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Federal Reserve Bank of Dallas R O B E R T D. M c T E E R , J R . DALLAS, TEXAS 75265-5906 P R E S ID E N T A N D C H IE F E X E C U T IV E O F F IC E R October 19, 1998 Notice 98-93 TO: The Chief Executive Officer of each financial institution and others concerned in the Eleventh Federal Reserve District SUBJECT Final Rules Amending Regulation DD (Truth in Savings), Regulation M (Consumer Leasing), and Regulation E (Electronic Fund Transfers) DETAILS The Board of Governors of the Federal Reserve System has published a final rule amending Regulation DD (Truth in Savings). The amendments modify the rules for indoor lobby signs, eliminate subsequent disclosure requirements for automatically renewable time accounts with terms of one month or less, and repeal the civil liability provisions as of Septem ber 30, 2001. The rule became effective September 24, 1998. The Board has also published amendments to Regulation M (Consumer Leasing) and Regulation E (Electronic Fund Transfers). The final rule on Regulation M adopts several techni cal amendments to the regulation and commentary concerning lease payments, advertisements, and the treatment of taxes. The rule became effective September 24, 1998. Compliance is optional until October 1, 1999. The final rule on Regulation E revises the time periods for investigating alleged errors involving point-of-sale and foreign-initiated transactions. This rule also became effective September 24, 1998; however, compliance is optional until April 1, 1999. ATTACHMENTS Copies of the Board’s notices as they appear on pages 52105-18, Vol. 63, No. 188 of the Federal Register dated September 29, 1998, are attached. For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) -2- MORE INFORMATION For more information, please contact Eugene Coy at (214) 922-6201. For additional copies of this Bank’s notice, contact the Public Affairs Department at (214) 922-5254. Sincerely yours, Tuesday September 29, 1998 Part V Federal Reserve System 12 CFR Parts 205, 213 and 230 Truth in Savings; Consumer Leasing; Electronic Fund Transfers; Final Rules 52106 Federal Register /Vol. 63, No. 188 /Tuesday, September 29, 1998/Rules and Regulations FEDERAL RESERVE SYSTEM 12CFR Part 230 [Regulation DD; Docket No. R-1003] Truth in Savings A G EN C Y : Board of Governors of the Federal Reserve System. ACTION: Final rule. SUMMARY: The Board is publishing a final rule am ending Regulation DD, w hich im plem ents the T ruth in Savings Act. The rule im plem ents am endm ents to the T ruth in Savings Act enacted as part of the Economic Growth and Regulatory Paperwork R eduction Act of 1996. The law modifies the rules for indoor lobby signs, eliminates subsequent disclosure requirem ents for autom atically renewable tim e accounts w ith terms of one m onth or less, and repeals the civil liability provisions as of September 30, 2001. D A TE S: This rule is effective September 24, 1998. 14533). Commenters on the proposal— all financial institutions or their trade associations—unanim ously supported the proposed am endm ents. In M arch 1998, the Board also published a proposal to allow institutions to provide Regulation DD disclosures electronically (63 FR 14533, M arch 25, 1998). Similar proposals were made u nder Regulations B (Equal Credit Opportunity), M (Consumer Leasing), and Z (Truth in Lending); an interim rule was issued u nder Regulation E. The Board anticipates further action on these proposals by year-end. III. Section-by-Section Analysis Section 230.5 Subsequent Disclosures 5(c) Notice for Time Accounts One M onth or Less That Renew Automatically Section 266(a)(3) of TISA requires institutions to provide certain disclosures for rollover tim e accounts at least 30 days before maturity. In im plem enting this provision, the Board FO R FURTHER INFORMATION CONTACT: determ ined in 1992 that the purposes of Kyung Cho-Miller, Staff Attorney, the legislation w ould not be served by Division of Consumer and Community requiring advance disclosures for Affairs, at (202) 452-3667 or 452-2412. rollover tim e accounts w ith m aturities For the hearing im paired only, Telecom m unications Device for the Deaf of one m onth or less. Regulation DD (TDD), contact Diane Jenkins, at (202) therefore does not require disclosures to 452-3544. be provided in advance of m aturity for such time accounts. However, under SU PPLE M E N T A RY INFORMATION: § 230.5(c) of the regulation, if a term I. Background disclosed w hen the account was opened is changed at renewal, institutions were The T ruth in Savings Act (TISA) is required to send a notice describing the im plem ented by the Board’s Regulation DD (12 CFR Part 230). The act and change w ithin a reasonable time after regulation require depository the renew al of the account. institutions to disclose yields, fees, and The 1996 Act eliminates the other terms concerning deposit accounts requirem ent that institutions provide to consum ers at account opening. The subsequent disclosures (that is, regulation also includes rules about disclosures in advance of m aturity) for advertising of deposit accounts. Credit autom atically renewable time accounts unions are governed by a substantially w ith a term of 30 days or less. sim ilar regulation issued by the (Institutions w ill continue to provide National Credit U nion Adm inistration. disclosures w hen these accounts are The act was am ended by the Economic opened.) Accordingly, § 230.5(c) an d the Growth and Regulatory Paperwork corresponding provision in the official Reduction Act of 1996 (1996 Act). staff commentary, comment 5(c)—1, are deleted. II. Regulatory Revisions Technically, the statute could be read On M arch 25, 1998, the Board to require subsequent disclosures for published proposed am endm ents to rollover tim e accounts w ith a m aturity Regulation DD to im plem ent statutory of 31 days. For ease of compliance, the am endm ents that elim inate the Board has elim inated these disclosures requirem ent that institutions provide for rollover tim e accounts w ith a disclosures in advance of m aturity for m aturity of “one m onth or less.” autom atically renew able (rollover) time Subsequent disclosures for accounts accounts w ith a term of 30 days or less, w ith a m aturity of 31 days are not expand an exem ption from certain required u nder this approach, w hich is advertising provisions for signs on the prem ises of a depository institution, and consistent w ith other provisions of Regulation DD that interpret one m onth repeal TISA’s civil liability provisions, to include 31 days. effective September 30, 2001 (63 FR Section 230.8 Advertising 8(e) Exem ption for Certain Advertisem ents 8(e)(2) Indoor Signs Section 263(a) of TISA provides that a reference to a specific interest rate, yield, or rate of earnings in an advertisem ent triggers a duty to state certain additional information, including the annual percentage yield. In 1994, the Congress am ended section 263(c) of the advertising rules to provide that if a rate is displayed on a sign (including a rate board) designed to be view ed only from the interior of an institution, the disclosure requirem ents of section 263 do not apply. A further am endm ent to section 263(c) contained in the 1996 Act expands the exem ption for signs on the prem ises of the depository institution. All signs inside the prem ises of an institution are now exem pt from certain advertising disclosures (including signs that are intended to be view ed from outside the premises). Accordingly, the reference in § 230.8(e) to signs that face outside the prem ises and the corresponding provision in the official staff commentary, com m ent 8(e)(2)(I)-2, are deleted. A ny sign posted outside a depository institution rem ains covered by the advertising provisions unless the sign qualifies for some other exemption, such as the exem ption for electronic media. Section 230.9 Retention E nforcem ent and Record 9(b) Civil Liability Section 271 of TISA, w hich provides for civil liability for violations of the act’s provisions, was repealed by the 1996 Act, effective September 30, 2001. The regulation refers to TISA’s civil liability provisions in § 230.9(b), and has been revised to reflect the effective date of the repeal of Section 271. IV. Regulatory Flexibility Analysis In accordance w ith section 3(a) of the Regulatory Flexibility Act (5 U.S.C. 604), the Board has reviewed the final am endm ents to Regulation DD. Two of the three requirem ents of a final regulatory flexibility analysis u nder this section are (1) a succinct statem ent of the need for and the objectives of the rule and (2) a sum m ary of the issues raised by the public comments, the agency’s assessm ent of the issues, and a statem ent of the changes made in the final rule in response to the comments. These two areas are discussed above. The third requirem ent of the analysis calls for a description of significant alternatives to the rule that w ould Federal Register/Vol. 63, No. 188/Tuesday, September 29, 1998/Rules and Regulations m inim ize the ru le’s economic im pact on small entities and reasons w hy the alternatives were rejected. The final am endm ents will apply to all financial institutions subject to Regulation DD, including small institutions. The am endm ents represent m inor changes to the existing regulation; in some cases, the am endm ents reduce economic burden. Accordingly, the am endm ents should not have a negative economic im pact on small institutions, and, therefore, there were no significant alternatives that w ould have further m inim ized the economic im pact on those institutions. V. Paperwork Reduction Act In accordance w ith the Paperwork Reduction Act of 1995 (44 U.S.C. 3506; 5 CFR 1320 A ppendix A .l), the Board review ed the rule u nder 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 inform ation collection unless it displays a currently valid OMB control number. The OMB control num ber is 7100-0271. The collection of information that is revised by this rulemaking is found in 12 CFR 230—Regulation DD, including A ppendices A and B and Supplem ent I. This inform ation collection is m andatory u nder the Truth in Savings Act (12 U.S.C. 4308) and the Board’s Regulation DD, w hich requires that consum ers be given certain account disclosures. The disclosures assist consum ers in com paring deposit accounts offered by depository institutions, principally through the disclosure of fees, APY, interest rates, and other account terms whenever a consum er requests the information and before an account is opened. The regulation also requires that fees and other inform ation be provided on any periodic statem ent the institution sends to the consumer. The respondents are for-profit financial institutions, including small businesses. Institutions are also required to retain records for tw enty-four m onths as evidence of compliance. No com m ents specifically addressing the b urden estimate were received. The Board also extended the recordkeeping and disclosure requirem ents in connection w ith Regulation DD for three years. The current total annual b urden for this inform ation collection is an estim ated 1,478,395 hours. This am ount reflects the burden estimate of the Federal Reserve System for the 996 state m em ber banks u nder its supervision. The m odified rules for indoor lobby signs and elim ination of subsequent disclosure requirem ents for autom atically renewable tim e accounts w ith terms less than one m onth w ill decrease the frequency of response slightly. The estim ated total annual burden after the revisions w ill be about 1,476,071 hours, a decrease of 2,324 hours. There is estim ated to be no associated capital or start up cost and no annual cost burden. Because the records w ould be m aintained at state mem ber banks and the notices are not provided to the Federal Reserve, no issue of confidentiality arises u nder the Freedom of Information Act. The Board has a continuing interest in the public’s opinions of Federal Reserve collections of information. At any time, com m ents regarding the burden estimate, or any other aspect of this collection of information, including suggestions for reducing the burden, m ay be sent to: Secretary, Board of Governors of the Federal Reserve System, 20th and C Streets, N.W., W ashington, DC 20551; and to the Office of M anagement and Budget, Paperw ork R eduction Project (71000271), W ashington, DC 20503. List of Subjects in 12 CFR Part 230 4. Section 230.9 is am ended by revising paragraph (b) to read as follows: §230.9 Enforcement and record retention. * * * * * (b) Civil liability. Section 271 of the Act contains the provisions relating to civil liability for failure to com ply w ith the requirem ents of the act and this part; Section 271 is repealed effective September 30, 2001. * * * * * SUPPLEMENT I to PART 2 3 0 OFFICIAL STAFF INTERPRETATION PART 230— SUPPLEMENT I [AMENDED] 5. In Supplem ent I to Part 230, in Section 230.5—Subsequent disclosures, under paragraph (c), paragraph 1. is removed. 6. In Supplem ent I to Part 230, in Section 230.8—Advertising, u nder paragraph (e)(2)(i), paragraph 2. is removed. By order of the Board of Governors of the Federal Reserve System, Septem ber 23, 1998. J e n n i f e r J. J o h n s o n , Secretary o f the Board. [FR Doc. 98-26010 Filed 9 -2 8-98 ; 8:45 am] BILLING CODE 6210 -01 -P Advertising, Banks, banking, Consum er protection, Federal Reserve System, Reporting and recordkeeping requirem ents, Truth in savings. FEDERAL RESERVE SYSTEM Text of Revisions [Regulation M; Docket No. R-1004] For the reasons set forth in the preamble, the Board am ends 12 CFR part 230, as set forth below: Consumer Leasing 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. §230.5 [Amended] 2. Section 230.5 is am ended by removing paragraph (c) and redesignating paragraph (d) as new paragraph (c). 3. Section 230.8 is am ended by revising paragraph (e)(2)(i) to read as follows: §230.8 * * Advertising. * * * (e) Exem ption fo r certain advertisem ents. * * * (2) Indoor signs, (i) Signs inside the prem ises of a depository institution (or the prem ises of a deposit broker) are not subject to paragraphs (b), (c), (d) or (e)(1) of this section. * * * * * 52107 12 CFR Part 213 Board of Governors of the Federal Reserve System. ACTION: Final rule. AG EN CY : The Board is publishing a final rule am ending Regulation M, w hich im plem ents the Consum er Leasing Act. The act requires lessors to provide consum ers w ith uniform cost and other disclosures about consum er lease transactions. The final rule adopts several technical am endm ents to the regulation and com m entary concerning lease paym ents, advertisem ents, and the treatm ent of taxes. D A TES: This rule is effective Septem ber 24,1998. Compliance is optional until October 1, 1999. SUMMARY: FO R FU R TH ER INFORMATION C O N T A CT : Kyung Cho-Miller, Staff Attorney, Division of Consum er an d Com munity Affairs, Board of Governors of the Federal Reserve System, at (202) 4 5 2 3667. For users of Telecom m unications Device for the Deaf (TDD) only, Diane Jenkins at (202) 452-3544. SU PPLE M E N T A RY INFORMATION: 52108 Federal Register/Vol. 63, No. 188/Tuesday, September 29, 1998/Rules and Regulations I. Background The Consumer Leasing Act (CLA), 15 U.S.C. 1667-1667e, is im plem ented by the Board’s Regulation M (12 CFR 213). The CLA requires lessors to provide consum ers w ith uniform cost and other disclosures about consum er lease transactions. The act generally applies to consum er leases of personal property in w hich the contractual obligation does not exceed $25,000 and has a term of m ore than four m onths. An autom obile lease is the most comm on type of consum er lease covered by the act. II. Regulatory Revisions O n M arch 25, 1998, the Board published several technical am endm ents to Regulation M (63 FR 14538). Seventeen commenters, representing major leasing com panies and a consum er representative, subm itted comments on the proposed am endm ents; m ost generally supported the revisions. In the same rulem aking, the Board proposed to allow lessors to provide Regulation M disclosures electronically. Sim ilar proposals were m ade under Regulations B (Equal Credit O pportunity), DD (Truth in Savings), and Z (Truth in Lending); an interim rule was issued under Regulation E. The Board anticipates further action on these proposals by year-end. III. Section-by-Section Analysis Section 213.4— Content o f Disclosures 4(f)(8) Lease term In September 1996, Regulation M was revised to require, among other things, that lessors show consum ers a m athem atical progression of how a scheduled paym ent is derived in a m otor vehicle lease. In deriving a scheduled paym ent, the “total of base periodic paym ents” is divided by the num ber of lease paym ents. The caption in the regulation and on the model forms refers to the num ber of lease paym ents as the “lease term .” To avoid confusion, references to the “lease term ” in § 213.4(f)(8) have been changed to “lease paym ents” w ith corresponding changes to the model forms in appendix A of Regulation M. For example, in reflecting the consum er’s legal obligation to make one paym ent u nder a single-payment lease, the figure disclosed under § 213.4(f)(8) should be one (not the lease term such as 24 m onths or 36 months). Despite the revision to the model forms, lessors may continue to use the existing form u n til supplies are exhausted. If properly completed, those forms com ply w ith the requirem ents of the act and regulation, protecting lessors from civil liability u nder sections 130 of the Truth in Lending Act and 185 of the Consumer Leasing Act. The term of the lease (such as 24 m onths or 36 m onths) is not a required disclosure. Lessors may, however, disclose the lease term among the segregated disclosures if they choose. This guidance, included in the preamble to the proposed change, has been incorporated into the commentary, replacing existing com m ent 4(f)(8)—1. Lessors should note, however, that the calculation u nder § 213.4(f)(8) calls for the num ber of payments. Section 213.7—Advertising On April 1,1997, the Board revised Regulation M to im plem ent am endm ents to the act contained in the Economic Growth and Regulatory Paperwork R eduction Act of 1996, w hich stream lined the advertising disclosures for lease transactions (62 FR 15364). Under the act, certain terms in an advertisem ent w ill trigger the disclosure of additional information. A statem ent in a lease advertisem ent that no initial paym ent is required is a “triggering” term that has been added to § 213.7(d)(l)(ii). It had been inadvertently om itted previously. A p p en d ix A —M odel Forms Several technical changes have been m ade to the model forms in appendix A. The model forms for open- and closedend leases in appendix A - l and A -2 have been revised to change the reference under the paym ent calculation (from “Lease term. The num ber of m onths in your lease.” to “Lease payments. The num ber of paym ents in your lease”). Page 2 of the open-end m odel form has been revised; in the “ end of term liability,” the second line of the paragraph following item 3 has been corrected by changing “actual” to read “actual value.” Model form A -3 for a furniture lease has been revised by adding “or delivery “ in the heading “A m ount due at lease signing.” IV. Commentary Provisions Section 213.4— Content o f Disclosures 4(f) Payment Calculation 4(f)(7) Total of Base Periodic Payments For m otor vehicle leases, lessors are required under § 213.4(f) to provide a m athem atical progression of how scheduled lease paym ents are derived. Some lessors have expressed concern about exposure to civil liability if one divides the total of the base periodic paym ents disclosed under § 213.4(f)(7) by the num ber of paym ents in the lease disclosed under § 213.4(f)(8) and then m ultiplies the base periodic payment disclosed under § 213.4(f)(9) by the num ber of paym ents in the lease disclosed under § 213.4(f)(8); the results are different because of rounding. Comment 4(f)(7)—1 has been added to respond to this concern. The comment has been revised from the proposed language for clarity, w ithout substantive change. The anom aly also could be avoided by making adjustm ents to the rent charge. 4(f)(8) Lease Payment. Current com m ent 4(f)(8)—1 has been deleted as unnecessary, and has been replaced by a new com m ent 4(f)(8)—1 that allows lessors to include the lease term among the segregated disclosures. (Generally, lessors m ay not add inform ation to the segregated disclosures unless required by regulation in § 213.3(a)(2) or perm itted to be included among the segregated disclosures. See com m ent 3(a)(2)—2 and comments 1 and 2 to appendix A.) 4(n) Fees and Taxes Several examples are provided in com ment 4 (n )-l to illustrate w hen taxes are disclosed u nder this section. This comm ent has been revised to clarify that taxes w hich are part of the scheduled paym ents are required to be disclosed under § 213.4(n). A p p e n d ix A — M odel Forms Comment 2 to appendix A provides examples of acceptable changes that may be made to the m odel forms. At the request of com m enters, the comment has been revised to clarify that inapplicable disclosures m ay be deleted. V. Regulatory Flexibility Analysis In accordance w ith section 3(a) of the Regulatory Flexibility Act (5 U.S.C. 604), the Board has review ed the final am endm ents to Regulation M. Two of the three requirem ents of a final regulatory flexibility analysis under this section are (1) a succinct statem ent of the need for and the objectives of the rule and (2) a sum m ary of the issues raised by the public comments, the agency’s assessm ent of the issues, and a statem ent of the changes made in the final rule in response to the comments. These two areas are discussed above. The third requirem ent of the analysis calls for a description of significant alternatives to the rule that w ould m inim ize the ru le’s economic im pact on small entities and reasons w hy the alternatives were rejected. The final am endm ents w ill apply to all lessors subject to Regulation M, including small entities. The am endm ents represent relatively small changes to the existing Federal Register/Vol. 63, No. 188/Tuesday, September 29, 1998/Rules and Regulations regulation; in some cases, the am endm ents clarify rights and duties of covered lessors or reduce economic burden. Accordingly, the am endm ents should not have a negative economic im pact on small entities, and, therefore, there were no significant alternatives that w ould have m inim ized further the economic im pact on those entities. VI. Paperwork Reduction Act In accordance w ith the Paperwork Reduction Act of 1995 (44 U.S.C. 3506; 5 CFR 1320 A ppendix A .l), the Board reviewed the final rule u nder the authority delegated to the Board by the Office of M anagement and Budget. The Federal Reserve may not conduct or sponsor, and an organization is not required to respond to, this inform ation collection unless it displays a currently valid OMB control num ber. The OMB control num ber is 7100-0202. The collection of inform ation that is revised by this rulem aking is found in 12 CFR 213— Regulation M, including A ppendices A, B, C, and D and Supplem ent I. This information collection is m andatory u nder the Consumer Leasing Act (CLA) (15 U.S.C. 1667 et seq.) and the Board’s Regulation M. The purpose of the disclosures associated w ith Regulation M is to ensure that lessees of personal property receive meaningful information that enables them to compare lease terms w ith other leases and, w here appropriate, w ith credit transactions. The respondents/recordkeepers are individuals or businesses that regularly lease, offer to lease, or arrange for the lease of personal property u nder a consumer lease, including small businesses. Institutions are also required to retain records for twenty-four m onths as evidence of compliance. No comments specifically addressing the b urden estimate w ere received. The Board also extended the recordkeeping and disclosure requirem ents in connection w ith Regulation M for three years. The current estim ated annual b urden for this inform ation collection is 11,179 hours. It is estim ated that there are 310 disclosure respondents and 15 advertising respondents w ith an average frequency of 120 and 3 responses per respondent each year, respectively. The technical am endm ents clarifying the rules on lease payments, advertisem ents and rounding calculations are estim ated to have no effect on burden. There is estim ated to be no annual cost burden and no associated capital or start up cost. Consum er lease inform ation in or referred to by advertisem ents is available to the public. Disclosures of the costs, liabilities, and term s of consum er lease transactions relating to specific leases are not publicly available. Because the Federal Reserve does not collect any of the information, no issue of confidentiality under the Freedom of Inform ation Act norm ally arises. However, the inform ation may be protected from disclosure u nder the exem ptions (b)(4), (6), and (8) of the Freedom of Information Act (5 U.S.C. 522 (b)(4), (6), and (8)). The Board has a continued interest in the p u b lic’s opinions of Federal Reserve collections of information. At any time, com ments regarding the b urden estimate, or any other aspect of this collection of information, including suggestions for reducing the burden, m ay be sent to: Secretary, Board of Governors of the Federal Reserve System, 20th and C Streets, N.W., W ashington DC 20551; and to the Office of M anagement and Budget, Paperwork R eduction Project (7100-0202), W ashington, DC 20503. 52109 List of Subjects in 12 CFR Part 213 Advertising, Federal Reserve System, Reporting and recordkeeping requirem ents, T ruth in lending. For the reasons set forth in the preamble, the Board am ends Regulation M, 12 CFR Part 213, as set forth below: PART 213— CONSUMER LEASING (REGULATION M) 1. The authority citation for part 213 is revised to read as follows: Authority: 15 U.S.C. 1604; 1667f. 2. Section 213.4 is am ended by revising paragraph (f)(8) to read as follows: § 213.4 * * Content of disclosures. * * * (f) Paym ent calculation. * * * (8) Lease paym ents. The lease paym ents w ith a description such as “the num ber of paym ents in your lease.” * * * * * 3. Section 213.7 is am ended by revising paragraph (d)(l)(ii) to read as follows: §213.7 * * Advertising. * * * (d) Advertising o f term s that require additional disclosure.—(1) Triggering terms. * * * (ii) A statem ent of any capitalized cost reduction or other paym ent (or th at no paym ent is required) prior to or at consum m ation or by delivery, if delivery occurs after consum m ation. * * * * * 4. A ppendix A to part 213 is am ended by revising A ppendix A—1, A ppendix A -2, and A ppendix A -3 to read as follows: BILLING CODE 6210 -01 -P 52110 Federal Register/Vol. 63, No. 188/Tuesday, September 29, 1998/Rules and Regulations Appendix A-l Model Open-End or Finance Vehicle Lease Disclosures Federal Consumer Leasing Act Disclosures Date_______________________ Lessor(s) ________________________________________________ Amount Due at Lease Signing or Delivery Monthly Payments (Itemized below)* is due on Lessee(s) _____________ Other Charges (not p a rt o f y o u r m onthly p aym en t) Your first monthly payment of $ payments of $ the Disposition fee (if you do . followed bv not purchase the vehicle} $ due on o f each month. The total of your You w ill owe an additional amount if the actual value of the vehicle is less than the residual value. monthly payments is $ Total $ Amount Due At Lease Signing or Delivery: Capitalized cost reduction First monthly payment Refundable security deposit Title fees Registration fees $ _ Total Total of Payments (The amount you will have paid by the end of the lease) of Amount Due at Lease Signing or Delivery How the Amount Due at Lease Signing or Delivery will be paid: _______ _______ _______ Net trade-in allowance Rebates and noncash credits Amount to be paid in cash $ $ _______________ _______________ _______________ Total $ Your monthly payment is determined as shown below: Gross capitalized cost. The agreed upon value of the vehicle ($. ) and any items you pay over the lease term (such as service contracts, insurance, and any outstanding prior credit or lease balance)................................................................................................................................... If you want an itemization of this amount, please check this box. d l Capitalized cost reduction. The amount of any net trade-in allowance, rebate, noncash credit, or cash you pay that reduces the gross capitalized c o st....................................................................................................................... Adjusted capitalized cost. The amount used in calculating your base monthly payment....................................... Residual value. The value of the vehicle at the end of the lease used in calculating your base monthly paym ent. Depreciation and any amortized amounts. The amount charged for the vehicle's decline in value through normal use and for other items paid over the lease term ............................................................................. Rent charge. The amount charged in addition to the depreciation and any amortized amounts............................. Total of base monthly payments. The depreciation and any amortized amounts plus the rent charge................. Lease payments. The number of payments in your lease........................................................................................ Base monthly payment............................................................................................................................................. Monthly sales/use ta x ................................................................................................................................................ Total monthly payment . + + = $" Rent and other charges. The total amount of rent and other charges imposed in connection with your lease S Early Termination. You may have to pay a substantial charge if you end this lease early. The charge may be up to several thousand dollars. The actual charge will depend on when the lease is terminated. The earlier you end the lease, the greater this charge is likely to be. Excessive Wear and Use. You may be charged for excessive wear based on our standards for normal use [and for mileage in excess o f _________ miles per year at the rate o f ________ per mile]. Purchase Option at End of Lease Term. [You have an option to purchase the vehicle at the end of the lease term for $ ___________ [and a purchase option fee of $ ________________ ].] [You do not have an option to purchase the vehicle at the end of the lease term.] Other Important Terms. See your lease documents for additional information on early termination, purchase options and maintenance responsibilities, warranties, late and default charges, insurance, and any security interest, if applicable. Federal Register/Vol. 63, No. 188/Tuesday, September 29, 1998/Rules and Regulations Appendix A-l Model Open-End or Finance Vehicle Lease Disclosures 52111 Page 2 of 2 [The following provisions are the nonsegregated disclosures required under Regulation M.] Year Make Description of Leased Property Model Body Style Vehicle ID ft Official Fees and Taxes. The total amount you w ill pay for official and license fees, registration, tide, and taxes over the term o f your lease, whether included with your monthly payments o r assessed otherwise: $ __________________ Insurance. The following types and amounts o f insurance will be acquired in connection with this lease: _________ We (lessor) will provide the insurance coverage quoted above for a total premium cost o f $ ___________________ -------------- You (lessee) agree to provide insurance coverage in the amount and types indicated above. End of Term Liability, (a) The residual value ( $ _______________ ) of the vehicle is based on a reasonable, good faith estimate o f the value o f the vehicle at the end o f the lease term . If the actual value o f the vehicle at that time is greater than the residual value, you will have no further liability under this lease, except for other charges already incurred [and are entided to a credit o r refund o f any surplus.] If the actual value o f the vehicle is less than the residual value, you will be liable for any difference up to $ __________________ (3 times the monthly paym ent). For any difference in excess o f that amount, you will be liable only if: 1. Excessive use or damage [as described in p aragraph ____ ] [representing m ore than normal w ear and use] resulted in an unusually low value at the end of the term. 2. The matter is not otherwise resolved and we win a lawsuit against you seeking a higher payment. 3. You voluntarily agree with us after the end o f the lease term to make a higher payment. Should we bring a lawsuit against you, we must prove that our original estimate o f the value o f the leased property at the end o f the lease term was reasonable and was made in good faith. For example, we might prove that the actual value was less than the original estimated value, although the original estimate was reasonable, because o f an unanticipated decline in value for that type o f vehicle. We must also pay your attorney’s fees. (b) If you disagree w ith the value we assign to the vehicle, you may obtain, at your own expense, from an independent third party agreeable to both o f us, a professional appraisal o f th e _____________ value o f the leased vehicle which could be realized at sale. The appraised value shall then be used as the actual value. Standards for Wear and Use. The following standards are applicable for determ ining unreasonable o r excess w ear and use o f the leased vehicle: Maintenance. [You are responsible for the following maintenance and servicing of the leased vehicle: ------------------------------------------------------------------------------- ]. [We are responsible for the following maintenance and servicing of the leased vehicle: ---------------------------------------------------------------------------- -- ]. Warranties. The leased vehicle is subject to the following express warranties: Early Termination and Default, (a) You may terminate this lease before the end of the lease term under the following conditions: The charge for such early termination is: (b) We may terminate this lease before the end o f the lease term under the following conditions: Upon such termination we shall be entitled to the following charge(s) for: (c) To the extent these charges take into account the value o f the vehicle at term ination, if you disagree with the value we assign to the vehicle, you may obtain, at your own expense, from an independent third party agreeable to both o f us, a professional appraisal o f th e ____________________ value o f the leased vehicle which could be realized at sale. The appraised value shall then be used as the actual value. Security Interest. We reserve a security interest o f the following type in the property listed below to secure performance o f your obligations under this lease: Late Payments. The charge for late payments is: Option to Purchase Leased Property Prior to the End of the Lease. [You have an option to purchase the leased vehicle prior to the end o f the term. The price will be [$ _________________________ /[the method o f determining the price].] [You do not have an option to purchase the leased vehicle.] 52112 Federal Register/ Vol. 63, No. 188/Tuesday, September 29, 1998/Rules and Regulations Appendix A-2 Model Closed-End or Net Vehicle Lease Disclosures Federal Consumer Leasing Act Disclosures D ate______________________ Lessor(s) _________________________________________________ Amount Due at Lease Signing or Delivery Monthly Payments (Itemized below)* is due on Other Charges (not p a rt o f y o u r m o nthly p aym ent) Disposition fee (if you do Your first monthly payment o f $ , followed by payments of $ the $ Lessee(s) _____________ nnt purchase thf* vehicle! Total of Payments (The amount you will have paid by the end of the lease) * due on of each month. The total o f your Total monthly payments is $ $ * Itemization of Amount Due at Lease Signing or Deliv ery Amount Due At Lease Signing or Delivery: How the Amount Due at Lease Signing or Delivery will be paid: Capitalized cost reduction First monthly payment Refundable security deposit Title fees Registration fees $ _______________ _______________ _______________ _______________ _______________ Total Net trade-in allowance Rebates and noncash credits Amount to be paid in cash ____________________ $ _______________ $ _______________ _______________ _______________ _______________ Total $ _______________ Your monthly payment is determined as shown below: Gross capitalized cost. The agreed upon value of the vehicle ($ _______________ ) and any items you pay over the lease term (such as service contracts, insurance, and any outstanding prior credit or lease balance)........................................................................................................................................................................ $ ------------------ If you want an itemization of this amount, please check this box. d Capitalized cost reduction. The amount of any net trade-in allowance, rebate, noncash credit, or cash you pay that reduces the gross capitalized cost...................................................................................................................................... Adjusted capitalized cost. The amount used in calculating your base monthly payment...................................................... Residual value. The value of the vehicle at the end of the lease used in calculating your base monthly payment.............. ....................... ....................... ....................... Depreciation and any amortized amounts. The amount charged for the vehicle's decline in value through normal use and for other items paid over the lease term........................................................................................... Rent charge. The amount charged in addition to the depreciation and any amortized amounts........................................... ....................... ...................... Total of base monthly payments. The depreciation and any amortized amounts plus the rent charge............................... ...................... Lease payments. The number of payments in your lease....................................................................................................... ...................... Base monthly payment............................................................................................................................................................ ....................... Monthly sales/use ta x .............................................................................................................................................................. ^ ----------------.............................................. ...................................................................... ....................................................................................................... = $ Total monthly payment.......................................................................................................................................................... ' ...................... Early Termination. You may have to pay a substantial charge if you end this lease early. The charge may be up to several thousand dollars. The actual charge will depend on when the lease is terminated. The earlier you end the lease, the greater this charge is likely to be. Excessive Wear and Use. You may be charged for excessive wear based on our standards for normal use [and for mileage in excess o f _________ miles per year at the rate o f ________ per mile]. Purchase Option at End of Lease Term. [You have an option to purchase the vehicle at the end of the lease term for $ ___________ [and a purchase option fee of $ ________________ ].] [You do not have an option to purchase the vehicle at the end of the lease term.] Other Important Terms. See your lease documents for additional information on early termination, purchase options and maintenance responsibilities, warranties, late and default charges, insurance, and any security interest, if applicable. Federal Register/Vol. 63, No. 188/Tuesday, September 29, 1998/R ules and Regulations Appendix A-2 Model Closed-End or Net Vehicle Lease Disclosures 52113 Page 2 of 2 [The following provisions are the nonsegregated disclosures required under Regulation M.] Year Make Description o f Leased Property Model Body Style Vehicle ID # Official Fees and Taxes. T he total am ount you w ill pay for official and license fees, registration, title, and taxes o v er the term o f your lease, whether included w ith your m onthly paym ents o r assessed otherw ise: $ ___________________ Insurance. The follow ing types and am ounts o f insurance w ill be acquired in connection w ith this lease: --------------- We (lessor) w ill provide the insurance coverage quoted above for a total prem ium cost o f $ ____________________ --------------- You (lessee) agree to provide insurance coverage in the am ount and types indicated above. Standards for Wear and Use. T he follow ing standards are applicable for determ ining unreasonable o r excess w ear and use o f the leased vehicle: Maintenance. [Y ou are responsible fo r the follow ing m aintenance and servicing o f the leased vehicle: ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- j. [W e are responsible for the follow ing m aintenance and servicing o f the leased vehicle: ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Warranties. The leased vehicle is subject to the following express w arranties: Early Termination and Default, (a) Y ou m ay term inate this lease before the end o f the lease term under the follow ing conditions: T he charge for such early term ination is: (b) W e may term inate this lease before the end o f the lease term under the follow ing conditions: U pon such term ination w e shall be entitled to the follow ing charge(s) for: (c) T o the extent these charges take into account the value o f the vehicle a t term ination, if you disagree w ith the value w e assign to the vehicle, you may obtain, a t your ow n expense, from an independent th ird party agreeable to b oth o f us, a professional appraisal o f t h e _____________________ value o f the leased vehicle w hich could be realized at sale. T he appraised value shall then be used as the actual value. Security Interest. W e reserve a security interest o f the follow ing type in the property listed below to secure perform ance o f your obligations under this lease: Late Payments. The charge for late paym ents is: ________________________________________________________________________________________________________ Option to Purchase Leased Property Prior to the End of the Lease. (Y ou have an option to purchase the leased vehicle p rio r to the end o f the term . T he price w ill be [$ __________________________ /[the m ethod o f determ ining the p rice].] [You do no t have an option to purchase the leased vehicle.] ]. 52114 Federal Register/Vol. 63, No. 188/Tuesday, September 29, 1998/Rules and Regulations Appendix A-3 Model Furniture Lease Disclosures Federal Consumer Leasing Act Disclosures D ate______________________ Lessor(s)__________________________________________________ Item Amount Due at Lease Signing or Delivery First monthly payment $ Refundable security deposit $ Delivery/Installation fee $ $ Total $ Color Lessee (s) ____________ Description of Leased Propi rty Stock # Monthly Payrnents Your first mont lly payment of $ is due on , followed by paymen s of $ due on the of each month. The total of your monthly paymen ts is $ Mfg. Other Charges (not part of your monthly payment) Pick-up fee $ $ Total $ Quantity Total of Payments (The amount you will have paid by the end of the lease) $ Purchase Option at End of Lease Term. [You have an option to purchase the leased property at the end of the lease term for $ rand a purchase option fee of $ 1-1 [You do not have an option to purchase the leased property at the end of the lease term.l Other Important Terms. See your lease documents for additional information on early termination, purchase options and maintenance responsibilities, warranties, late and default charges, insurance, and any security interest, if applicable. [The following provisions are the nonsegregated disclosures required under Regulation M.] Official Fees and Taxes. The total amount you will pay for official fees, and taxes over the term o f your lease, whether included w ith your monthly payments or assessed otherwise: $ __________________. Insurance. The following types and amounts o f insurance will be acquired in connection with this le a se :________________________________________________ ______ We (lessor) will provide the insurance coverage quoted above for a total premium cost of $ __________________ . ______ You (lessee) agree to provide insurance coverage in the amount and types indicated above. Standards for Wear and Use. The following standards are applicable for determining unreasonable or excess wear and use o f the leased property: Maintenance. [You are responsible for the following maintenance and servicing o f the leased property: •] [We are responsible for the following maintenance and servicing of the leased property: •] Warranties. The leased property is subject to the following express warranties: Early Termination and Default, (a) You may terminate this lease before the end o f the lease term under the following conditions: The charge for such early termination i s : _____________________________________________________________________________________________________. (b) We may terminate this lease before the end of the lease term under the following conditions:___________________________________________________ Upon such termination we shallbe entitled to the following charge(s) f o r :___________________________________________ _____________________________ . Federal Register/Vol. 63, No. 188/Tuesday, September 29, 1998/Rules and Regulations Appendix A-3 Model Furniture Lease Disclosures Early Termination and Default, 52115 Page 2 of 2 (continued) (c) T o the extent these charges take into account the value o f the leased property at term ination, if you disagree w ith the value w e assign to the property, you m ay obtain, at your ow n expense, from an independent third party agreeable to both o f us, a professional appraisal o f the value o f the property w hich could be realized at sale. T he appraised value shall then be used as the actual value. Security Interest. W e reserve a security interest o f the follow ing type in the property listed below to secure perform ance o f your obligations under this lease: Late Payments. T he charge fo r late paym ents is: _________________________________________________________________________________________________ . Purchase Option Prior to the End of the Lease Term. [You have an option to purchase the leased property p rio r to the end o f the term . The price w ill be [ $ __________ ]/the m ethod o f determ ining the price].] [Y ou do not have an option to purchase the leased property.] BILLING CODE 6 210 -01 -C 5. In Supplem ent I to Part 213— Official Staff Commentary to Regulation M, u nder Section 213.4—Content of Disclosures, the following am endm ents are made: a. A new paragraph 4(f)(7) Total o f Base Periodic P aym ents is added in num erical order. b. The heading to paragraph 4(f)(8) and paragraph 1. are revised. c. U nder paragraph 4(n) Fees and taxes, paragraph l.ii. is revised. d. U nder A p p e n d ix A —M odel Forms, paragraph 2.v. is revised. The addition and revisions read as follows: ii. Taxes that are part of the scheduled paym ents are reflected in the disclosure u n d er § 213.4(c), (f), and (n). * * * * * Appendix A—Model Forms * * * * * 2. Exam ples o f acceptable changes. * * * v. Deleting or blocking out inapplicable disclosures, filling in “N/ A ” (not applicable) or “ 0,” crossing out, leaving blanks, checking a box for applicable items, or circling applicable items (this should facilitate use of m ultipurpose standard forms). * * * * * Supplement I to Part 213— Official Staff Commentary to Regulation M By order of the Board of Governors of the Federal Reserve System, September 23,1998. * J e n n i f e r J. J o h n s o n , * * * * Section 213.4— Content o f Disclosures * * * * * 4(f)(7) Total of Base Periodic Payment 1. Accuracy o f disclosure. If the periodic paym ent calculation under § 213.4(f) has been calculated correctly, the am ount disclosed under § 213.4(f)(7)—the total of base periodic paym ents—is correct for disclosure purposes even if that am ount differs from the base periodic paym ent disclosed u nder § 213.4(f)(9) m ultiplied by the num ber of lease paym ents disclosed u nder § 213.4(f)(8), w hen the difference is due to rounding. * * * * * 4(f)(8) Lease Payment 1. Lease Term. The lease term may be disclosed among the segregated disclosures. * * * * * 4(n) Fees and taxes. 1. Treatm ent o f certain taxes. * * * Secretary of the Board. [FR Doc. 98-26011 Filed 9-28-98; 8:45 am] BILLING CODE 6 210 -01 -P FEDERAL RESERVE SYSTEM 12 CFR Part 205 [Regulation E; Docket No. R-1007] Electronic Fund Transfers Board of Governors of the Federal Reserve System. ACTION: Final rule; technical am endm ents. A G EN CY : The Board is publishing a final rule under Regulation E revising the tim e periods for investigating alleged errors involving point-of-sale and foreign-initiated transactions. The former rule extended the statutory time periods for these transactions to allow financial institutions a longer period to investigate before they m ust provisionally credit an account and a longer period to complete an SUMMARY: investigation. The final rule requires financial institutions to provisionally credit an account w ithin 10 business days (rather than 20) and leaves in place the 90 calendar day period to complete the investigation of an alleged error. At the same time, the Board is extending the tim e periods to provisionally credit funds and investigate claims involving new accounts. The rule applies to claims m ade w ith in 30 calendar days after an account is opened. The rule allows 20 business days for resolving an alleged error and up to 90 calendar days for com pleting the investigation. D A TES: This rule is effective September 24,1998. Compliance is optional until A pril 1, 1999. FO R FU R TH ER INFORMATION C O N T A CT : John C. W ood or Jane Jensen Cell, Senior Attorneys, Division of Consumer and Com m unity Affairs, Board of Governors of the Federal Reserve System, at (202) 452-2412 or (202) 452-3667. For users of Telecom m unications Device for the Deaf (TDD) only, contact Diane Jenkins at (202) 452-3544. SU PPLE M E N T A RY INFORMATION: I. Background The Electronic Fund Transfer Act (EFTA), 15 U.S.C. 1693—1693r, provides a basic framework establishing the rights, liabilities, and responsibilities of participants in electronic fund transfer (EFT) systems. The Board’s Regulation E (12 CFR Part 205) im plem ents the act. Types of transfers covered by the act and regulation include transfers initiated through an autom ated teller m achine (ATM), point-of-sale (POS) term inal, autom ated clearinghouse, telephone bill-paym ent system, or hom e banking program. The rules prescribe restrictions on the unsolicited issuance of ATM cards and other access devices; 52116 Federal Register/Vol. 63, No. 188/Tuesday, September 29, 1998/Rules and Regulations disclosure of terms and conditions of an EFT service; docum entation of EFTs by m eans of term inal receipts and periodic account statements; lim itations on consum er liability for unauthorized transfers; procedures for error resolution; and certain rights related to preauthorized EFTs. II. Regulatory Revisions Error Resolution—POS and Foreign Transactions The EFT A requires a financial institution to investigate and resolve a consum er’s claim of error—for an unauthorized EFT, for example—w ithin specified time limits. W ithin 10 business days after receiving notice of an alleged error, an institution m ust either resolve the claim or provisionally credit the consum er's account w hile continuing to investigate. In the latter case, the institution m ust resolve the claim no later than 45 calendar days after receiving notice. For foreign-initiated and POS transactions, Regulation E provides longer tim e periods adopted in 1982 and 1984, respectively. The regulation allows 20 business days to resolve a claim of error (or to provisionally credit an account if additional time is needed to investigate), and u p to 90 calendar days to com plete the investigation. The longer tim e periods generally allow issuers to avoid provisionally crediting an account before the investigation is complete. In M arch 1998, the Board proposed to elim inate the extended time periods for investigating and resolving alleged errors in foreign-initiated transactions and POS transactions (63 FR 14555, M arch 25, 1998). The im petus for the proposal was the increased use of off line debit cards that can be used w ithout a personal identification num ber (PIN), often referred to as “check cards.” The cards are used by signing a sales slip (much like a credit card), and may increase the risk of unauthorized access to a consum er’s asset account. In September 1997, a House Banking Subcommittee held a hearing on w hether additional consum er protections are needed for off-line debit cards. At that hearing, the Board testified that it w ould reexam ine its extended tim ing rules for resolving claims of errors for POS transactions. The Board noted that the im portance of more prom pt recrediting of consum ers’ funds pending investigation may outweigh any related compliance burden, especially in the case of an account that can be accessed w ithout PIN protection. The Board noted that technological advances allow financial institutions to investigate claims of error m ore quickly than in the past, and thus the extended tim e periods may no longer be needed. The Board received 55 com ments on the proposal to reduce the extended time periods for POS and foreign transactions, prim arily from financial institutions and their trade associations. About 45 commenters addressed the proposed reduction from 90 to 45 days in the tim e allow ed for completing an investigation; the m ajority opposed the reduction. Those commenters stated that financial institutions still need the additional tim e to research claims, get inform ation from the consumer, and obtain docum entation such as receipts from the m erchant. Commenters noted that institutions may need additional tim e to investigate foreign-initiated transactions because of differences in technological capabilities, business customs, and language barriers. Several com menters believed that reducing the time to complete the investigation from 90 to 45 days w ould result in losses w here financial institutions provide final credit only to later discover that the claim was not valid. M any of those commenters did not object, however, to reducing the time period for providing provisional credit to 10 days. They recognized that in some situations it may be a hardship for a consum er to w ait 20 business days before receiving credit for the am ount of the alleged error. These commenters suggested th at the Board consider reducing the tim e period for provisional crediting w hile retaining the extended time period for completing the investigation. In response to comments and upon further analysis, the Board is revising the tim e periods for claims involving POS and foreign-initiated transactions to require institutions to provide provisional credit w ithin 10, rather than 20 business days. The Board believes that the change w ill benefit consumers because they now w ill have access to their funds through provisional crediting sooner. The 90-day time period to complete the investigation rem ains unchanged. By leaving in place the 90-day tim e period, financial institutions w ill continue to have adequate tim e to complete the investigation and resolve the alleged error. Because POS and foreign transactions are more likely to involve occasional difficulty and delay in obtaining necessary inform ation for the reasons discussed above, the Board believes that this extended time frame rem ains appropriate. To take advantage of the longer tim e period (90 days) for resolving claims involving POS and foreign-initiated transactions, a financial institution m ust have disclosed these longer tim e periods. Financial institutions may disclose the time periods by making appropriate alterations to the error resolution notice in appendix A. Error Resolution— N ew A ccounts In May 1996, the Board proposed to am end Regulation E to extend the error resolution tim e periods for new accounts, to address concerns of financial institutions (61 FR 19696, May 2,1996). The problem arises w hen an individual opens an account w ith the intent to defraud. Such individuals m ay open an account, w ithdraw all or a large portion of the deposited funds through ATMs, and file a claim w ith the financial institution disputing the ATM transactions. Often the individual receives provisional credit because the financial institution is unable to conclude research of the claim (such as by obtaining photographic evidence from a nonproprietary ATM) w ith in 10 business days of a claim. Once provisional credit is provided, the individual im m ediately w ithdraw s those funds and abandons the account. Institutions believe that having more tim e to investigate errors involving new accounts w ould enable them to lim it their losses and better control this type of fraud. The Board proposed to allow 20 business days (rather than 10) for investigating an error before an institution m ust provisionally credit, and up to 90 calendar days (rather than 45) for resolving the claim. The Board solicited com m ent on the proposed extensions of time and on w hether consum er protections relating to error resolution w ould be adversely affected. The Board also proposed a definition of a new account, consistent w ith the definition in Regulation CC, w hich im plem ents the Expedited Funds A vailability Act. U nder Regulation CC, an account is considered a new account during the first 30 calendar days after the account is established. Comments on the proposed rule, prim arily from financial institutions and their trade associations, were generally favorable. But in light of the Board’s com m itm ent to reconsider the tim e periods applicable to POS and foreigninitiated transactions, the Board deferred final action on the new -account proposal. The majority of commenters supported the extension of tim e for resolving errors involving new accounts. They believed that the additional time Federal Register/Vol. 63, No. 188/Tuesday, September 29, 1998/Rules and Regulations w ould not adversely affect consumers and w ould help financial institutions lim it fraud. Several commenters expressed concern w ith the proposed time frame. Commenters suggested that the Board allow an institution up to 30 business days to provide provisional credit so that financial institutions have enough tim e to obtain inform ation from nonlocal banks. Some commenters urged the Board to revise the definition of a new account to apply to EFTs that occur 45 or up to 120 calendar days after the account is opened (instead of 30). These commenters believed that financial institutions need the longer tim e to establish the consum er’s transaction pattern. Other commenters believed that the outside lim it for resolving claims should be betw een 45 and 60 days rather than 90 days. They believed it should not take financial institutions 90 days to receive the information necessary to resolve a claim. U pon further analysis, the Board believes the time frames that were proposed are appropriate. Therefore, Regulation E is am ended, pursuant to the Board’s section 904(c) authority u n d er the EFTA to provide for adjustm ents and exceptions in the regulation, to extend the tim e periods for resolving errors that involve new accounts. An institution m ust provisionally credit a new account if it takes longer than 20 business days to resolve an error, and it has up to 90 calendar days to complete the investigation and resolve the claim. To provide consistency and ease regulatory compliance, the rule tracks the definition of “new account” in Regulation CC (12 CFR 229.13(a)(2)). Thus, the rule applies to EFTs made during the first 30 calendar days after the first deposit to the account is made. The rules in Regulation E also parallel the interpretations of “new account” in Regulation CC. For example, an account is not considered a new account if a custom er had another account at the financial institution for at least 30 calendar days. The extended tim e periods apply to all EFTs that occur w ithin this 30-day tim e period, including those for POS or foreign transactions. Therefore, if an alleged error concerns a POS or foreign EFT to or from a new account, financial institutions may take up to 20 business days to resolve the claim (or to provisionally credit an account if additional tim e is needed to investigate), and up to 90 calendar days to complete the investigation. The Board believes these tim e periods strike the appropriate balance betw een the need for consum ers to have access to their funds and the need of financial institutions to combat fraud. To use the longer time periods for resolving errors for new accounts, a financial institution m ust disclose these longer tim e periods. Financial institutions m ay disclose the time periods by making appropriate alterations to the error resolution notice in appendix A. Technical A m en d m en t to Error Resolution Notice In 1996, the Board am ended the error resolution procedures (§ 205.11) to allow institutions three days to notify the consum er about the outcome of its investigation in all cases. Before that time, the three-day rule applied only if the institution found that an error had n ot occurred. The Board has revised the text of the m odel error resolution notice (A ppendix A, paragraph A -3) to conform the notice to § 205.11 as amended. III. Regulatory Flexibility Analysis In accordance w ith section 3(a) of the Regulatory Flexibility Act (5 U.S.C. 604), the Board has reviewed the final am endm ents to Regulation E. Two of the three requirem ents of a final regulatory flexibility analysis u nder this section are (1) a succinct statem ent of the need for and the objectives of the rule and (2) a sum m ary of the issues raised by the public comments, the agency’s assessm ent of the issues, and a statem ent of the changes m ade in the final rule in response to the comments. These two areas are discussed above. The third requirem ent of the analysis is a description of significant alternatives to the rule that w ould m inim ize the ru le’s economic im pact on small entities and reasons w hy the alternatives were rejected. The final am endm ents w ill apply to all financial institutions subject to Regulation E, including small institutions. The Initial Disclosure: Initial terms ................................................................................................................................. Change in te rm s ........................................................................................................................ 52117 am endm ents represent relatively m inor changes to the existing regulation; in some cases, the am endm ents clarify rights and duties of covered institutions or reduce economic burden. Accordingly, the am endm ents should not have a negative economic im pact on small institutions, and, therefore, there were no significant alternatives that w ould have further m inim ized the economic im pact on those institutions. IV. Paperwork Reduction Act In accordance w ith the Paperwork Reduction Act of 1995 (44 U.S.C. 3506; 5 CFR 1320 A ppendix A .l), the Board review ed the final rule u nder the authority delegated to the Board by the Office of M anagement and Budget. The Federal Reserve may not conduct or sponsor, and an organization is not required or respond to, this inform ation collection unless it displays a currently valid OMB control number. The OMB control num ber is 7100-0200. The collection of inform ation that is revised by this rulem aking is found in 12 CFR Part 205 and in A ppendix A. This inform ation is m andatory (15 U.S.C. 1693 et seq.) to evidence com pliance w ith the requirem ents of the Regulation E, Electronic Funds Transfer (EFT). The inform ation is used to ensure adequate disclosure of basic terms, costs and rights relating to EFT services provided to consum ers. The respondents and recordkeepers are forprofit financial institutions, including small businesses. Institutions are also required to retain records for twentyfour m onths as evidence of compliance. No com m ents specifically addressing the b urden estimate were received. The Board also extended the recordkeeping and disclosure requirem ents in connection w ith Regulation E for three years. It is estim ated that there are 851 respondent/ recordkeepers w ith an annual b u rd en of 462,839 hours, as show n in the table below. The final rule w ill reduce the tim e periods allow ed for investigating alleged errors involving point-of-sale (POS) and foreign-initiated transactions. The Board is also am ending its rule to perm it longer tim e periods to investigate claims involving new accounts. These changes are estim ated to have no effect, on average, on reporting burden. Number of respond ents Estimated annual fre quency 851 851 250 340 Estimated response time (min utes) 2.50 1.00 Estimated annual burden hours 8,865 4,822 52118 Federal Register/Vol. 63, No. 188/Tuesday, September 29, 1998/Rules and Regulations Number of respond ents Estimated annual fre quency 851 851 851 851 71,990 420 12,800 8 Transaction disclosures: Terminal re ce ip ts....................................................................................................................... Deposit verifications .................................................................................................................. Periodic disclosures .................................................................................................................. Error resolution rules ................................................................................................................. Estimated response time (min utes) Estimated annual burden hours 0.25 1.50 1.00 30.00 462,839 Total .................................................................................................................................... Since the Federal Reserve does not collect any of the information, no issue of confidentiality norm ally arises. However, the inform ation may be protected from disclosure u n d er the exem ptions (b)(4), (6), and (8) of the Freedom of Information Act (5 U.S.C. 522 (b)(4), (6), and (8)). The disclosures and inform ation about error allegations are confidential betw een the institutions and the consupier. The Board has a continuing interest in the public’s opinions of Federal Reserve collections of information. At any time, com m ents regarding the burden estimate, or any other aspect of this collection of information, including suggestions for reducing the burden, m ay be sent to: Secretary, Board of Governors of the Federal Reserve System, 20th and C Streets, N.W., W ashington, DC 20551; and to the Office of Management and Budget, Paperw ork Reduction Project (71000200), W ashington, DC 20503. List o f Subjects in 12 CFR Part 205 Banks, banking, Consumer protection, Electronic fund transfers, Federal Reserve System, Reporting and recordkeeping requirements. Text of Final Rule Pursuant to the authority granted in sections 904 (a) and (c) of the Electronic F und Transfer Act, 15 U.S.C. 1693b (a) and (c), and for the reasons set forth in the preamble, the Board am ends 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. 1693-1693r. 2. Section 205.11 is am ended by revising paragraph (c)(3) as follows: § 205.11 Procedures for resolving errors. * * * * * (c) * * * (3) Extension o f tim e periods. The tim e periods in paragraphs (c)(1) and (c)(2) of this section are extended as follows: (i) The applicable time is 20 business days in place of 10 business days under paragraphs (c)(1) and (c)(2) of this section if the notice of error involves an electronic fund transfer to or from the account w ithin 30 days after the first deposit to the account was made. (ii) The applicable tim e is 90 days in place of 45 days under paragraph (c)(2) of this section, for completing an investigation, if a notice of error involves an electronic fund transfer that: (A) Was not initiated w ithin a state; (B) Resulted from a point-of-sale debit card transaction; or (C) Occurred w ithin 30 days after the first deposit to the account was made. * * * * * 3. In A ppendix A to Part 205, in A 3 MODEL FORMS FOR ERROR RESOLUTION NOTICE (§§ 205.7(b)(10) and 205.8(b)), the undesignated second and third paragraphs following paragraph (a)(3) are revised to read as follows: 255,265 8,936 181,547 3,404 Appendix A To Part 205—Model Disclosure Clauses and Forms * * * * * A -3— MODEL FORMS FOR ERROR RESOLUTION NOTICE (§§205.7(b)(10) and 205.8(b)) (a) Initial and annual error resolution notice (§§ 205.7(b)(10) and 205.8(b)). * * * * * We w ill determ ine w hether an error occurred w ithin 10 business days after we hear from you and w ill correct any error prom ptly. If w e need more time, however, we may take up to 45 days to investigate your com plaint or question. If we decide to do this, w e w ill credit your account w ithin 10 business days for the am ount you think is in error, so that you w ill have the use of the money during the tim e it takes us to complete our investigation. If w e ask you to put your com plaint or question in writing and we do not receive it w ithin 10 business days, we m ay not credit your account. We w ill tell you the results w ithin three business days after completing our investigation. If w e decide that there was no error, w e w ill send you a w ritten explanation. You m ay ask for copies of the docum ents that we used in our investigation. * * * * * By order of the Board of Governors of the Federal Reserve System, September 23, 1998. Jennifer J. Johnson, Secretary o f the Board. [FR Doc. 98-26012 Filed 9-28-98; 8:45 am] BILLING CODE 6210 -01 -P
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