulation E. The Board
proposes to exercise its authority under
sections 904(a) and 904(c) of the EFTA
to amend § 205.4(a)(1) to provide that
disclosures required under Regulation E
must be ‘‘clear and conspicuous’’ and
consistent with the standard contained
in other consumer protection
regulations. Comment 4(a)–1 would be
revised to conform to the amended
disclosure standard. Guidance regarding
the ‘‘clear and conspicuous’’ standard
for disclosures transmitted by electronic
communication will be considered in
the context of rulemakings dealing

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specifically with electronic delivery of
disclosures.
III. Form of Comment Letters
Comment letters should refer to
Docket No. R–1169 and, when possible,
should use a standard typeface with a
font size of 10 or 12; this will enable the
Board to convert text submitted in paper
form to machine-readable form through
electronic scanning, and will facilitate
automated retrieval of comments for
review. Comments may be mailed
electronically to
regs.comments@federalreserve.gov.
IV. Solicitation of Comments Regarding
the Use of ‘‘Plain Language’’
Section 722 of the Gramm-LeachBliley Act of 1999 requires the Board to
use ‘‘plain language’’ in all proposed
and final rules published after January
1, 2000. The Board invites comments on
whether the proposed rules are clearly
stated and effectively organized, and
how the Board might make the proposed
text easier to understand.
V. Initial Regulatory Flexibility
Analysis
In accordance with section 3(a) of the
Regulatory Flexibility Act, the Board
has reviewed the proposed amendments
to Regulation E. The proposed
amendments are not expected to have
any significant impact on small entities.
A final regulatory flexibility analysis
will be conducted after consideration of
comments received during the public
comment period.
VI. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3506;
5 CFR 1320 Appendix A.1), the Board
reviewed the rule under the authority
delegated to the Board by the Office of
Management and Budget. The Federal
Reserve may not conduct or sponsor,
and an organization is not required to
respond to, this information collection
unless it displays a currently valid OMB
control number. The OMB control
number is 7100–0200.
The collection of information that is
revised by this rulemaking is found in
12 CFR part 205. This collection is
mandatory (15 U.S.C. 1693 et seq.) to
evidence compliance with the
requirements of Regulation E and the
Electronic Fund Transfer Act (EFTA).
The respondents and recordkeepers are
financial institutions. Institutions are
required to retain records for twentyfour months. Regulation E applies to all
types of financial institutions, not just
state member banks; however, under
Paperwork Reduction Act regulations,
the Federal Reserve accounts for the

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burden of paperwork associated with
the regulation only for the financial
institutions it regulates and that meet
the criteria set forth in the regulation.
Other agencies account for the
paperwork burden on their respective
constituencies under this regulation.
The proposed revisions would require
disclosures to be provided ‘‘clearly and
conspicuously.’’ The proposed revisions
would provide financial institutions
with a more uniform definition for
‘‘clear and conspicuous’’ disclosures
and provide examples of how to satisfy
the clear and conspicuous standard.
While the proposal would amend
Regulation E and the staff commentary,
it is expected that these revisions would
not increase the paperwork burden of
financial institutions. With respect to
state member banks, it is estimated that
there are 1,289 respondents and
recordkeepers. Current annual burden is
estimated to be 48,868 hours.
Because the records would be
maintained at state member banks and
the notices are not provided to the
Federal Reserve, no issue of
confidentiality arises under the
Freedom of Information Act.
Comments on the collection of
information should be sent to the Office
of Management and Budget, Paperwork
Reduction Project (7100–0200),
Washington, DC 20503, with copies of
such comments sent to Cynthia Ayouch,
Federal Reserve Board Clearance
Officer, Division of Research and
Statistics, Mail Stop 41, Board of
Governors of the Federal Reserve
System, Washington, DC 20551.
Text of Proposed Revisions
Certain conventions have been used
to highlight the proposed revisions.
New language is shown inside boldfaced arrows while language that would
be deleted is set off with bold-faced
brackets.
List of Subjects in 12 CFR Part 205
Consumer protection, Electronic fund
transfers, Federal Reserve System,
Reporting and recordkeeping
requirements.
For the reasons set forth in the
preamble, the Board proposes to amend
Regulation E, 12 CFR part 205, as set
forth below:
PART 205—ELECTRONIC FUND
TRANSFERS (REGULATION E)
1. The authority citation for part 205
continues to read as follows:
Authority: 15 U.S.C. 1693 et seq.

2. Section 205.2 is amended by
adding a new paragraph (n) to read as
follows:

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§ 205.2

Definitions

For purposes of this part, the
following definitions apply:
*
*
*
*
*
(n) Clear and conspicuous means that
a disclosure is reasonably
understandable and designed to call
attention to the nature and significance
of the information in the disclosure.
*
*
*
*
*
3. Section 205.4 is amended by
revising paragraph (a)(1) to read as
follows:
§ 205.4 General disclosure requirements;
jointly offered services

(a)(1) Form of disclosures. Disclosures
required under this part shall be [clear
and readily understandable] clear and
conspicuous , in writing, and in a form
the consumer may keep. A financial
institution may use commonly accepted
or [readily understandable] clear and
conspicuous abbreviations in complying
with the disclosure requirements of this
part.
*
*
*
*
*
4. In Supplement I to Part 205:
a. Under Section 205.2—Definitions, a
new paragraph title 2(n) Clear and
conspicuous is added, and new
paragraphs (n) 1. through (n) 3. are
added.
b. Under Section 205.4—General
Disclosure Requirements; Jointly
Offered Services, under 4(a) Form of
Disclosures, paragraph 1. is revised.
c. Under Section 205.4—General
Disclosure Requirements; Jointly
Offered Services, a new paragraph title
4(b) Additional information; disclosures
required by other laws is added, and a
new paragraph 1. is added.
Supplement I to Part 205—Official Staff
Interpretations
*

*

*

*

*

Section 205.2—Definitions

*

*

*

*

*

2(n) Clear and Conspicuous
1. Reasonably understandable. Examples
of disclosures that are reasonably
understandable include disclosures that:
i. Present the information in the disclosure
in clear, concise sentences, paragraphs, and
sections;
ii. Use short explanatory sentences or
bullet lists whenever possible;
iii. Use definite, concrete, everyday words
and active voice whenever possible;
iv. Avoid multiple negatives;
v. Avoid legal and highly technical
business terminology whenever possible; and
vi. Avoid explanations that are imprecise
and readily subject to different
interpretations.
2. Designed to call attention. Examples of
disclosures that are designed to call attention
to the nature and significance of the
information include disclosures that:

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i. Use a plain-language heading to call
attention to the disclosure;
ii. Use a typeface and type size that are
easy to read. Disclosures in 12-point type
generally meet this standard. Disclosures
printed in less than 12-point type do not
automatically violate the standard; however,
disclosures in less than 8-point type would
likely be too small to satisfy the standard;
iii. Provide wide margins and ample line
spacing;
iv. Use boldface or italics for key words;
and
v. In a document that combines disclosures
with other information, use distinctive type
size, style, and graphic devices, such as
shading or sidebars, to call attention to the
disclosures.
3. Other information. Except as otherwise
provided, the clear and conspicuous standard
does not prohibit adding to the required
disclosures such items as contractual
provisions, explanations of contract terms,
state disclosures, and translations; or sending
promotional material with the required
disclosures. However, the presence of this
other information may be a factor in
determining whether the clear and
conspicuous standard is met.

*

*

*

*

*

Section 205.4—General Disclosure
Requirements; Jointly Offered Services
4(a) Form of Disclosures
1. General. See § 205.2(n) and
accompanying comments. [Although no
particular rules govern type size, number of
pages, or the relative conspicuousness of
various terms,] The disclosures must be in a
[clear and readily understandable] clear and
conspicuous written form that the consumer
may retain. Numbers or codes are permissible
[are considered readily understandable] if
explained elsewhere on the disclosure form.

*

*

*

*

*

4(b) Additional Information; Disclosures
Required by Other Laws
1. Clear and conspicuous. See comment
2(n)–3.

*

*

*

*

*

By order of the Board of Governors of the
Federal Reserve System, November 25, 2003.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 03–29943 Filed 12–9–03; 8:45 am]
BILLING CODE 6210–01–P

FEDERAL RESERVE SYSTEM
12 CFR Part 213
[Regulation M; Docket No. R–1170]

Consumer Leasing
AGENCY: Board of Governors of the
Federal Reserve System.
ACTION: Proposed rule.
SUMMARY: The Board is proposing to
amend Regulation M, which
implements the Consumer Leasing Act,

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and the staff commentary to the
regulation. Regulation M would be
revised to define more specifically the
standard for providing ‘‘clear and
conspicuous’’ disclosures, and to
provide a more uniform standard among
the Board’s regulations. The staff
commentary would be revised to
include examples of how to meet this
standard. Similar proposed revisions to
Regulations B, E, Z and DD appear
elsewhere in today’s Federal Register.
These revisions are intended to help
ensure that consumers receive
noticeable and understandable
information that is required by law in
connection with obtaining consumer
financial products and services. In
addition, consistency among the
regulations should facilitate compliance
by institutions.
DATES: Comments must be received on
or before January 30, 2004.
ADDRESSES: Comments should refer to
Docket No. R–1170 and should be
mailed to Jennifer J. Johnson, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue, NW., Washington,
DC 20551. However, because paper mail
in the Washington area and at the Board
of Governors is subject to delay, please
consider submitting your comments by
e-mail to
regs.comments@federalreserve.gov, or
faxing them to the Office of the
Secretary at (202) 452–3819 or 452–
3102. Members of the public may
inspect comments in Room MP–500 of
the Martin Building between 9 a.m. and
5 p.m. on weekdays pursuant to
§ 261.12, except as provided in § 261.14,
of the Board’s Rules Regarding
Availability of Information, 12 CFR
261.12 and 261.14.
FOR FURTHER INFORMATION CONTACT: Jane
E. Ahrens, Senior Counsel, and David A.
Stein, Counsel, Division of Consumer
and Community Affairs, Board of
Governors of the Federal Reserve
System, at (202) 452–3667 or 452–2412;
for users of Telecommunications Device
for the Deaf (‘‘TDD’’) only, contact (202)
263–4869.
SUPPLEMENTARY INFORMATION:
I. Background
The Consumer Leasing Act (CLA), 15
U.S.C. 1667–1667e, was enacted into
law in 1976 as an amendment to the
Truth in Lending Act (TILA), 15 U.S.C.
1601 et seq. The CLA requires lessors to
provide lessees with uniform cost and
other disclosures about certain
consumer lease transactions.
Disclosures are provided to consumers
before they enter into lease transactions,
when they renegotiate or extend a lease,

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68791

and in advertisements that state the
availability of consumer leases on
particular terms. The act and regulation
generally apply to consumer leases of
personal property in which the
contractual obligation does not exceed
$25,000 and has a term of more than
four months. An automobile lease is the
most common type of consumer lease
covered by the regulation. The CLA is
implemented by the Board’s Regulation
M (12 CFR part 213). An official staff
commentary interprets the requirements
of Regulation M (12 CFR part 213 (Supp.
I)).
II. Proposed Revisions
Section 213.2—Definitions
2(q) Clear and Conspicuous
Section 182 of the CLA requires that
lessors provide consumers with
disclosures in a clear and conspicuous
manner. See 15 U.S.C. 1667a. This
standard is incorporated in Regulation
M. See §§ 213.3(a) and 213.7(b).
Guidance on how lessors may comply
with the clear and conspicuous standard
is contained in the staff commentary.
See comments 3(a)–2 and 7(b)–1. The
commentary states that under this
standard, disclosures must be in a
reasonably understandable form.
Consumer financial services and fair
lending laws and the Board regulations
that implement them contain similar but
not identical standards for providing
disclosures that consumers will notice
and understand. Generally, disclosures
must be ‘‘clear and conspicuous’’ under
Regulations B (Equal Credit
Opportunity), M (Consumer Leasing),
Regulation P (Privacy of Consumer
Financial Information), Z (Truth in
Lending) and DD (Truth in Savings),
and ‘‘clear and readily understandable’’
under Regulation E (Electronic Fund
Transfers). In interpreting the ‘‘clear and
conspicuous’’ standard, the staff
commentaries to Regulations B, M and
Z provide that disclosures must be ‘‘in
a reasonably understandable’’ form;
similarly, under Regulation DD
disclosures must be in a format that
allows consumers ‘‘to readily
understand the terms of their account.’’
For purposes of the disclosures
provided with credit card solicitations
and applications, the commentary to
Regulation Z provides more specifically
that those disclosures must also be
‘‘readily noticeable to the consumer.’’ In
contrast, the Board’s Regulation P
(Privacy of Consumer Financial
Information) defines the ‘‘clear and
conspicuous’’ standard to mean that a
disclosure is ‘‘reasonably
understandable and designed to call
attention to the nature and significance

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Federal Register / Vol. 68, No. 237 / Wednesday, December 10, 2003 / Proposed Rules

of the information’’ in the disclosure. 12
CFR 216.3(b)(1). Regulation P also
provides examples of how to satisfy the
standard. 12 CFR 216.3(b)(2).
The Board believes that the recently
implemented standard in Regulation P
(65 FR 35162, June 1, 2000), articulates
with greater precision than the other
regulations the concepts underlying the
duty to provide disclosures that
consumers will notice and understand.
Therefore, to provide consistent
guidance on the clear and conspicuous
standard among its regulations, the
Board is proposing to amend Regulation
M by adding a definition for clear and
conspicuous in § 213.2(q), consistent
with the ‘‘clear and conspicuous’’
definition in Regulation P. The staff
commentary to Regulation M also would
be revised to add comments 2(q)–1 and
–2, consistent with Regulation P’s
examples of how to meet the clear and
conspicuous standard. Similar proposed
revisions to Regulations B, E, Z and DD
appear elsewhere in today’s Federal
Register. These revisions are intended
to help ensure that consumers receive
noticeable and understandable
information that is required by law in
connection with obtaining consumer
financial products and services. In
addition, consistency among the
regulations should facilitate compliance
by institutions.
The Board also proposes to adopt for
Regulations B, E, M, Z and DD, guidance
concerning type-sizes that are deemed
to meet the ‘‘clear and conspicuous’’
standard and those that would likely be
too small (this guidance currently
applies only to credit card solicitations
and applications under Regulation Z).
See proposed comment 2(q)–2(ii).
The proposal does not add special
format requirements to the regulation
where none currently exist.
Accordingly, even though the revisions
clarify that type size can be one factor
to consider in determining whether a
disclosure is conspicuous, the proposal
would not add a specific type-size
requirement. The proposal also would
not affect other format rules, such as the
existing requirement for segregating
disclosures. See 12 CFR 213.3(a)(2).
To eliminate redundancy with
proposed § 213.2(q) and its
accompanying commentary, the Board
also proposes to revise comment 3(a)–2
and 7(b)–1. Guidance regarding the
‘‘clear and conspicuous’’ standard for
disclosures transmitted by electronic
communication will be considered in
the context of rulemakings dealing
specifically with electronic delivery of
disclosures.

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III. Form of Comment Letters
Comment letters should refer to
Docket No. R–1170 and, when possible,
should use a standard typeface with a
font size of 10 or 12; this will enable the
Board to convert text submitted in paper
form to machine-readable form through
electronic scanning, and will facilitate
automated retrieval of comments for
review. Comments may be mailed
electronically to
regs.comments@federalreserve.gov.
IV. Solicitation of Comments Regarding
the Use of ‘‘Plain Language’’
Section 722 of the Gramm-LeachBliley Act of 1999 requires the Board to
use ‘‘plain language’’ in all proposed
and final rules published after January
1, 2000. The Board invites comments on
whether the proposed rules are clearly
stated and effectively organized, and
how the Board might make the proposed
text easier to understand.
V. Initial Regulatory Flexibility
Analysis
In accordance with section 3(a) of the
Regulatory Flexibility Act, the Board
has reviewed the proposed amendments
to Regulation M. The proposed
amendments are not expected to have
any significant impact on small entities.
A final regulatory flexibility analysis
will be conducted after consideration of
comments received during the public
comment period.
VI. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3506;
5 CFR 1320 Appendix A.1), the Board
reviewed the rule under the authority
delegated to the Board by the Office of
Management and Budget. The Federal
Reserve may not conduct or sponsor,
and an organization is not required to
respond to, this information collection
unless it displays a currently valid OMB
control number. The OMB control
number is 7100–0202.
The collection of information that is
revised by this rulemaking is found in
12 CFR part 213. This collection is
mandatory (15 U.S.C. 1667 et seq. and
Pub. L. 104–208, 110 Stat. 3009) to
evidence compliance with the
requirements of Regulation M and the
Consumer Leasing Act (CLA). The
respondents are individuals or
businesses that regularly lease, offer to
lease, or arrange for the lease of personal
property under a consumer lease.
Records, required in order to evidence
compliance with the regulation, must be
retained for twenty-four months.
Regulation M applies to all types of
lessors of personal property, not just
state member banks; however, under the

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Paperwork Reduction Act regulations,
the Federal Reserve accounts for the
paperwork burden associated with the
regulation only for state member banks.
Other agencies account for the
paperwork burden on their respective
constituencies under this regulation.
The proposed revisions would
provide lessors with a more uniform
definition of providing ‘‘clear and
conspicuous’’ disclosures and examples
of how to satisfy the clear and
conspicuous standard. While the
proposal would amend Regulation M
and the staff commentary, it is expected
that these revisions would not increase
the paperwork burden of lessors. With
respect to state member banks, there are
310 respondents and recordkeepers.
Current annual burden is estimated to
be 11,179 hours for state member banks.
Because the records would be
maintained at state member banks and
the notices are not provided to the
Federal Reserve, no issue of
confidentiality arises under the
Freedom of Information Act.
Comments on the collection of
information should be sent to the Office
of Management and Budget, Paperwork
Reduction Project (7100–0202),
Washington, DC 20503, with copies of
such comments sent to Cynthia Ayouch,
Federal Reserve Board Clearance
Officer, Division of Research and
Statistics, Mail Stop 41, Board of
Governors of the Federal Reserve
System, Washington, DC 20551.
Text of Proposed Revisions
Certain conventions have been used
to highlight the proposed revisions.
New language is shown inside boldfaced arrows while language that would
be deleted is set off with bold-faced
brackets.
List of Subjects in 12 CFR Part 213
Advertising, Federal Reserve System,
Reporting and record keeping
requirements, Truth in Lending.
For the reasons set forth in the
preamble, the Board proposes to amend
Regulation M, 12 CFR part 213, as set
forth below:
PART 213—CONSUMER LEASING
(REGULATION M)
1. The authority citation for part 213
continues to read as follows:
Authority: 15 U.S.C. 1604 and 1667f.

2. Section 213.2 is amended by
adding a new paragraph (q) to read as
follows:

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§ 213.2

Definitions.

For the purposes of this part the
following definitions apply:
*
*
*
*
*
(q) Clear and conspicuous means that
a disclosure is reasonably
understandable and designed to call
attention to the nature and significance
of the information in the disclosure.
3. In Supplement I to Part 213:
a. Under Section 213.2—Definitions, a
new paragraph title 2(q) Clear and
conspicuous is added, and new
paragraphs (q)1. and (q)2. are added.
b. Under Section 213.3—General
Disclosure Requirements, under 3(a)
General Requirements, paragraph 2. is
revised.
c. Under Section 213.7—Advertising,
under 7(b) Clear and Conspicuous
Standard, paragraph 1. is revised.
Supplement to Part 213—Official Staff
Commentary to Regulation M
*

*

*

*

*

Section 213.2—Definitions

*

*

*

*

*

2(q) Clear and Conspicuous
1. Reasonably understandable. Examples
of disclosures that are reasonably
understandable include disclosures that:
i. Present the information in the disclosure
in clear, concise sentences, paragraphs, and
sections;
ii. Use short explanatory sentences or
bullet lists whenever possible;
iii. Use definite, concrete, everyday words
and active voice whenever possible;
iv. Avoid multiple negatives;
v. Avoid legal and highly technical
business terminology whenever possible; and
vi. Avoid explanations that are imprecise
and readily subject to different
interpretations.
2. Designed to call attention. Examples of
disclosures that are designed to call attention
to the nature and significance of the
information include disclosures that:
i. Use a plain-language heading to call
attention to the disclosure;
ii. Use a typeface and type size that are
easy to read. Disclosures in 12-point type
generally meet this standard. Disclosures
printed in less than 12-point type do not
automatically violate the standard; however,
disclosures in less than 8-point type would
likely be too small to satisfy the standard;
iii. Provide wide margins and ample line
spacing;
iv. Use boldface or italics for key words;
and
v. In a document that combines disclosures
with other information, use distinctive type
size, style, and graphic devices, such as
shading or sidebars, to call attention to the
disclosures.

*

*

*

*

*

Section 213.3—General Disclosure
Requirements
3(a) General Requirements

*

*

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*

*

*

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2. Clear and conspicuous standard. See
§ 213.2(q) and accompanying comments.
[The clear and conspicuous standard requires
that disclosures be reasonably
understandable. For example, the disclosures
must be presented in a way that does not
obscure the relationship of the terms to each
other; appendix A of this part contains model
forms that meet this standard. In addition,
although no minimum typesize is required,
the disclosures must be legible, whether
typewritten, handwritten, or printed by
computer.]

*

*

*

*

*

Section 213.7—Advertising

*

*

*

*

*

7(b) Clear and Conspicuous Standard
1. Standard. See § 213.2(q) and
accompanying comments. [The disclosures in
an advertisement in any media must be
reasonably understandable. For example,]
Very fine print in a television advertisement
or detailed and very rapidly stated
information in a radio advertisement does
not meet the clear[-]and[-]conspicuous
standard if consumers cannot see and read or
hear, and cannot comprehend, the
information required to be disclosed.

*

*

*

*

*

By order of the Board of Governors of the
Federal Reserve System, November 25, 2003.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 03–29944 Filed 12–9–03; 8:45 am]
BILLING CODE 6210–01–P

FEDERAL RESERVE SYSTEM
12 CFR Part 226
[Regulation Z; Docket No. R–1167]

Truth in Lending
AGENCY: Board of Governors of the
Federal Reserve System.
ACTION: Proposed rule.
SUMMARY: The Board is proposing to
amend Regulation Z, which implements
the Truth in Lending Act, and the staff
commentary to the regulation.
Regulation Z would be revised to define
more specifically the standard for
providing ‘‘clear and conspicuous’’
disclosures, and to provide a more
uniform standard among the Board’s
regulations. The staff commentary
would be revised to include examples of
how to meet this standard. Similar
proposed revisions to Regulations B, E,
M, and DD appear elsewhere in today’s
Federal Register. These revisions are
intended to help ensure that consumers
receive noticeable and understandable
information that is required by law in
connection with obtaining consumer
financial products and services. In
addition, consistency among the

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68793

regulations should facilitate compliance
by institutions. The Board also is
proposing to add an interpretative rule
of construction to state that the word
‘‘amount’’ represents a numerical
amount throughout Regulation Z. The
proposed updates to the staff
commentary also provide guidance on
consumers’ exercise of the right to
rescind certain home-secured loans. In
addition, the proposal includes several
technical revisions to the staff
commentary.
DATES: Comments must be received on
or before January 30, 2004.
ADDRESSES: Comments should refer to
Docket No. R–1167 and should be
mailed to Jennifer J. Johnson, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue, NW., Washington,
DC 20551. However, because paper mail
in the Washington area and at the Board
of Governors is subject to delay, please
consider submitting your comments by
e-mail to
regs.comments@federalreserve.gov, or
faxing them to the Office of the
Secretary at (202) 452–3819 or 452–
3102. Members of the public may
inspect comments in Room MP–500 of
the Martin Building between 9 a.m. and
5 p.m. on weekdays pursuant to
§ 261.12, except as provided in § 261.14,
of the Board’s Rules Regarding
Availability of Information, 12 CFR
261.12 and 261.14.
FOR FURTHER INFORMATION CONTACT:
Krista P. DeLargy and Elizabeth A.
Eurgubian, Attorneys, Division of
Consumer and Community Affairs,
Board of Governors of the Federal
Reserve System, at (202) 452–3667 or
452–2412; for users of
Telecommunications Device for the Deaf
(‘‘TDD’’) only, contact (202) 263–4869.
SUPPLEMENTARY INFORMATION:
I. Background
The purpose of the Truth in Lending
Act (TILA), 15 U.S.C. 1601 et seq., is to
promote the informed use of consumer
credit by providing for disclosures about
its terms and cost. The act requires
creditors to disclose the cost of credit as
a dollar amount (the finance charge) and
as an annual percentage rate (APR).
Uniformity in creditors’ disclosures is
intended to assist consumers in
comparison shopping for credit. TILA
requires additional disclosures for loans
secured by consumers’ homes and
permits consumers to rescind certain
transactions that involve their principal
dwelling. In addition, the act regulates
certain practices of creditors. TILA is
implemented by the Board’s Regulation
Z (12 CFR part 226). An official staff

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commentary interprets the requirements
of Regulation Z (12 CFR part 226 (Supp.
I)).
II. Proposed Revisions
Subpart A—General
Section 226.2—Definitions and Rules of
Construction
2(a)(27) Clear and Conspicuous
Section 122(a) of TILA requires
disclosures to be made clearly and
conspicuously. See 15 U.S.C. 1632. This
standard is implemented in Regulation
Z. See § 226.5(a)(1); § 226.17(a)(1);
§ 226.31(b). Guidance on how creditors
may comply with the clear and
conspicuous standard is contained in
the staff commentary. See comment
5(a)(1)–1; 17(a)(1)–1. The commentary
states that under this standard,
disclosures must be in a reasonably
understandable form. For purposes of
the disclosures provided with credit
card solicitations and applications, the
commentary also notes that disclosures
must be readily noticeable to the
consumer. See comment 5a(a)(2)–1.
Consumer financial services and fair
lending laws and the Board regulations
that implement them contain similar but
not identical standards for providing
disclosures that consumers will notice
and understand. Generally, disclosures
must be ‘‘clear and conspicuous’’ under
Regulations B (Equal Credit
Opportunity), M (Consumer Leasing),
Regulation P (Privacy of Consumer
Financial Information), Z (Truth in
Lending) and DD (Truth in Savings),
and ‘‘clear and readily understandable’’
under Regulation E (Electronic Fund
Transfers). In interpreting the ‘‘clear and
conspicuous’’ standard, the staff
commentaries to Regulations B, M and
Z provide that disclosures must be ‘‘in
a reasonably understandable’’ form;
similarly, under Regulation DD
disclosures must be in a format that
allows consumers ‘‘to readily
understand the terms of their account.’’
In contrast, the Board’s Regulation P
(Privacy of Consumer Financial
Information) defines the ‘‘clear and
conspicuous’’ standard to mean that a
disclosure is ‘‘reasonably
understandable and designed to call
attention to the nature and significance
of the information’’ in the disclosure. 12
CFR 216.3(b)(1). Regulation P also
provides a series of examples of how to
satisfy the standard. 12 CFR 216.3(b)(2).
The Board believes that the recently
implemented standard in Regulation P
(65 FR 35162, June 1, 2000), articulates
with greater precision than the other
regulations the concepts underlying the
duty to provide disclosures that

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consumers will notice and understand.
Therefore, to provide consistent
guidance on the clear and conspicuous
standard among its regulations, the
Board is proposing to amend Regulation
Z by adding a definition for clear and
conspicuous in § 226.2(a)(27), consistent
with the ‘‘clear and conspicuous’’
definition in Regulation P. The staff
commentary to Regulation Z also would
be revised to add comments 2(a)(27)–1
and –2, consistent with Regulation P’s
examples of how to meet the clear and
conspicuous standard. Similar proposed
revisions to Regulations B, E, M, and DD
appear elsewhere in today’s Federal
Register. These revisions are intended
to help ensure that consumers receive
noticeable and understandable
information that is required by law in
connection with obtaining consumer
financial products and services. In
addition, consistency among the
regulations should facilitate compliance
by institutions.
Proposed comments 2(a)(27)–3 and –4
contain guidance currently in comment
5(a)(1)–1. The ‘‘clear and conspicuous’’
standard does not prohibit adding other
items to the federally required
disclosures (such as contractual
provisions or state-required
disclosures); nor does it prohibit
sending promotional material with the
disclosures. Proposed comment
2(a)(27)–3 would clarify, however, that
the presence of other information may
be a factor in determining whether the
‘‘clear and conspicuous’’ standard is
met. Generally, segregating federally
mandated disclosures from other
information is more likely to satisfy the
clear and conspicuous standard.
The Board also proposes to adopt for
Regulations B, E, M, Z and DD, guidance
concerning type-sizes that are deemed
to meet the ‘‘clear and conspicuous’’
standard and those that would likely be
too small (this guidance currently
applies only to credit card solicitations
and applications under Regulation Z).
See proposed comment 2(a)(27)–2(ii).
The proposal does not add special
format requirements to the regulation
where none currently exist.
Accordingly, even though the revisions
clarify that type size can be one factor
to consider in determining whether a
disclosure is conspicuous, the proposal
would not add a specific type size
requirement. Similarly, the proposal
also would not affect other format rules,
such as the existing requirement for
making some disclosures more
conspicuous than others (See
§ 226.5(a)(2); § 226.17(a)(2)), or
segregating some specific information
(See § 226.17(a)(1)).

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To eliminate redundancy with
proposed § 226.2(a)(27) and its
accompanying commentary, the Board
also proposes to revise the following
commentary provisions in Regulation Z
that address the ‘‘clear and
conspicuous’’ standard: comments
5(a)(1)–1, 5a(a)(2)–1, 16–1, 24–1, and
Appendix K (d)(2)–1. In this regard, in
comment 5a(a)(2)-1, the guidance
regarding disclosures for credit card
applications and solicitations that are
transmitted by electronic
communication, has been deleted.
Guidance regarding the ‘‘clear and
conspicuous’’ standard for disclosures
transmitted by electronic
communication will be considered in
the context of rulemakings dealing
specifically with electronic delivery of
disclosures.
2(b) Rules of Construction
The Board proposes to add an
interpretative rule of construction in
§ 226.2(b)(5) stating that where the word
‘‘amount’’ is used to describe a
disclosure requirement it refers to a
numerical amount throughout
Regulation Z. This interpretation
addresses a matter discussed in a recent
court decision regarding the disclosure
of payments scheduled to repay a
closed-end credit transaction. See 15
U.S.C. 1638(a)(6); 12 CFR 226.18(g). The
Board believes that the decision, by
endorsing narrative descriptions of
amounts rather than numerical
amounts, may lead to confusion in
disclosures.
The term ‘‘amount’’ has general
applicability throughout Regulation Z
and the term ‘‘amount’’ is used
throughout TILA, for example, to
describe disclosures such as the amount
financed, the amounts being disbursed
to the consumer and to third parties,
and the total of payments, which is
defined as the amount the consumer
will have paid after making all
scheduled payments. A broad
interpretation of the term suggesting
that narrative descriptions may replace
numerical ‘‘amounts’’ contravenes
TILA’s purpose to provide consumers
with clear and uniform credit
disclosures. Proposed comment 2(b)–2
would provide examples of how the
interpretative rule of construction for
‘‘amount’’ applies in certain disclosures
required by Regulation Z.
Subpart B—Open-end Credit
Section 226.15—Right of Rescission
15(a) Consumer’s Right To Rescind
15(a)(2)
Section 125(a) of TILA provides that,
in certain credit transactions in which

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the consumer’s principal dwelling
secures an extension of credit, the
consumer may rescind the transaction
for three business days after becoming
obligated on the debt (and for open-end
plans, after opening or increasing the
credit limit on the plan). See 15 U.S.C.
1635(a); 12 CFR 226.15(a)(1). The
rescission period may extend up to
three years in certain cases. The right of
rescission was created to allow
consumers time to reexamine their
credit contracts and cost disclosures and
to reconsider whether they want to
place their home at risk by offering it as
security for the credit. A consumer
exercises the right to rescind by
notifying the creditor of the rescission
by mail, telegram, or other means of
written communication. Creditors must
provide consumers with a form to use
in exercising the right to rescind, which
must include the name and address of
the creditor or agent of the creditor to
receive the notice. See § 226.15(b).
Notice is considered given when
mailed, or when filed for telegraphic
transmission, or, if sent by other means,
when delivered to the creditor’s
designated place of business. See
§ 226.15(a)(2).
Comment 15(a)(2)–1 states that a
creditor may designate an agent to
receive the notification so long as the
agent’s name and address appear on the
notice provided to the consumer under
§ 226.15(b). The comment would be
revised to address situations where a
creditor fails to provide the required
form or designate an address for sending
the notice. The proposed comment
would provide that in such cases, if a
consumer sends the notice to someone
other than the creditor or assignee, such
as a third-party loan servicer acting as
the creditor’s agent, the consumer’s
notice of rescission may be effective if
under the applicable state law, delivery
to that person would be deemed to
constitute delivery to the creditor or
assignee.
15(d) Effects of Rescission
When a consumer exercises the right
to rescind a mortgage transaction, the
consumer is not liable for any finance
charges or other charges and any
security interest in the consumer’s home
becomes void. See 15 U.S.C. 1635(b);
§ 226.15(d)(1). After the transaction is
rescinded, the creditor must tender any
money or property given to anyone in
connection with the transaction within
a specified time frame, which triggers
the consumer’s duty to return any
money or property that the creditor
delivered to the consumer, although a
court may modify these procedures. See
§ 226.15(d)(2)–(4).

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Comment 15(d)(4)–1 would be revised
to state expressly that a consumer’s
substantive right to rescind under
§ 226.15(a)(1) and § 226.15(d)(1) is not
affected by the procedures referred to in
§ 226.15(d)(2) and (3), or the
modification of those procedures by a
court. Accordingly, where consumers
seek rescission and the matter is
contested by the creditor, a
determination regarding consumers’
right to rescind would normally be
made before a court determines the
amounts owed and establishes the
procedures for the parties to tender any
money or property. The sequence of
procedures should not affect consumers’
ability under TILA to establish their
substantive right to rescind and to have
the lien amount reduced, which may be
necessary before consumers are able to
establish how they will refinance or
otherwise repay the loan.
Subpart C—Closed-End Credit
Section 226.18—Content of Disclosures
18(c) Itemization of Amount Financed
A technical revision would be made
to comment 18(c)(1)(iii)–1, to conform a
citation to footnote 41 of Regulation Z.
No substantive change is intended.
Section 226.19—Certain Residential
Mortgage and Variable-Rate
Transactions
19(b) Certain Variable-Rate Transactions
Section 226.19(b) applies to all
closed-end variable-rate transactions
that are secured by the consumer’s
principal dwelling and have a term
greater than one year. Guidance about
the applicability of § 226.19 to
construction loans was published in
comment 19(b)–1. 54 FR 9422, March 7,
1989. That guidance has been
inadvertently appended to comment
19(b)(1)–1 in the Code of Federal
Regulations. The two comments are
restated in their correct form for
reprinting in the Code of Federal
Regulations. No substantive change is
intended.
Section 226.23—Right of Rescission
23(a) Consumer’s Right To Rescind
For the reasons discussed above,
comment 23(a)(2)–1 would be revised to
state the rule for effective delivery of a
rescission notice when the creditor fails
to provide the required form or
designate an address for sending the
notice (See supplementary information
to proposed comment 15(a)(2)–1.)

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Section 226.23—Right of Rescission
23(d) Effects of Rescission
For the reasons discussed above,
comment 23(d)(4)–1 would be revised to
expressly state that a consumer’s
substantive right to rescind under
§ 226.23(a)(1) and § 226.23(d)(1) is not
affected by the procedures referred to in
§ 226.23(d)(2) and (3), or the
modification of those procedures by a
court. (See supplementary information
to proposed comment 15(d)(4)–1.)
Subpart D—Miscellaneous
Section 226.27—Language of
Disclosures
In March 2001, the Board revised
§ 226.27 to permit creditors to provide
disclosures in languages other than
English as long as disclosures in English
are available to consumers who request
them. 66 FR 1739, March 30, 2001.
Technical revisions would be made to
comment 27–1, and comment 27–2
would be deleted to conform the
commentary to § 226.27, as amended.
No substantive change is intended.
Subpart E—Special Rules for Certain
Home Mortgage Transactions
Section 226.32—Requirements for
Certain Closed-End Home Mortgages
32(a) Coverage
Rules for certain closed-end mortgage
loans in § 226.32 are triggered, in part,
by the amount of ‘‘points and fees’’
payable by the consumer at or before
loan closing and the ‘‘total loan
amount.’’ See § 226.32(a)(1)(ii).
Comment 32(a)(1)(ii)–1, which was
added in 1996, provides examples for
calculating the ‘‘total loan amount.’’ 61
FR 14952, April 4, 1996. A technical
revision would be made to comment
32(a)(1)(ii)–1, to correct a dollar amount
given in one of the examples. No
substantive change is intended.
Request for Information Regarding Debt
Cancellation and Debt Suspension
Agreements
Some lenders have replaced credit
insurance products with products
known as debt cancellation agreements
and debt suspension agreements. Under
a debt cancellation agreement or debt
suspension agreement, a creditor agrees
to cancel, or temporarily suspend, all or
part of the borrower’s repayment
obligation upon the occurrence of a
specified event, such as death,
disability, or unemployment. The fee for
a debt cancellation or debt suspension
agreement can be collected monthly or
in a lump sum.
At least one state has said it will
regulate debt cancellation and

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suspension products as insurance, other
states have said they will regulate the
products as bank products and not as
insurance, and still others have not yet
announced positions. The Office of the
Comptroller of the Currency (OCC) has
recently issued regulations governing
sales of debt cancellation and
suspension agreements by national
banks. See 12 CFR 37.1 et seq.
Under the TILA and Regulation Z,
debt cancellation agreements are
generally subject to the same disclosure
rules as credit insurance. In 1996, the
Board revised Regulation Z to establish
essentially identical disclosure rules for
credit insurance and debt cancellation
agreements. Accordingly, although debt
cancellation fees satisfy the definition of
a ‘‘finance charge,’’ they may be
excluded from the finance charge on the
same conditions as credit insurance
premiums (without regard to whether
debt cancellation agreements are
deemed to be insurance contracts under
state law). The types of debt
cancellation agreements eligible for the
exclusion are limited to those that
provide for cancellation of or all or part
of a debtor’s liability (1) in case of
accident or loss of life, health, or
income or (2) for amounts exceeding the
value of collateral securing the debt
(commonly referred to as ‘‘gap’’
coverage, frequently sold in connection
with motor vehicle loans). See
§ 226.4(b)(7) and (10), 4(d)(1) and (3).
Industry representatives have asked
the Board to address disclosure issues
under TILA and Regulation Z that may
be raised by the sale of debt cancellation
and debt suspension products.
Anecdotal evidence suggests that the
sale of those products in lieu of credit
insurance has increased and that
creditors are offering expanded
coverage, for example to suspend
repayment obligations for life-cycle
events such as marriage and divorce.
Some industry representatives have
stated that additional guidance may be
useful in clarifying the circumstances in
which products offering expanded
coverage qualify for the exclusions in
§ 226.4(d)(3) for debt cancellation fees,
and in clarifying what disclosures
should be provided to consumers in
certain circumstances.
To consider the requests for guidance
more fully, information and comment
are solicited as follows:
• What are the similarities and
differences among credit insurance, debt
cancellation coverage, and debt
suspension coverage, in the case of both
closed-end and open-end credit?
• With what types of closed-end and
open-end credit are debt cancellation
and debt suspension products sold? Do

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creditors typically package multiple
types of coverage (e.g., disability and
divorce), or sell them separately? Do
creditors typically sell the products at,
or after, consummation (for closed-end
credit) or account opening (for open-end
credit plans)?
• What disclosures are made with the
sale of a product or upon conversion
from one product to another, whether
required by TILA or other laws? How
are monthly or other periodic fees
disclosed to consumers?
• Under Regulation Z, fees for credit
protection programs written in
connection with a credit transaction are
finance charges but some fees may be
excluded from the disclosed finance
charge if required disclosures are made
and the consumer affirmatively elects
the optional coverage in writing. See
§ 226.4(b)(7) and (10), 4(d)(1) and (3). Is
there a need for guidance concerning
the applicability of those provisions to
certain types of coverage now available?
Are the required disclosures adequate
for all types of products subject to
§ 4(d)(1) or 4(d)(3)?
• Under TILA, a credit card issuer
must notify a consumer before changing
the consumer’s credit insurance
provider. See 15 U.S.C. 1637(g); 12 CFR
226.9(f). Card issuers that intend to
change credit insurance providers need
only notify consumers that they may opt
out of the new coverage. Should the
Board interpret or amend § 226.9(f) to
address conversions from credit
insurance to debt cancellation or debt
suspension agreements? If so, is there a
need to address conversions other than
for credit card accounts?
• OCC regulations for national bank
sales of debt cancellation and
suspension agreements require a
customer’s affirmative election of the
product. If the Board interprets or
amends § 226.9(f) to address
conversions from credit insurance to
debt cancellation or debt suspension
agreements, what additional guidance
would card issuers need, if any, to
comply with both rules?
III. Form of Comment Letters
Comment letters should refer to
Docket No. R–1167 and, when possible,
should use a standard typeface with a
font size of 10 or 12; this will enable the
Board to convert text submitted in paper
form to machine-readable form through
electronic scanning, and will facilitate
automated retrieval of comments for
review. Comments may be mailed
electronically to
regs.comments@federalreserve.gov.

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IV. Solicitation of Comments Regarding
the Use of ‘‘Plain Language’’
Section 722 of the Gramm-LeachBliley Act of 1999 requires the Board to
use ‘‘plain language’’ in all proposed
and final rules published after January
1, 2000. The Board invites comments on
whether the proposed rules are clearly
stated and effectively organized, and
how the Board might make the proposed
text easier to understand.
V. Initial Regulatory Flexibility
Analysis
In accordance with section 3(a) of the
Regulatory Flexibility Act, the Board
has reviewed the proposed amendments
to Regulation Z. The proposed
amendments are not expected to have
any significant impact on small entities.
A final regulatory flexibility analysis
will be conducted after consideration of
comments received during the public
comment period.
VI. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3506;
5 CFR Part 1320 Appendix A.1), the
Board reviewed the rule under the
authority delegated to the Board by the
Office of Management and Budget. The
Federal Reserve may not conduct or
sponsor, and an organization is not
required to respond to, this information
collection unless it displays a currently
valid OMB control number. The OMB
control number is 7100–0199.
The collection of information that is
revised by this rulemaking is found in
12 CFR part 226. This collection is
mandatory (15 U.S.C. 1601 et seq.) to
evidence compliance with the
requirements of Regulation Z and the
Truth in Lending Act (TILA). The
respondents and recordkeepers are forprofit financial institutions, including
small businesses. Institutions are
required to retain records for twentyfour months. This regulation applies to
all types of creditors, not just state
member banks; however, under
Paperwork Reduction Act regulations,
the Federal Reserve accounts for the
burden of the paperwork associated
with the regulation only for state
member banks. Other agencies account
for the paperwork burden on their
respective constituencies under this
regulation.
The proposed revisions would
provide creditors with a more uniform
definition of providing ‘‘clear and
conspicuous’’ disclosures and examples
of how to satisfy the ‘‘clear and
conspicuous’’ standard. The proposed
revisions also would provide that the
term ‘‘amount’’ represents a numerical

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amount throughout Regulation Z. The
proposed updates to the staff
commentary also provide guidance on
consumers’ exercise of rescission for
certain home-secured loans. While the
proposal would amend Regulation Z
and the staff commentary, it is expected
that these revisions would not increase
the paperwork burden of creditors. With
respect to state member banks, there are
1,312 respondents and recordkeepers.
Current annual burden is estimated to
be 618,398 hours.
Because the records would be
maintained at state member banks and
the notices are not provided to the
Federal Reserve, no issue of
confidentiality arises under the
Freedom of Information Act.
Comments on the collection of
information should be sent to the Office
of Management and Budget, Paperwork
Reduction Project (7100–0199),
Washington, DC 20503, with copies of
such comments sent to Cynthia Ayouch,
Federal Reserve Board Clearance
Officer, Division of Research and
Statistics, Mail Stop 41, Board of
Governors of the Federal Reserve
System, Washington, DC 20551.
Text of Proposed Revisions
Certain conventions have been used
to highlight the proposed revisions.
New language is shown inside boldfaced arrows while language that would
be deleted is set off with bold-faced
brackets.
List of Subjects in 12 CFR Part 226
Advertising, Consumer protection,
Federal Reserve System, Reporting and
recordkeeping requirements, Truth in
Lending.
For the reasons set forth in the
preamble, the Board proposes to amend
Regulation Z, 12 CFR part 226, as set
forth below:
PART 226—TRUTH IN LENDING
(REGULATION Z)
1. The authority citation for part 226
would continue to read as follows:
Authority: 12 U.S.C. 3806; 15 U.S.C. 1604
and 1637(c)(5).

2. Section 226.2 is amended by
adding a new paragraph (a)(27) and
adding a new paragraph (b)(5) to read as
follows:
Subpart A—General
*

*

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*

*

*

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§ 226.2 Definitions and rules of
construction.

(a) Definitions. For purposes of this
regulation, the following definitions
apply:
*
*
*
*
*
(27) Clear and conspicuous means
that a disclosure is reasonably
understandable and designed to call
attention to the nature and significance
of the information in the disclosure.
*
*
*
*
*
(b) Rules of construction. For
purposes of this regulation, the
following rules of construction apply:
*
*
*
*
*
(5) Where the word ‘‘amount’’ is used
in this regulation to describe disclosure
requirements, it refers to a numerical
amount.
3. In Supplement I to Part 226:
a. Under Section 226.2 Definitions
and Rules of Construction, under 2(a)
Definitions, a new paragraph title
2(a)(27) Clear and conspicuous is
added, and new paragraphs (27) 1.
through (27) 4. are added; and under
2(b) Rules of Construction, a new
paragraph (b)2. is added.
b. Under Section 226.5 General
Disclosure Requirements, under
Paragraph 5(a)(1), paragraph 1. is
revised.
c. Under Section 226.5a Credit and
Charge Card Applications and
Solicitations, under Paragraph 5a(a)(2),
paragraph 1. is revised.
d. Under Section 226.15 Right of
Rescission, under Paragraph 15(a)(2),
paragraph 1. is revised, and under
Paragraph 15(d)(4), paragraph 1. is
revised.
e. Under Section 226.16 Advertising,
paragraph 1. is revised.
f. Under Section 226.18 Content of
Disclosures, under Paragraph
18(c)(1)(iii), paragraph 1. is revised.
g. Under Section 226.19 Certain
Residential Mortgage and Variable-Rate
Transactions, under 19(b) Certain
variable-rate transactions, paragraph 1.
is revised, and under Paragraph
19(b)(1), paragraph 1. is revised.
h. Under Section 226.23 Right of
Rescission, under Paragraph 23(a)(2),
paragraph 1. is revised, and under
Paragraph 23(d)(4), paragraph 1. is
revised.
i. Under Section 226.24 Advertising,
paragraph 1. is revised.
j. Under Section 226.27, the section
title is revised, paragraph 1. is revised,
and paragraph 2. is removed and
reserved.
k. Under Section 226.32
Requirements for Certain Closed-End
Home Mortgages, under Paragraph
32(a)(1)(ii), paragraph 1.ii. is revised.

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l. Under Appendix K—Total Annual
Loan Cost Rate Computations for
Reverse Mortgage Transaction, under (d)
Reverse mortgage model form and
sample form, under (d)(2), paragraph 1.
would be revised.
Supplement I To Part 226—Official
Staff Interpretations
*

*

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Subpart A—General
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Section 226.2—Definitions and Rules of
Construction
2(a) Definitions.

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2(a)(27) Clear and conspicuous.
1. Reasonably understandable. Examples
of disclosures that are reasonably
understandable include disclosures that:
i. Present the information in the disclosure
in clear, concise sentences, paragraphs, and
sections;
ii. Use short explanatory sentences or
bullet lists whenever possible;
iii. Use definite, concrete, everyday words
and active voice whenever possible;
iv. Avoid multiple negatives;
v. Avoid legal and highly technical
business terminology whenever possible; and
vi. Avoid explanations that are imprecise
and readily subject to different
interpretations.
2. Designed to call attention. Examples of
disclosures that are designed to call attention
to the nature and significance of the
information include disclosures that:
i. Use a plain-language heading to call
attention to the disclosure;
ii. Use a typeface and type size that are
easy to read. Disclosures in 12-point type
generally meet this standard. Disclosures
printed in less than 12-point type do not
automatically violate the standard; however,
disclosures in less than 8-point type would
likely be too small to satisfy the standard;
iii. Provide wide margins and ample line
spacing;
iv. Use boldface or italics for key words;
and
v. In a document that combines disclosures
with other information, use distinctive type
size, style, and graphic devices, such as
shading or sidebars, to call attention to the
disclosures.
3. Other information. Except as otherwise
provided, the ‘‘clear and conspicuous’’
standard does not prohibit adding to the
required disclosures such items as
contractual provisions, explanations of
contract terms, state disclosures, and
translations; or sending promotional material
with the required disclosures. However, the
presence of this other information may be a
factor in determining whether the ‘‘clear and
conspicuous’’ standard is met.
4. Use of codes or symbols. The ‘‘clear and
conspicuous’’ standard does not prohibit
using codes or symbols such as APR (for
annual percentage rate), FC (for finance
charge), or Cr (for credit balance), so long as

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a legend or description of the code or symbol
is provided on the disclosure statement.

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2(b) Rules of Construction

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2. Amount. A creditor would state a dollar
amount when disclosing the amount
financed, finance charge, or the amount of
any payment for a closed-end transaction
(Subpart C). A creditor might explain how
the amount of any finance charge will be
determined by stating a percentage (for
example, where the fee is a percentage of
each cash advance) or a dollar amount (for
example, a minimum finance charge of $1.00)
in disclosures provided before the first
transaction under an open-end plan (Subpart
B).

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Subpart B—Open-End Credit
*

*

*

*

*

Section 226.5—General Disclosure
Requirements
5(a) Form of Disclosures
Paragraph 5(a)(1).
1. Clear and conspicuous. See
§ 226.2(a)(27) and accompanying comments.
[The ‘‘clear and conspicuous’’ standard
requires that disclosures be in a reasonably
understandable form. Except where
otherwise provided, the standard does not
require that disclosures be segregated from
other material or located in any particular
place on the disclosure statement, or that
numerical amounts or percentages be in any
particular type size. (But see comments
5a(a)(2)–1 and –2 for special rules concerning
section 226.5a disclosures for credit card
applications and solicitations.) The standard
does not prohibit:
• Pluralizing required terminology
(finance charge and annual percentage rate).
• Adding to the required disclosures such
items as contractual provisions, explanations
of contract terms, state disclosures, and
translations.
• Sending promotional material with the
required disclosures.
• Using commonly accepted or readily
understandable abbreviations (such as mo.
for month or Tx. for Texas) in making any
required disclosures.
• Using codes or symbols such as APR (for
annual percentage rate), FC (for finance
charge), or Cr (for credit balance), so long as
a legend or description of the code or symbol
is provided on the disclosure statement.]

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*

Section 226.5a—Credit and Charge Card
Applications and Solicitations

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5a(a) General Rules
5a(a)(2) Form of Disclosures
1. Clear and conspicuous standard. See
§ 226.2(a)(27) and accompanying comments.
[For purposes of § 226.5a disclosures, ‘‘clear
and conspicuous’’ means in a reasonably
understandable form and readily noticeable
to the consumer. As to type size, disclosures

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in 12-point type are deemed to be readily
noticeable for purposes of section 226.5a.
Disclosures printed in less than 12-point type
do not automatically violate the standard;
however, disclosures in less than 8-point
type would likely be too small to satisfy the
standard. Disclosures that are transmitted by
electronic communication are judged for
purposes of the clear-and-conspicuous
standard based on the form in which they are
provided even though they may be viewed by
the consumer in a different form.]

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Section 226.15—Right of Rescission
15(a) Consumer’s Right to Rescind

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*

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*

Paragraph 15(a)(2).
1. Consumer’s exercise of right. The
consumer must exercise the right of
rescission in writing but not necessarily on
the notice supplied under § 226.15(b).
Whatever the means of sending the
notification of rescission—mail, telegram or
other written means—the time period for the
creditor’s performance under § 226.15(d)(2)
does not begin to run until the notification
has been received. The creditor may
designate an agent to receive the notification
so long as the agent’s name and address
appear on the notice provided to the
consumer under § 226.15(b). Where the
creditor fails to provide the consumer with
a designated address for sending the
notification of rescission and the consumer
sends the notification to someone other than
the creditor or assignee, such as a third-party
loan servicer acting as the creditor’s agent,
state law determines whether delivery to that
person constitutes delivery to the creditor or
assignee.

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15(d) Effects of Rescission

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Paragraph 15(d)(4).
1. Modifications. The procedures outlined
in § 226.15(d)(2) and (3) may be modified by
a court. For example, when a consumer is in
bankruptcy proceedings and prohibited from
returning anything to the creditor, or when
the equities dictate, a modification might be
made. The consumer s substantive right to
rescind under § 226.15(a)(1) and
§ 226.15(d)(1) is not affected by the
procedures referred to in § 226.15(d)(2) and
(3), or the modification of those procedures
by a court.

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Section 226.16—Advertising
1. Clear and conspicuous standard. See
§ 226.2(a)(27) and accompanying comments.
[Section 226.16 is subject to the general
‘‘clear and conspicuous’’ standard for subpart
B (see § 226.5(a)(1)) but prescribes no specific
rules for the format of the necessary
disclosures. The credit terms need not be
printed in a certain type size nor need they
appear in any particular place in the
advertisement.]

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Subpart C—Closed-End Credit
*

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Section 226.18—Content of Disclosures

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18(c) Itemization of Amount Financed

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Paragraph 18(c)(1)(iii).
1. Amounts paid to others. This includes,
for example, tag and title fees; amounts paid
to insurance companies for insurance
premiums; security interest fees, and
amounts paid to credit bureaus, appraisers or
public officials. When several types of
insurance premiums are financed, they may,
at the creditor’s option, be combined and
listed in one sum, labeled ‘‘insurance’’ or
similar term. This includes, but is not limited
to, different types of insurance premiums
paid to one company and different types of
insurance premiums paid to different
companies. Except for insurance companies
and other categories noted in footnote [40]
41, third parties must be identified by name.

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Section 226.19—Certain Residential
Mortgage and Variable-Rate Transactions

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*

19(b) Certain Variable-Rate Transactions
1. Coverage. Section 226.19(b) applies to
all closed-end variable-rate transactions that
are secured by the consumer’s principal
dwelling and have a term greater than one
year. The requirements of this section apply
not only to transactions financing the initial
acquisition of the consumer’s principal
dwelling, but also to any other closed-end
variable-rate transaction secured by the
principal dwelling. Closed-end variable-rate
transactions that are not secured by the
principal dwelling, or are secured by the
principal dwelling but have a term of one
year or less, are subject to the disclosure
requirements of § 226.18(f)(1) rather than
those of § 226.19(b). (Furthermore, ‘‘sharedequity’’ or ‘‘shared-appreciation’’ mortgages
are subject to the disclosure requirements of
§ 226.18(f)(1) rather than those of § 226.19(b)
regardless of the general coverage of those
sections.) For purposes of this section, the
term of a variable-rate demand loan is
determined in accordance with the
commentary to § 226.17(c)(5). In determining
whether a construction loan that may be
permanently financed by the same creditor is
covered under this section, the creditor may
treat the construction and the permanent
phases as separate transactions with distinct
terms to maturity or as a single combined
transaction. For purposes of the disclosures
required under § 226.18, the creditor may
nevertheless treat the two phases either as
separate transactions or as a single combined
transaction in accordance with § 226.17(c)(6).
Finally, in any assumption of a variable-rate
transaction secured by the consumer’s
principal dwelling with a term greater than
one year, disclosures need not be provided
under §§ 226.18(f)(2)(ii) or 226.19(b).

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Paragraph 19(b)(1).
1. Substitute. Creditors who wish to use
publications other than the Consumer
Handbook on Adjustable Rate Mortgages
must make a good faith determination that
their brochures are suitable substitutes to the

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Consumer Handbook. A substitute is suitable
if it is, at a minimum, comparable to the
Consumer Handbook in substance and
comprehensiveness. Creditors are permitted
to provide more detailed information than is
contained in the Consumer Handbook. [In
determining whether a construction loan that
may be permanently financed by the same
creditor is covered under this section, the
creditor may treat the construction and the
permanent phases as separate transactions
with distinct terms to maturity or as a single
combined transaction. For purposes of the
disclosures required under § 226.18, the
creditor may nevertheless treat the two
phases either as separate transactions or as a
single combined transaction in accordance
with § 226.17(c)(6). Finally, in any
assumption of a variable-rate transaction
secured by the consumer’s principal dwelling
with a term greater than one year, disclosures
need not be provided under §§ 226.18(f)(2)(ii)
or 226.19(b).]

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Section 226.23—Right of Rescission
23(a) Consumer’s Right To Rescind

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*

*

*

*

Paragraph 23(a)(2).
1. Consumer’s exercise of right. The
consumer must exercise the right of
rescission in writing but not necessarily on
the notice supplied under § 226.23(b).
Whatever the means of sending the
notification of rescission—mail, telegram or
other written means—the time period for the
creditor’s performance under § 226.23(d)(2)
does not begin to run until the notification
has been received. The creditor may
designate an agent to receive the notification
so long as the agent’s name and address
appear on the notice provided to the
consumer under § 226.23(b). Where the
creditor fails to provide the consumer with
a designated address for sending the
notification of rescission and the consumer
sends the notification to someone other than
the creditor or assignee, such as a third-party
loan servicer acting as the creditor’s agent,
state law determines whether delivery to that
person constitutes delivery to the creditor or
assignee.

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23(d) Effects of Rescission.

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Paragraph 23(d)(4).
1. Modifications. The procedures outlined
in § 226.23(d)(2) and (3) may be modified by
a court. For example, when a consumer is in
bankruptcy proceedings and prohibited from
returning anything to the creditor, or when
the equities dictate, a modification might be
made. The consumer’s substantive right to
rescind under § 226.23(a)(1) and
§ 226.23(d)(1) is not affected by the
procedures referred to in § 226.23(d)(2) and
(3), or the modification of those procedures
by a court.

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Section 226.24—Advertising
1. Clear and conspicuous standard. See
§ 226.2(a)(27) and accompanying comments.
On a merchandise tag that is an

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advertisement under the regulation, a
creditor is not prohibited under the ‘‘clear
and conspicuous’’ standard from including
the necessary credit terms on both sides of
the tag, so long as each side is accessible.
[This section is subject to the general ‘‘clear
and conspicuous’’ standard for this subpart
but prescribes no specific rules for the format
of the necessary disclosures. The credit terms
need not be printed in a certain type size nor
need they appear in any particular place in
the advertisement. For example, a
merchandise tag that is an advertisement
under the regulation complies with this
section if the necessary credit terms are on
both sides of the tag, so long as each side is
accessible.]

(d) Reverse-Mortgage Model Form and
Sample Form

*

By order of the Board of Governors of the
Federal Reserve System, November 25, 2003.
Jennifer J. Johnson,
Secretary of the Board.

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Subpart D—Miscellaneous
*

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(d)(2) Sample Form
1. General. [The ‘‘clear and conspicuous’’
standard for reverse-mortgage disclosures
does not require disclosures to be printed in
any particular type size.] The ‘‘clear and
conspicuous’’ standard applies to disclosures
required by § 226.33. Disclosures may be
made on more than one page, and use both
the front and the reverse sides, as long as the
pages constitute an integrated document and
the table disclosing the total annual loan-cost
rates is on a single page.

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Section 226.27—[Spanish] Language of
Disclosures
1. Subsequent disclosures. If a creditor [in
Puerto Rico] provides initial disclosures in
[Spanish] a language other than English,
subsequent disclosures need not be in
[Spanish] that other language. For example,
if the creditor gave Spanish-language initial
disclosures, periodic statements and changein-terms notices may be made in English.
2. [Removed and reserved.]

[FR Doc. 03–29945 Filed 12–9–03; 8:45 am]

*

AGENCY: Board of Governors of the
Federal Reserve System.
ACTION: Proposed rule.

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Subpart E—Special Rules for Certain
Home Mortgage Transactions
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*

Section 226.32—Requirements for Certain
Closed-End Home Mortgages

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*

Paragraph 32(a)(1)(ii).
1. Total loan amount. For purposes of the
‘‘points and fees’’ test, the total loan amount
is calculated by taking the amount financed,
as determined according to section 226.18(b),
and deducting any cost listed in section
226.32(b)(1)(iii) and section 226.32(b)(1)(iv)
that is both included as points and fees under
section 226.32(b)(1) and financed by the
creditor. Some examples follow, each using
a $10,000 amount borrowed, a $300 appraisal
fee, and $400 in points. A $500 premium for
optional credit life insurance is used in one
example.

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*

*

*

ii. If the consumer pays the $300 fee for the
creditor-conducted appraisal in cash at
closing, the $300 is included in the points
and fees calculation because it is paid to the
creditor. However, because the $300 is not
financed by the creditor, the fee is not part
of the amount financed under section
226.18(b) [($10,000, in this case)]. In this
case, the amount financed is the same as the
total loan amount [is] $9,600 ($10,000, less
$400 in prepaid finance charges).

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Appendix K—Total-Annual-Loan-Cost
Rate Computations for ReverseMortgage Transactions
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BILLING CODE 6210–01–P

FEDERAL RESERVE SYSTEM
12 CFR Part 230
[Regulation DD; Docket No. R–1171]

Truth in Savings

SUMMARY: The Board is proposing to
amend Regulation DD, which
implements the Truth in Savings Act,
and the staff commentary to the
regulation. Regulation DD would be
revised to define more specifically the
standard for providing ‘‘clear and
conspicuous’’ disclosures, and to
provide a more uniform standard among
the Board’s regulations. The staff
commentary would be revised to
include examples of how to meet this
standard. Similar proposed revisions to
Regulations B, E, M, and Z appear
elsewhere in today’s Federal Register.
These revisions are intended to help
ensure that consumers receive
noticeable and understandable
information that is required by law in
connection with obtaining consumer
financial products and services. In
addition, consistency among the
regulations should facilitate compliance
by institutions.
DATES: Comments must be received on
or before January 30, 2004.
ADDRESSES: Comments should refer to
Docket No. R–1171 and should be
mailed to Jennifer J. Johnson, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue, NW., Washington,
DC 20551. However, because paper mail
in the Washington area and at the Board

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of Governors is subject to delay, please
consider submitting your comments by
e-mail to
regs.comments@federalreserve.gov, or
faxing them to the Office of the
Secretary at (202) 452–3819 or 452–
3102. Members of the public may
inspect comments in Room MP–500 of
the Martin Building between 9 a.m. and
5 p.m. on weekdays pursuant to
§ 261.12, except as provided in § 261.14,
of the Board’s Rules Regarding
Availability of Information, 12 CFR
261.12 and 261.14.
FOR FURTHER INFORMATION CONTACT:
Krista P. DeLargy and Elizabeth A.
Eurgubian, Attorneys, Division of
Consumer and Community Affairs,
Board of Governors of the Federal
Reserve System, at (202) 452–3667 or
452–2412; for users of
Telecommunications Device for the Deaf
(‘‘TDD’’) only, contact (202) 263–4869.
SUPPLEMENTARY INFORMATION:
I. Background
The purpose of the Truth in Savings
Act (TISA), 12 U.S.C. 4301 et seq., is to
assist consumers in comparing deposit
accounts offered by depository
institutions, principally through the
disclosure of fees, the annual percentage
yield (APY), the interest rate, and other
account terms. The act and regulation
require depository institutions to
provide a consumer with disclosures
upon request and before an account is
opened. Institutions are not required to
provide periodic statements; but if they
do, the act and regulation require that
fees, yields, and other information be
provided on the statements. Notice must
be given to accountholders before an
adverse change in account terms occurs
and prior to the renewal of certificates
of deposit (time accounts). The TISA is
implemented by the Board’s Regulation
DD (12 CFR part 230). An official staff
commentary interprets the requirements
of Regulation DD (12 CFR part 230
(Supp. I)).
II. Proposed Revisions
Section 230.2—Definitions
2(w) Clear and Conspicuous
Section 264(e) of TISA requires
disclosures to be made in clear and
plain language and presented in a
format designed to allow consumers to
readily understand the terms of the
accounts offered. See 12 U.S.C. 4303(e).
This standard is implemented in
Regulation DD. See §§ 230.3(a) and
230.8(c). Guidance on how depository
institutions may comply with the clear
and conspicuous standard is contained
in the staff commentary. See comment

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3(a)–1. The commentary states that
under this standard, disclosures must be
in a readily understandable form.
Consumer financial services and fair
lending laws and the Board regulations
that implement them contain similar but
not identical standards for providing
disclosures that consumers will notice
and understand. Generally, disclosures
must be ‘‘clear and conspicuous’’ under
Regulations B (Equal Credit
Opportunity), M (Consumer Leasing),
Regulation P (Privacy of Consumer
Financial Information), Z (Truth in
Lending) and DD (Truth in Savings),
and ‘‘clear and readily understandable’’
under Regulation E (Electronic Fund
Transfers). In interpreting the ‘‘clear and
conspicuous’’ standard, the staff
commentaries to Regulations B, M and
Z provide that disclosures must be ‘‘in
a reasonably understandable’’ form;
similarly, under Regulation DD
disclosures must be in a format that
allows consumers ‘‘to readily
understand the terms of their account.’’
For purposes of the disclosures
provided with credit card solicitations
and applications, the commentary to
Regulation Z provides more specifically
that those disclosures must also be
‘‘readily noticeable to the consumer.’’ In
contrast, the Board’s Regulation P
(Privacy of Consumer Financial
Information) defines the ‘‘clear and
conspicuous’’ standard to mean that a
disclosure is ‘‘reasonably
understandable and designed to call
attention to the nature and significance
of the information’’ in the disclosure. 12
CFR 216.3(b)(1). Regulation P also
provides examples of how to satisfy the
standard. 12 CFR 216.3(b)(2).
The Board believes that the recently
implemented standard in Regulation P
(65 FR 35162, June 1, 2000), articulates
with greater precision than the other
regulations the concepts underlying the
duty to provide disclosures that
consumers will notice and understand.
Therefore, to provide consistent
guidance on the clear and conspicuous
standard among its regulations, the
Board is proposing to amend Regulation
DD by adding a definition of clear and
conspicuous in § 230.2(w), consistent
with the ‘‘clear and conspicuous’’
definition in Regulation P. The staff
commentary to Regulation DD also
would be revised to add comments
2(w)–1 and –2, consistent with
Regulation P’s examples of how to meet
the clear and conspicuous standard.
Similar proposed revisions to
Regulations B, E, M and Z appear
elsewhere in today’s Federal Register.
These revisions are intended to help
ensure that consumers receive
noticeable and understandable

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information that is required by law in
connection with obtaining consumer
financial products and services. In
addition, consistency among the
regulations should facilitate compliance
by institutions.
Additional information may
accompany disclosures required under
Regulation DD. See § 230.3(a), comment
6(a)–4. Proposed comment 2(w)–3
further clarifies that the ‘‘clear and
conspicuous’’ standard generally does
not prohibit adding other terms to the
federally required disclosures (such as
contractual provisions or state-required
disclosures); nor does it prohibit
sending promotional material with the
disclosures. Proposed comment 2(w)–3
would clarify, however, that the
presence of other information may be a
factor in determining whether the ‘‘clear
and conspicuous’’ standard is met.
Generally, segregating federally
mandated disclosures from other
information is more likely to satisfy the
clear and conspicuous standard.
The Board also proposes to adopt for
Regulations B, E, M, Z and DD, guidance
concerning type-sizes that are deemed
to meet the ‘‘clear and conspicuous’’
standard and those that would likely be
too small (this guidance currently
applies only to credit card solicitations
and applications under Regulation Z).
See proposed comment 2(w)–2(ii).
The proposal does not add special
format requirements to the regulation
where none currently exist.
Accordingly, even though the revisions
clarify that type size can be one factor
to consider in determining whether a
disclosure is conspicuous, the proposal
would not add a specific type-size
requirement.
The Board also proposes to delete as
unnecessary the guidance in comment
3(a)–1 and replace it with a crossreference to § 230.2(w) and
accompanying comments. Guidance
regarding the ‘‘clear and conspicuous’’
standard for disclosures transmitted by
electronic communication will be
considered in the context of
rulemakings dealing specifically with
electronic delivery of disclosures.
III. Form of Comment Letters
Comment letters should refer to
Docket No. R–1171 and, when possible,
should use a standard typeface with a
font size of 10 or 12; this will enable the
Board to convert text submitted in paper
form to machine-readable form through
electronic scanning, and will facilitate
automated retrieval of comments for
review. Comments may be mailed
electronically to
regs.comments@federalreserve.gov.

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In accordance with section 3(a) of the
Regulatory Flexibility Act, the Board
has reviewed the proposed amendments
to Regulation DD. The proposed
amendments are not expected to have
any significant impact on small entities.
A final regulatory flexibility analysis
will be prepared and will consider
comments received during the public
comment period.

that these revisions would not increase
the paperwork burden of depository
institutions. With respect to state
member banks, it is estimated that there
are 976 respondents and recordkeepers.
Current annual burden is estimated to
be 146,644 hours.
Because the records would be
maintained at state member banks and
the notices are not provided to the
Federal Reserve, no issue of
confidentiality arises under the
Freedom of Information Act.
Comments on the collection of
information should be sent to the Office
of Management and Budget, Paperwork
Reduction Project (7100–0271),
Washington, DC 20503, with copies of
such comments sent to Cynthia Ayouch,
Federal Reserve Board Clearance
Officer, Division of Research and
Statistics, Mail Stop 41, Board of
Governors of the Federal Reserve
System, Washington, DC 20551.

VI. Paperwork Reduction Act

Text of Proposed Revisions

In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3506;
5 CFR 1320 Appendix A.1), the Board
reviewed the rule under the authority
delegated to the Board by the Office of
Management and Budget. The Federal
Reserve may not conduct or sponsor,
and an organization is not required to
respond to, this information collection
unless it displays a currently valid OMB
control number. The OMB control
number is 7100–0271.
The collection of information that is
revised by this rulemaking is found in
12 CFR part 230. This collection is
mandatory (15 U.S.C. 4301 et seq.) to
evidence compliance with the
requirements of Regulation DD and the
Truth in Savings Act (TISA). The
respondents and recordkeepers are forprofit depository institutions, including
small businesses. Institutions are
required to retain records for twentyfour months. This regulation applies to
all types of depository institutions, not
just state member banks; however,
under Paperwork Reduction Act
regulations, the Federal Reserve
accounts for the burden of the
paperwork associated with the
regulation only for state member banks.
Other agencies account for the
paperwork burden on their respective
constituencies under this regulation.
The proposed revisions would
provide depository institutions with a
more uniform definition for ‘‘clear and
conspicuous’’ disclosures and provide
examples of how to satisfy the clear and
conspicuous standard. While the
proposal would amend Regulation DD
and the staff commentary, it is expected

Certain conventions have been used
to highlight the proposed revisions.
New language is shown inside boldfaced arrows while language that would
be deleted is set off with bold-faced
brackets.

IV. Solicitation of Comments Regarding
the Use of ‘‘Plain Language’’
Section 722 of the Gramm-LeachBliley Act of 1999 requires the Board to
use ‘‘plain language’’ in all proposed
and final rules published after January
1, 2000. The Board invites comments on
whether the proposed rules are clearly
stated and effectively organized, and
how the Board might make the proposed
text easier to understand.
V. Initial Regulatory Flexibility
Analysis

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List of Subjects in 12 CFR Part 230
Advertising, Banks, banking,
Consumer Protection, Federal Reserve
System, Reporting and record keeping
requirements, Truth in Savings.
For the reasons set forth in the
preamble, the Board proposes to amend
Regulation DD, 12 CFR part 230, as set
forth below:
PART 230—TRUTH IN SAVINGS
(REGULATION DD)
1. The authority citation for part 230
continues to read as follows:
Authority: 12 U.S.C. 4301 et seq.

2. Section 230.2 is amended by
adding a new paragraph (w) to read as
follows:
§ 230.2

Definitions.

For the purposes of this regulation the
following definitions apply:
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*
*
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*
(w) Clear and conspicuous means that
a disclosure is reasonably
understandable and designed to call
attention to the nature and significance
of the information in the disclosure.
3. In Supplement I to Part 230:
a. Under Section 230.2 Definitions, a
new paragraph title (w) Clear and
conspicuous is added, and new
paragraphs (w) 1. through (w) 3. are
added.

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68801

b. Under Section 230.3 General
disclosure requirements, under (a)
Form, paragraph 1. is revised.
Supplement I to Part 230—Official Staff
Interpretations
*

*

*

Section 230.2

*

*

*

*

*

Definitions

*

*

(w) Clear and conspicuous
1. Reasonably understandable. Examples
of disclosures that are reasonably
understandable include disclosures that:
i. Present the information in the disclosure
in clear, concise sentences, paragraphs, and
sections;
ii. Use short explanatory sentences or
bullet lists whenever possible;
iii. Use definite, concrete, everyday words
and active voice whenever possible;
iv. Avoid multiple negatives;
v. Avoid legal and highly technical
business terminology whenever possible; and
vi. Avoid explanations that are imprecise
and readily subject to different
interpretations.
2. Designed to call attention. Examples of
disclosures that are designed to call attention
to the nature and significance of the
information include disclosures that:
i. Use a plain-language heading to call
attention to the disclosure;
ii. Use a typeface and type size that are
easy to read. Disclosures in 12-point type
generally meet this standard. Disclosures
printed in less than 12-point type do not
automatically violate the standard; however,
disclosures in less than 8-point type would
likely be too small to satisfy the standard;
iii. Provide wide margins and ample line
spacing;
iv. Use boldface or italics for key words;
and
v. In a document that combines disclosures
with other information, use distinctive type
size, style, and graphic devices, such as
shading or sidebars, to call attention to the
disclosures.
3. Other information. Except as otherwise
provided, the clear and conspicuous standard
does not prohibit adding to the required
disclosures such items as contractual
provisions, explanations of contract terms,
state disclosures, and translations; or sending
promotional material with the required
disclosures. However, the presence of this
other information may be a factor in
determining whether the clear and
conspicuous standard is met.
Section 230.3 General disclosure
requirements
(a) Form
1. Clear and conspicuous. See § 230.2(w)
and accompanying comments. [Design
Requirements. Disclosures must be presented
in a format that allows consumers to readily
understand the terms of their account.
Institutions are not required to use a
particular type size or typeface, nor are
institutions required to state any term more
conspicuously than any other term.
Disclosures may be made:
i. In any order
ii. In combination with other disclosures or
account terms

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Federal Register / Vol. 68, No. 237 / Wednesday, December 10, 2003 / Proposed Rules

iii. In combination with disclosures for
other types of accounts, as long as it is clear
to consumers which disclosures apply to
their account
iv. On more than one page and on the front
and reverse sides
v. By using inserts to a document or filling
in blanks
vi. On more than one document, as long as
the documents are provided at the same
time.]

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By order of the Board of Governors of the
Federal Reserve System
Dated: November 25, 2003.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 03–29946 Filed 12–9–03; 8:45 am]
BILLING CODE 6210–01–P


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102