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F ederal Reserve Bank
DALLAS. TEXAS
of
D allas
75222
Circular No. 76-102
July 21, 1976
American Revolution Bicentennial
PUBLIC HEARING ON PROPOSALS TO AMEND REGULATION Z
TO IMPLEMENT THE CONSUMER LEASING A C T OF 1976
TO ALL BANKS, OTHER CREDITORS,
AND OTHERS CONCERNED IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
T h e B o a r d of G o v e r n o r s of t h e F e d e r a l R e s e r v e S y s te m h a s i s s u e d for
co m m en t p r o p o s e d a m e n d m e n t s to Its R e g u l a ti o n Z, T r u t h - i n - L e n d i n g , to im p le m e n t
t h e C o n s u m e r L e a s i n g A c t of 1976 r e q u i r i n g d i s c l o s u r e s o f t h e t e r m s u n d e r w h ic h
p e r s o n a l p r o p e r t y is l e a s e d . A h e a r i n g on t h e m a t t e r is s c h e d u l e d fo r A u g u s t 3,
1976. T h e A ct w ill b e c o m e e f f e c tiv e on M a r c h 23, 1977.
T h e A c t a p p l i e s to t h e l e a s in g fo r p e r s o n a l , f a m ily , o r h o u s e h o l d u s e of
p e r s o n a l p r o p e r t y for w h i c h t h e total c o n t r a c t u a l o b l i g a ti o n is le s s t h a n $ 25,000.
T h e A ct p l a c e s c e r t a i n lim its on t h e lia b ility of t h e p e r s o n l e a s i n g t h e p r o p e r t y a t
t h e e n d of t h e l e a s e t e r m , r e q u i r e s m e a n in g f u l a n d a c c u r a t e d i s c l o s u r e b y t h e firm
to w hom t h e p r o p e r t y b e l o n g s , a n d r e g u l a t e s t h e t e r m s of l e a s e a d v e r t i s i n g .
It is i n t e n d e d t h a t t h e d i s c l o s u r e s r e q u i r e d u n d e r t h e r e g u l a t i o n e n a b l e
a c o n s u m e r to c o m p a r e th e total c o s t of l e a s in g p e r s o n a l p r o p e r t y w ith t h e c o s t of
b u y i n g t h e s a m e p r o p e r t y a n d r e v e a l t h e a d d i tio n a l a m o u n t, if a n y , w h i c h is o w ed
a t t h e e n d of t h e le a s e t e r m .
In i n v i t i n g c o m m e n t o n its p r o p o s a l s , t h e B o a r d a s k s p a r t i c u l a r l y fo r
co m m en t r e l a t i n g to t h e r e q u i r e m e n t s it is p r o p o s i n g r e l a t i n g to t h e r e s i d u a l li a b il
ity of t h e le a s e e u n d e r c e r t a i n c o n t r a c t s .
A n y o n e w h o w i s h e s to p a r t i c i p a t e in t h e h e a r i n g s h o u l d file a w r i t t e n
r e q u e s t w ith th e S e c r e t a r y , B o a r d o f G o v e r n o r s o f th e F e d e r a l R e s e r v e S y s t e m ,
W a s h i n g to n , D . C . 20551, to b e r e c e i v e d no l a t e r t h a n J u l y 28. T h e h e a r i n g is s e t
fo r 10 a . m . A u g u s t 3 on t h e T e r r a c e level o f t h e B o a r d ' s A n n e x b u i l d i n g , 20th a n d
C S t r e e t s , N .W . in W a s h i n g to n .
C om m ent o n t h e p r o p o s e d a m e n d m e n t s w ill b e r e c e i v e d b y t h e B o a r d
t h r o u g h A u g u s t 16.
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
- 2 -
P r i n t e d o n t h e e n c l o s e d p a g e s is a c o p y o f t h e p r o p o s a l s a s t h e y a p p e a r e d
in t h e FEDERAL REGISTER o n J u l y 9 , 1976, a n d t h e B o a r d ' s n o ti c e o f p u b l i c h e a r i n g
o n t h e p r o p o s a l s d a t e d J u l y 14, 1976. A n y q u e s t i o n s a b o u t t h e p r o p o s e d a m e n d
m e n ts s h o u l d b e d i r e c t e d to G e o r g e H . M cE iroy o f o u r R e g u l a t i o n s D e p a r t m e n t a t
(214) 651-6169.
S in ce rely y o u r s ,
T . W. P la n t
F i r s t V ic e P r e s i d e n t
Enclosures
FEDERAL RESERVE SYSTEM
[1 2 C . F . R .
P a r t 226]
[Reg. Z]
[Docket No. R-0048]
PART 226--TRUTH IN LENDING
Notice of Hearing on Proposed Amendments to
Regulation Z to Implement the Consumer Leasing
On July
Act
9, 1976, the Board of Governors published for comment
in the Federal Register (41 FR 28313) proposed amendments to Regula
tion Z to implement the Consumer Leasing Act of 1976 (Pub. L. 94-240).
To aid
in its consideration of this proposal, the Board hasscheduled
an informal hearing on issues presented by the proposed
amendments on
Tuesday, August 3, 1976.
The purpose of the hearing is to solicit comment on the pro
posed amendments generally.
In addition, the Board specifically requests
comments on the following issues of interest:
(§ 226.15),
(1) disclosure requirements
(2) residual liability disclosures (§ 226.15(b) (15)), (3) any
unique concerns of multiple item lessors, and (4) the integration of the
proposal into Regulation Z.
The scheduled hearing will be held before available members
of the Board on the Terrace level of the Martin Building at 20th and
C Streets, N.W., Washington, D.C., on August 3, 1976, beginning at 10 a.m.
The proceeding will consist of presentations of statements in oral and
written form.
-2-
Any persons desiring to give testimony, present evidence,
or otherwise participate in the hearing should file with the Secretary
of the Board of Governors of the Federal Reserve System, Washington, D.C.
20551, to be received by July 28, 1976, a written request containing the
names and affiliation of witnesses who propose to appear, the amount of
time desired for testimony, and a summary of the matters concerning
which petitioner wishes to give testimony or submit evidence.
If pos
sible, prepared statements in writing should be presented at the time
of the hearing.
All such communications will be made available for in
spection and copying in Room 1118 of the Board Building.
All parties will be given until August 16, 1976, to submit
such additional material related to the issues raised at the hearing,
or any other issues in the proposed regulations, as they desire.
Inter
ested persons need not participate in the oral presentation to have
their views considered but may submit their views in writing to be
received by the Secretary no later than August 16, 1976.
Written com
ments, as they are received, will be made available for inspection and
copying in Room 1118 in the Board Building.
This notice is published pursuant to 5 U.S.C. § 553(b) and
§ 262.2(a) of the Rules of Procedure of the Board of Governors of the
Federal Reserve System (12 C.F.R. § 262.2(a)).
By order of the Board of Governors, July 14, 1976.
(signed) Theodore E. Allison
Theodore E. Allison
Secretary of the Board
[SEAL]
(“the Regulation”) to Implement the
Consumer Leasing Act of 1976 (“the
Act”) (Pub. L. 94-240) enacted on
March 23, 1976, which amended the
Truth In Lending Act (15 U.8.C. Chapter
41,1601 et seq.). The Act, which requires
the Board to Issue Implementing regula
tions and becomes effective March 23,
1977, provides for the disclosure of cer
tain information In leases of personal
property primarily for personal, family
or household purposes, where the total
contractual obligation is less than
$25,000, and the term is greater than
four months. The Act also limits the
liability of the lessee at the end of the
lease term and assures meaningful and
accurate disclosures in advertising of
leasing terms.
The Board has set forth the proposed
regulations implementing the Act as
amendments to Regulation Z. This step
eliminates the duplication of sections of
Regulation Z that would be necessary
for a separate leasing regulation. It also
provides a simple format for lease dis
closures and permits lessors, many of
whom may be familiar with Regulation
Z, to refer to a body of experience gained
under that Regulation. Many of the
amendments are technical; they merely
implement the statutory language. The
major leasing disclosure provisions have
been added as a new section (§ 226.15 >,
E x t r a c t F rom
and other additions have been made to
FEDERAL REGISTER
the definitional section (§ 226.2), the
general disclosure section (§ 226.6), the
V OL. 41, NO. 133
advertising section (§ 226.10), and the
exemption of State regulated transac
F r i d a y , J u l y 9 , 1976
tions section (§226.12).
p p . 28313 - 28317
A more detailed discussion of the pro
posal follows.
1. The findings and purpose of the
Consumer Leasing Act are incorporated
in § 226.1 of the Regulation. This section
also outlines where responsibility for ad
ministrative enforcement resides and the
penalties and liabilities for noncompli
ance. The proposed amendments also
make reference to section 185(b) of the
Act which provides for lessor liability
under section 130 of Truth in Lending to
any person who suffers actual damage
because of a violation of the lease adver
tising requirements.
2. The definitions of the terms “con
sumer lease,” “lessee,” “lessor” and “per
sonal property” as found In the Act are
included in § 226.2 with the other defini
tions of Regulation Z. It was not neces
sary to include the terms “security” and
“security interest” as those terms are
presently defined in §226.2(gg). The
Board proposes three additional defini
tions to add clarity to the Regulation and
to facilitate comparison of lease terms by
consumers. The proposed terms are: “ag
gregate cost of the lease,” “fair market
value at consummation” and “realized
FEDERAL RESERVE SYSTEM
value.” The following example is pro
vided to illustrate the use of the terms
[12CFR Part226]
“aggregate cost of the lease” and “fair
[Reg. Z; D ocket No. R-0048]
market value at consummation.” It is
TRUTH IN LENDING
merely an example and Is not Intended to
Proposed Amendments to Regulation Z to set a pattern or form for disclosure. The
Implement the Consumer Leasing Act
example also provides the differential re
The Board Is publishing for comment quired to be disclosed in proposed S 226.proposed amendments to Regulation Z 15(b) (15) (1).
Example of Disclosure under 1228.15(b)
( » ) (»):
Pair market value a t consummation
(cost to lessor o f le u e property
Including m arkup)_____________ $5,800
Monthly payments (24-month lea se):
Rental _______________________
Lease charge-------------------------T o ta l............................................
T o tal of periodic p a y m e n ts_
1. T o tal of periodic p a y m e n ts____
2. C ash
paym ent
or
tra d e -in
a llo w a n c e ____________________ t
3. E stim a te d fa ir m a rk e t v alu e o f
lease p ro p e rty a t e n d te rm ____
100
20
120
2,880
2, 880
400
3,000
Aggregate cost o f th e lease_________
6,280
Aggregate co st o f th e lease------------6,280
Pair m ark e t value a t c o n su m m a tio n . —5,800
480
The Board asks that comments be ad
dressed to these definitions as well as to
any need for additional definitions. The
existing definitions of “advertisement”
(§ 226.2(d)), “arrange for the extension
of credit” (§ 226.2(h)), consummation
(§ 226.2 (kk)), and one pertaining to the
construction of regulatory terms (§ 226.2
(Jj)) also have been adjusted to accom
modate the Consumer Leasing Act. Ap
propriate letter designations for the defi
nitions will be provided in the final regu
lations.
3. Those paragraphs of § 226.6 relating
to inconsistent State requirements, addi
tional information, multiple creditors
and customers, unknown information es
timates, effect of subsequent occurrences
and preservation and inspection of evi
dence of compliance are modified to in
clude references to leasing where neces
sary to provide general standards and
guidance in making lease disclosures. At
tention is directed to § 226.6(f) which
permits estimates where information re
quired to be disclosed is unknown at the
time of disclosure.
4. The advertising provisions of the
Consumer Leasing Act (section 184) are
incorporated into the existing advertis
ing provisions of Regulation Z. The gen
eral advertising rule is expanded to pro
hibit a lease advertisement at specific
amounts or terms unless the lessor cus
tomarily leases or will lease the property
for those amounts or at those terms. Pro
vision is made for the use of charts or
tables in multi-page or catalog lease ad
vertising. The Board is interested in re
ceiving comments concerning any spe
cial problems posed by the advertising
disclosure requirements including those
regarding merchandise tags used on
property to be leased which is on display
for potential lessees.
5. As Is available under Truth in Lend
ing, any State may apply for and receive
an exemption from the Act’s require
ments of certain State regulated leasing
transactions and the Board will subse
quently provide procedures and criteria
for exemption applications. The regula
tion provides that in order for an exemp
tion to be granted, the State law must
either be substantially similar to the
Federal Act or afford greater protection
and benefit to lessees than does the Fed
eral law. An applying S tate m ust also
dem onstrate th a t there Is adequate provlslpn for enforcem ent.
6. M ost of th e lease disclosure re
quirem ents reflect th e specific provisions
contained in th e Consumer Leasing Act.
Generally, th e disclosures m ust be made
together on one side of either th e lease
contract or a separate disclosure sta te
m ent. Because of th e practical difficulty
in m ultiple item leases of describing all
th e property leased on one page together
w ith th e other required disclosures, the
Regulation perm its th e use of a separate
statem ent or statem ents containing the
description incorporated by reference in
th e disclosure statem ent.
In addition to th e disclosures enum er
ated in the Act, th e Board proposes to
require, in open end leases, a statem ent
of th e lim its placed by th e Act on the
lessee’s liability a t th e end of th e lease
term and of th e fa c t th a t the lessee has
th e opportunity to procure an appraisal
of th e leased property. These have been
included because th e enum erated dis
closure in section 182 th a t the lessee may
have Mid term liability is incomplete
w ithout a statem ent of th e lim itations on
th a t liability which the additional dis
closure would supply. Similarly, disclo
sure of th e presum ptions concerning end
term liabilities would be u nfair to lessors
w ithout disclosing th a t agreem ents
which negate those presum ptions can be
m ade between lessor and lessee and an
appraisal agreed to by both parties can
be obtained.
7. Another provision requires new lease
disclosures when a lease is renegotiated
or extended. This provision would not
apply in m ultiple item leases where a new
item is provided or a previously leased
item is returned and the change in the
average m onthly paym ent is 10 per cent
or less. The Board is interested in learn
ing w hether the 10 per cent adjustm ent
is sufficient to cover such m inor changes
in th e lessee’s obligation. Additionally,
com m ent should be directed to other
term s th a t m ay change in a renegotia
tion or extension and th e need for re
disclosure in those instances.
The Board invites comment on the
proposed am endm ents generally and
especially in those instances Indicated
in the previous discussion. In developing
the proposed amendments, th e Board
has attem pted to m aintain the stated
Congressional aim of neutrality regard
ing various business entities engaged In
consumer leasing and noninterference
with th e ability of particular lessors to
carry on business. The proposed am end
m ents are intended by th e Board to pro
vide consumers with certain basic in
form ation which Is both m eaningful and
useful in securing th e lease of personal
property.
T he deadline fo r receipt of w ritten
comments on th e proposed am endm ents
is August 16. 1976. Comments should be
addressed to th e Secretary, Board of
Governors of th e Federal Reserve Sys
tem, W ashington, D.C. 20551. Comments
should Include a reference to Docket No.
R-0048. A d ate for public hearings will
be set during th e comment period.
Pursuant to th e authority granted in
15 UJ9.C. 1604 (1968) th e Board proposes
to am end Regulation Z, 12 CFR P a rt
226, as follows:
§ 226.1
[Amended]
Section 226.1 is amended as follows:
(1) By revising th e last sentence of
paragraph (a) (1) to read as follows:
(a)(1 )* * * Except as otherwise pro
vided herein, this part, w ithin th e con
text of its related provisions, applies to
all persons who are creditors, as defined
in paragraph (s) of § 226.2, and in the
case of consumer leases, as defined in
paragraph (nn) of § 226.2, to all persons
who are lessors, as defined in paragraph
(gg) of § 226.2.
*
•
*
*
*
apparent, on th e face of th e Instrum ent
assigned, unless th e assignm ent is in
voluntary. P ursuant to section 108 of th e
Act, violations of th e Act or th is P a rt
constitute violations of o ther Federal
laws which may provide further
penalties.
§ 2 2 6 .2
[A m en d ed ]
Section 226.2 is amended as follows:
(1) In paragraph (d) by inserting the
words “or lessee or prospective lessee”
between th e words "prospective cus
tom er” and “in.”
(2) By amending paragraph <h' to
read as follows:
*
*
*
6
4
(h)
“Arrange for the extension of
(2) In paragraph (a) C2) by inserting credit or for the lease of personal prop
the words “and consumer lease” between erty” m eans to provide or offer to pro
the words “Advertising of consumer vide consumer credit or a lease which
credit” and “term s m ust comply” and is or will be extended by another person
by adding the following sentence before under a business or other relationship
pursuant to which the person arranging
the last sentence of th e paragraph:
* * * This P a rt is also designed to as such credit or lease.
(1) Receives or will receive a fee,
sure th a t lessees of personal property are
given m eaningful disclosures of lease compensation, or other consideration for
term s, to delim it th e ultim ate liability of such service, or
(2) Has knowledge of the credit or
lessees in leasing personal property and
to require m eaningful and accurate dis lease term s and participates in the
closures of lease term s in advertisem ents. preparation of th e contract dociunents
* *
*
required in connection with the exten
(3) In paragraph (b) (1) by inserting a sion of credit or the lease. I t does not
comma after th e word "creditors” delet include honoring a credit card or sim i
ing the word “and” between th e words lar device where no finance charge is
“creditors” and “credit’ and inserting the imposed a t th e tim e of th a t transaction.
•
*
*
*
t
words “and lessors” between the words
"issuers” and “is.”
(3) In paragraph (jj) by deleting the
(4) By amending paragraph (c) to read word “an d” afte r th e words “consumer
as follows:
loan” and adding the words “and ‘lease’
*
*
*
*
*
to m ean ‘consumer lease' ” after the
(c)
Penalties and liabilities. Section words “consumer credit transaction.”
(4) In paragraph (kk) by inserting
112 of the Act provides crim inal liability
for willful and knowing failure to comply the words “or a lessor and lessee” be
w ith any requirem ent imposed under the tween the words “custom er” and “irre
Act and this P art. Section 134 provides spective.”
( 5 ) By adding th e following after
for crim inal liability for certain fraudu
lent activities related to credit cards. Sec paragraph (11):
“Aggregate cost of th e lease” equals
tion 130 provides for civil liability In in
dividual or class actions for anv creditor the total of (1) the scheduled periodic
or lessor who fails to comply w ith any re paym ents under th e lease, (2) any nonquirem ent Imposed under C hapter 2, refundable cash paym ent required of the
C hapter 4 or C hapter 5 of th e Act and lessee or agreed upon by th e lessor and
th e corresponding provisions of this P art. lessee or any trad e-in allowance made
Section 130 also provides creditors or les a t consummation and (3) the estim ated
sors a defense against civil and crim inal fair m arket value of the leased property
liability for any act done or om itted In a t th e end of the lease term .
“Consumer lease” means a contract In
good fa ith in conform ity with th e pro
visions of this P a rt or any interpretation th e form of a bailm ent or lease fo r the
thereof by th e Board, or w ith any Inter use of personal property by a n atu ral
pretations or approvals Issued by a duly person prim arily for personal, family or
authorized official or employee of th e household purposes, fo r a period of tim e
Federal Reserve System, notw ithstanding exceeding four m onths, for a to tal con
th a t a fte r such a c t or omission has oc tractual obligation not exceeding $25,000,
curred, such rule, regulation or interpre w hether o r not th e lessee h as th e option
tatio n Is amended, rescinded or otherwise to purchase or otherwise become th e own
determ ined to be Invalid for any reason. e r of the property a t th e expiration of
Section 130 fu rth e r provides th a t a mul th e lease. I t does not include a lease
tiple failure to disclose In connection with which meets th e definition of a credit sale
a single account or single consumer lease In S 226.2 ( t) , nor does it Include a lease
shall perm it b u t a single recovery. Sec fo r agricultural, business or commercial
tio n 115 provides fo r civil liability for an purposes or one m ade to an organization.
“F air m arket value a t consum m ation”
assignee of an original creditor where the
original creditor h as violated th e disclo equals the cost to th e lessor of th e leased
sure requirem ents and such violation Is property Including, If applicable, any In
creditor or lessor in a transaction, each sum er lease may sta te th a t a specific
creditor or lessor shall be clearly identi lease of any property a t specific am ounts
fied and shall be responsible for m aking or term s is available unless the lessor
only those disclosures required by this usually and custom arily leases o r will
P a rt which are w ithin his knowledge and lease such property a t those am ounts or
“Lessor” means a person who in the or the purview of his relationship with the term s.
(b)
Catalogs and multi-page adver
dinary course of business regularly leases, customer o r lessee. If two or more credi
offers to lease or arranges for the leasing tors or lessors m ake a Joint disclosure, tisements. If a catalog or other multipleof personal property under a consumer each creditor or lessor shall be clearly page advertisem ent sets fo rth or gives in
identified. T he disclosures required under form ation in sufficient detail to perm it
lease.
“Personal property” means any prop paragraphs (b) and (c) of § 226.8 shall determ ination of the disclosures required
erty which is not real property under be m ade by the seller If he extends or a r by this section in a table or schedule of
the law of the State where it is located ranges for the extension of credit. O ther credit or lease term s, such catalog or
at the time it is offered or made available wise disclosures shall be m ade as required m ultiple-page advertisem ent shall be
under paragraphs (b) and (d) of § 226.8 considered a single advertisem ent pro
for lease.
vided :
“Realized value" means the price re and p aragraph (b) of { 226.15.
(1) T he table or schedule and the dis
(e) Multiple customers or lessees; dis
ceived by the lessor for the leased prop
erty at disposition, the highest offer for closure to one. In any transaction other closures m ade therein are set forth
disposition or the fair m arket value at th a n a credit transaction which may be clearly and conspiciously; and
(2) Any statem ent of credit or lease
the end of the lease term, less any adjust rescinded under the provisions of S 226.9,
m ent for costs incurred or to be incurred if there is m ore th an one custom er or les term s appearing in any place other than
by the lessor in conjunction with the dis see, the creditor or lessor need furnish a in th a t table or schedule of credit or lease
position if not previously charged to the statem ent of disclosures required by this term s clearly and conspicuously refers to
p a rt to only one of them other th an an the page or pages on which th a t table or
lessee.
endorser, comaker, guarantor, or a simi schedule appears, unless th a t statem ent
H 2 2 6 ,6
IA m ended]
discloses all of the credit or lease term s
la r party.
(f) Unknown information estimate. If required to be stated under this section.
Section 226 6 is amended as follows:
(1) B y adding a new 8 2 2 6 .6 (b ) <3> to a t th e tim e disclosure m ust be made, an For the purpose of this subparagraph,
am ount or other item of Inform ation re cash price is not a credit term .
read as follows:
*
*
*
*
*
quired to be disclosed, or needed to de
*
*
*
=!
term ine a required disclosure, is unknown
(g)
Advertising of consumer leases. No
<b) (3> ti* A S t a t e la w w h ic h is s im ila r
or not available to the creditor or lessor advertisem ent to aid, prom ote or assist
i n nature, purpose, scope, intent, effect o r
the creditor or lessor has m ade a re a directly or indirectly any consumer lease
requisites to a section of chapter 5 of the and
sonable effort to ascertain it, the creditor shall state the am ount of any payment,
Act is not inconsistent with the Act or or
may use an estim ated am ount or th e num ber of the required payments, or
this P art within the meaning of section an lessor
approxim ation of the Inform ation, th a t any or no downpayment or other
186(a) of the Act if the lessor can comply provided
the estim ate or approxim ation paym ent is required a t consummation of
with the State law without violating this is clearly identified
as such, is reasonable, the lease unless the advertisem ent also
Part. If a lessor cannot comply with h is based on the best
ation avail states clearly and conspicuously each of
State law without violating a provision able to the creditor orinform
lessor and IS not th e following item s of Inform ation as ap
of this P art which implements a section used for th e purpose of circum
venting or plicable:
of chapter 5 of the Act, such State law evading th e disclosure requirem
ents of
(1) T h at the transaction advertised is
is inconsistent with the requirements of th is P art.
a lease.
*
the Act and this part within the m ean
*
*
*
*
*
(2) The total am ount of any paym ent
ing of section 186(a) of the Act a n d is
(4) By revising the footnote to p a ra such as a security deposit or capitalized
preempted.
cost reduction required a t the consum
(ii)
A State, through its Governor, Atgraph <g) to read as follows:
(5) In paragraph (i) by inserting the m ation of the lease or th a t no such pay
torney General, or other appropriate of
ficial having primary enforcement or words “or lessor” between the words m ents are required.
(3) The num ber, amounts, due dates or
interpretative responsibilities for its con “creditor” and “for” in the first sentence
sumer leasing law, may apply to the and between the words “creditor” and periods of scheduled payments, and the
to tal of such payments under the lease.
Board for a determination th at the State “shall” in th e last sentence.
(4) A statem ent of w hether or not the
Section 226.10 is am ended by redesig
law offers greater protection and benefit
has the option to purchase the
to lessees than a comparable provision (s> nating the introductory text of I 226.10 lessee
property and a t w hat price and
of chapter 5 of the Act and its imple (a) as S 226.10(a) (1), S 226.10(a) (1) as lease
time. The m ethod of determ ining the
menting provision(s) in this part, or is § 226.10(a) (1) (i) an d 5 26.10(a) (2) as price
m ay be substituted for disclosure
§
226.10(a)
(1)
(11),
and
by
adding
a
new
otherwise not inconsistent with chapter
th e price.
5 of the Act and this Part, or for a § 226.10(a) (2). Section 226.10 reads as of (5)
A statem ent of th e am ount or
determination with respect to any is follows:
ethod of determ ining th e am ount of
sues not clearly covered by § 226.6(b) (3) § 226.10 A d vertisin g credit and lea se m
any liabilities the lease imposes upon the
(1) as to the consistency or Inconsistency
term s.
lessee a t the end of the term and a state
of a State law with chapter 5 of the Act
m ent th a t the lessee shall be liable for the
(a) General Rule. * • •
or its Implementing provisions in this
(2)
No advertisem ent to aid, promotedifferential, if any, between the estim ated
Part.
or assist directly or indirectly any con fair m arket value of th e lease property
•
*
•
•
•
and its realized value a t th e end of th e
lease term , if the lessee has such liability.
(2) In paragraph (c) by inserting the
• Such acts, occurrences, or agreements in
words “or lessor’s” between the words clude the failure of the customer or lessee to
Section 226.12 is am ended to read as
"creditor’s ” and “option” and by Insert perform his obligations under the contract follows:
ing th e words “or lessee” between th e and such actions by the creditor or lessor as
words "custom er” and “or” In th e first may be proper to protect his interests In such §226.12 E x e m p tio n o f certain State r eg
u la ted transactions.
sentence, and by inserting; the words “or circumstances. Such failure may result In
lessor” between the words “creditor’' the Uability of the customer or lessee to pay
(a)
Exemption for State regulated
and “who elects” In th e second sentence. delinquency charge*, collection costs, or ex transactions. In accordance with the pro
penses
of
the
creditor
or
lessor
for
perfection
( 3 ) By revising paragraphs (d ), (e)
or acquisition of any security interest or visions of Supplements II, IV, V, and VI
and (f) to read as follows:
amounts advanced by th e creditor or lessor to Regulation Z, any S tate m ay make ap
»
•
•
•
•
on behalf of the customer or leasee In con plication to th e Board for exemption of
class of transactions w ithin th e
(d)
Multiple creditors or lessors; jointnection with Insurance^ repairs to or pres any
S tate from th e requirem ents of chapters
disclosure. If there Is m ore th a n one ervation o f collateral.
crease or m arkup by th e lessor prior to
consummation.
“Lessee” means a n atu ral person who
leases under or Is offered a consumer
lease.
2, 4 or 5 of the Act an d the correspond
(3) The am ount paid or payable by the
ing provisions of this p art, Provided, lessee during the lease term for official
That:
fees, registration, certificate of title,
(1) The Board determ ines th a t under license fees or taxes.
th e law of th a t State, th a t class of tra n s
(4) The num ber, am ount and due
actions Is subject to requirem ents sub dates or periods of paym ents scheduled
stantially sim ilar to those Imposed under under the lease and the to tal am ount of
chapter 2 or chapter 4 of th e Act, or both, such periodic payments.
or under chapter 5, and th e correspond
(5) The to tal am ount of all other
ing provisions of this p a rt; or In the case charges, individually itemized, payable
of chapter 4, th e consumer is afforded by th e lessee to th e lessor, which are not
greater protection th a n is afforded under Included in th e periodic payments.
chapter 4 of the Act, or in th e case of
(6) A statem ent of any express w ar
chapter 5, the lessee Is afforded greater ranties or guarantees m ade by the lessor
protection and benefit th a n is afforded w ith respect to th e leased property, and
under chapter 5 of th e Act, and
an identification of any express w arran
(2) There is adequate provision for en ties or guarantees made by the m anu
forcement.
facturer and available to the lessee with
(b)
Procedures and criteria. The prorespect to the leased property. If no ex
cedures and criteria under which any press w arranties or guarantees are made
S tate m ay apply fo r the determ ination as to the leased property, th a t fact shall
provided for in paragraph (a) of this sec be disclosed.
tion are set forth in Supplem ent n to
(7) An identification of the party re
Regulation Z with respect to disclosure sponsible for m aintaining or servicing
and rescission requirem ents (sections th e leased property together w ith a brief
121-131 of chapter 2), Supplem ent IV description of th e responsibility, and a
w ith respect to the prohibition of the statem ent of reasonable standards for
issuance of unsolicited credit cards and wear and use, if the lessor sets such
th e liability of th e cardholder for unau
thorized use of a credit card (sections standards.
(8) A brief identification of insurance
132-133 of chapter 2), in Supplem ent V required in connection w ith the lease
with respect to fa ir credit billing require provided or paid for by the lessor includ
ments (sections 161-171 of chapter 4) ing the types and am ounts of coverages
and in Supplement VI with respect to and cost to th e lessee or, if not provided
consumer leasing (sections 181-186 of or
paid for by the lessor, the types and
chapter 5).
am ounts of coverages required of the
*
*
*
*
*
lessee
A new S 226.15 is added to read as
(9) A description of any security in
follows:
terest held or to be retained by the lessor
in connection with the lease and a clear
§ 2 2 6 .1 5 C on sum er lea sin g .
identification of th e property to which
(a) General requirements. Any lessor the security interest relates.
shall, in accordance w ith § 226.6 and to
(10) The am ount or method of deter
th e extent applicable, make the disclos mining th e am ount of any penalty or
ures required by paragraph (b) of this other charge for delinquency, default or
section with respect to any consumer late payments.
lease. Such disclosures shall be made
(11) A statem ent w hether or not the
prior to th e consum m ation of the lease lessee has th e option to purchase the
on a dated w ritten statem ent which leased property and, If a t the end of the
identifies th e lessor and th e lessee, and a lease term , a t w hat price, and, if prior to
copy of such statem ent shall be given to th e end of th e lease term , a t w hat time
th e lessee a t th a t time. All of the disclos and the price or m ethod of determ ining
ures shall be made together on either.
the price.
(1) T he contract or other instrum ent
(12) A statem ent of th e conditions
evidencing th e lease on th e same side of under which th e lessee or lessor may
th e page and above th e place for the term inate the lease prior to th e end of
lessee’s signature; or
th e lease term and th e am ount or m ethod
(2) One side of a separate statem ent of determ ining th e am ount of any
which identifies the lease transaction.
penalty or other charge for early
In any lease of m ultiple items, the de term ination.
scription required by S 226.15(b) (1) m ay
(13) A statem ent of the am ount or
be provided on a separate statem ent or m ethod of determ ining the am ount of
statem ents which are Incorporated by any liabilities the lease imposes upon the
reference In th e disclosure statem ent re lessee a t th e end of the lease term .
quired by { 226.15(a).
(14) A statem ent th a t th e lessee shall
(b) Specific disclosure requirements. be liable for th e dlfflerential between th e
In any lease subject to this section the estim ated fair m arket value of the prop
following items, as applicable, shall be erty and its realized value a t early
disclosed:
term ination or th e end of th e lease term .
(1) A brief description of th e leased
(15) W here th e lessee’s liability a t the
property, sufficient to identify the prop end of the lease term is based upon th e
erty to the lessee and lessor.
estim ated fair m arket value of the leased
(2) The total am ount of any paym ent, property:
such as a security deposit, advance pay
(1) The fair m arket value of th e prop
m ent, capitalized cost reduction o r any erty a t consummation of th e lease, the
trad e-in allowance, appropriately identi itemized aggregate cost of th e lease a t
fied, to be paid by the lessee at tb s con th e end of the lease term , and the dif
sum m ation of the lease.
ferential between them.
(ii) T h at there is a rebuttable pre
sum ption th a t th e estim ated fa ir m arket
value of tlie leased property a t th e end of
th e lease term is unreasonable and not in
good fa ith to th e extent th a t it exceeds
th e realized value by m ore th a n three
times th e average paym ent allocable to a
m onthly period, and th a t th e lessor can
n o t collect th e am ount of such excess
liability unless th e lessor brings a suc
cessful action in court in which the les
sor pays the lessee’s attorneys fees, and
th a t this presum ption and attorney’s
fees provision do not apply to the extent
th e excess of estim ated fa ir m arket value
over realized value is due to unreason
able wear or use, or excessive use.
(iii) A statem ent th a t the provisions of
§ 226.15(b) (15) (ii) do not preclude the
right of a willing lessee to make any
m utually agreeable final adjustm ent re
garding such excess liability, provided
such agreem ent is reached after the end
of th e lease term .
(16)
A statem ent th a t the lessee may
obtain a t the end of th e lease term or a t
early term ination, a t th e lessee’s ex
pense, a professional appraisal by an
independent th ird party agreed to by
th e lessee and th e lessor of th e value
which could be realized a t sale of the
leased property which shall be final and
binding on the parties.
(c)
Renegotiations or extensions. If
any existing lease is renegotiated or ex
tended, such renegotiation or extension
shall be considered a new lease subject to
the disclosure requirem ents of this Part,
except th a t th e requirem ents of this
paragraph shall n ot apply to a lease of
m ultiple item s where a new item (s) is
provided or a previously leased ltem (s)
is returned, and th e average paym ent
allocable to a m onthly period is not
changed by m ore th an 10 per cent.
By order of the Board of Governors,
July 1,1976.
T h eod ore E . A llis o n ,
Secretary of the Board.
[PR Doc.76-19823 Plied 7-8-76;8:45 am]
@FedFRASER