View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

Federal reserve Bank of Dallas
DALLAS. TEXAS

75222

C i r c u l a r No. 78-84
J u n e 21, 1978

REGULATION Z—CONSUMER LEASING ACT
New Pam phlet on T r u t h in L e a sing

TO ALL BANKS, OTHER CREDITORS,
AND OTHERS CONCERNED IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
T h e B oard of G o v e r n o r s of th e Fe d e ra l R e s e r v e System has
a n n o u n c e d th a t th e latest in a s e r i e s of c o n s u m e r e d u ca tio n p a m p h le ts ,
" T r u t h in L e a s i n g , " is now a v a i la b l e for p u b lic d i s t r i b u t i o n .
T h e p a m p h le t g i v e s a sim plified e x p la n a ti o n of th e C o nsum er
L e a sin g A ct, w h ic h w as in te n d e d to he lp c o n s u m e r s c o m p a re the cost of
on e lease w ith a n o t h e r o r with t h e c o st of b u y i n g for c a s h or on c r e d it.
It a ls o c o v e r s th e law 's limit on balloon p a y m e n ts u n d e r o p e n - e n d leases
a n d th e r e g u l a t i o n of lease a d v e r t i s i n g .
A co p y of th e new p a m p h le t is e n c l o s e d . A dditional c o p ie s may
be o b ta in e d f r e e of c h a r g e from th e S e c r e t a r y ' s Office of th is B a n k , Ext.
6267.
Sincerely y o u rs ,
R o b e r t H . Boykin
F i r s t Vice P r e s i d e n t
Enclosure

Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank:
1 -8 0 0 -4 9 2 -4 4 0 3 (intrastate) and 1-8 00 -527 -497 0 (interstate). For calls placed locally, please use 651 plus
the extension referred to above.

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

or no d ow npaym en t is required, it must also
mention several other im portant terms, in­
cluding the total of regular paym ents, your
responsibilities at the end of the lease, and
w hether or not you may purchase the p ro p ­
erty. This is to m ake sure you get enough
information from the advertisem ent to under­
stand the offer an d to com pare it with others.

A tla n ta , Georgia
104 Marietta Street, N.W.
ZIP 30303
(404) 586-8500
B o s to n , Massachusetts
600 Atlantic Avenue
ZIP 02106
(617) 973-3000

W hat are th e p e n a ltie s?

You as an
individual may sue a leasing com pany if it
fails to give you the required information or
does so improperly. Y ou m ay sue for 25 per
cent of the total of the m onthly paym ents (but
not less than $10 0 or m ore than $1,000) plus
any actual dam ages. If an advertisement
violates the law, you m ay sue the leasing com ­
pany for your actual dam ages. In any suc­
cessful lawsuit, you are also entitled to court
costs an d reasonable attorney’s fees. T he law
also provides criminal penalties for intentional
violations.

T FND OUT/MORE .
O

To find Out m o r e . . .

A num ber of
Federal agencies are responsible for enforcing
the C onsum er Leasing Act. If you have any
questions about the law in connection with a
lease transaction with a bank, you m ay write
to the nearest Federal Reserve Bank or to the
Board of G overnors of the Federal Reserve
System, W ashington, D.C. 20551. Be sure to
identify the nam e an d location of the bank so
that your letter can be brought to the attention
of the appropriate bank enforcem ent agency
— the Federal Reserve B oard (for Statechartered m em ber banks), the Comptroller
of the C urrency (for national banks) or the
Federal Deposit Insurance C orporation (for
non-m em ber insured banks).
The Federal Trade C om m ission enforces the
law for almost all leasing com panies other
than banks. Questions or complaints can be
sent to the nearest Federal T rade Com m is­
sion Regional Office, or, if they concern
national com panies, to: Federal T rade C o m ­
mission, C o n su m er Leasing, Washington,
D.C. 20580. The Commission does not repre­
sent individual consum ers in private disputes,
but information from consum ers about their
experiences and concerns is vital to its e n ­
forcem ent of the C onsum er Leasing Act.

u

6

cd
•3
S
■O
Q
i

Un
r

V

JO

O
C
t
o
V
>
o
O
«*■

o
■o
1
3
o
DQ
0
>
X
+
4
•u

C h ica go , Illinois
230 South LaSalle Street
P.O. Box 834
ZIP 60690
(312) 322-5322
C lev ela n d , Ohio
1455 East Sixth Street
P.O. Box 6387
ZIP 44101
(216) 241-2800
D a lla s, T exas
400 South Akard Street
Station K
ZIP 75222
(214) 651-6111
K a n sa s City, Missouri
925 Grand Avenue
Federal Reserve Station
ZIP 64198
(816) 881 2000
M in n ea p o lis, Minnesota
250 Marquette Avenue
ZIP 55480
(612) 340-2345

e
to
c

N ew York, New York
33 Liberty Street
Federal Reserve P.O. Station
ZIP 10045
(212) 791-5000

E

P h ila d elp h ia , Pennsylvania
100 North Sixth Street
P.O. Box 66
ZIP 19105
(215) 574-6000

o
8
E

o
O
«

•9
f
l
«

s
■V
0
1
b.
w
£

XI

»

C

•o
V
a
&

R ich m on d , Virginia
100 North Ninth Street
P.O. Box 27622
ZIP 23261
(804)649-3611
S a n F ra n cisco , California
400 Sansome Street
P.O. Box 7702
ZIP 94120
(415) 544-2000
S t. Lomis, Missouri
411 Locust Street
P.O. Box 442
ZIP 63166
(314)421-1700

IlgOOQ
A tlanta, Georgia
Room 1000
1718 Peachtree Street, N.W.
ZIP 30309
(404) 881-4836
B o s to n , Massachusetts
1301 Analex Building
150 Causeway
ZIP 02114
(617) 223-6621
C h ica g o , I l l i n o i s
Suite 1437
55 East Monroe Street
ZIP 60603
(312) 353-4423

FE E A TR D COMMISSION REGIONAL
DRL
AE

C lev ela n d , O h i o
Suite 500
The Mall Building
118 St. Clair Avenue, N.E.
ZIP 44114
(216) 522 4207
D a lla s, Texas
Suite 2665
2001 Bryan T ower
ZIP 75201
(214) 749-3056
D e n v e r , Colorado

Suite 2900
1405 Curtis Street
ZIP 80202
(303) 837-2271
L os A n g e le s , California
Room 13209
11000 Wilshire Boulevard
ZIP 90024
(213) 824-7575
N ew York, New York
22nd Floor, Federal Building
26 Federal Plaza
ZIP 10007
(212) 264-1207
S a n F ra n cisco , California
450 Golden Gate Avenue
Box 36005
ZIP 94102
(415) 556-1270
S e a ttle , Washington
28th Floor, Federal Building
915 Second Avenue
ZIP 98174
(206) 442-4655

• A re y o u w ondering w h e th e r leasing your
next car would be a g o o d idea?
• W o u ld yo u rather lease th a n b u y furni­
ture for an a p a r tm e n t y o u ’ll use for
only a year?

W hen lea sin g lo o k s like a good
op tion , there’s a Federal law that will
help you shop for the best deal. T he C o n ­
sum er Leasing Act requires leasing co m ­
panies to tell you the facts about the cost
a n d terms of their contracts. You can use the
information to com pare on e lease with
an o th er or to com pare the cost of leasing
with the cost of buying the sam e property.
T he law also limits any extra p ay m en t you
may have to m ake at the en d of a lease and
regulates lease advertising.
This pam phlet describes the C on sum er
Leasing Act and the regulation issued by
the Federal Reserve Board to carry it out.

What le a s e s are covered? T he
law applies to p e rso n a l p ro p e rty leased
by an individual for a period of m ore than
f o u r m on ths for person al, fa m ily or
h o u seh o ld use. It covers long-term rentals
of cars, furniture, appliances an d other p er­
sonal property.
The law does n o t cover:
• daily car rentals or m onth-to-m onth rentals
which you can cancel without penalty at
the end of the month;
• leases for apartm ents or houses — or
furniture that com es with a rented apart­
ment;
• property leased to com panies or to in­
dividuals for business use.

What about co sts?

Before you agree
to a lease, the law requires that you get a
written statem ent of its co s ts , including:
• the am o u n t of any advance payment,
such as a security deposit;
• the number, the am o u n t an d the dates
your regular paym ents are due, as well
as the total am o u n t of those paym ents;and
• the am o unt you must pay for license,
registration and taxes, and for any other
fees, such as m aintenance.

W hat a b o u t term s o f th e le a s e ?

no m o r e t h a n t h r e e t i m e s t h e a v e r a g e

You m ust also be told certain term s of the
lease, including:

m o n t h l y p a y m e n t — unless you agree to
m ake a higher pay m en t or you have used
the property m ore th an average (for ex­
ample, if you put m ore than average mileage
on a car). T he leasing com pany m ay also
seek a larger paym ent by going to court. If it
goes to c o u rt the com pany has the burden
of proving that its original estimate of the
value of the property, although wrong, was
reasonable and m ade in good faith. T he com ­
p any must pay your attorney’s fees in such a
lawsuit, whether or not it wins.

• w hat kind of insurance you need;
• any express warranty on the property;
• w ho is responsible for maintaining and
servicing the property, an d any standards
for w ear and tear (which must be reaso n­
able) set by the leasing company;
• any penalty for default or late paym ent;
• how you or the leasing com pany may
cancel the lease a n d the charges for doing
so; and
• w hether or not you can buy the property
and, if you can, w hen and at w hat price.

I How do I sh o p for a lea se?
•

W hat are o p e n e n d le a s e s and
b a llo o n p a y m en ts? O ne decision
that will affect leasing costs an d term s is
w hether you choose an “open e n d ” (or
“finance”) or “closed e n d ” lease. In an open
end lease you run the risk of owing extra
m oney depending on the value of the p ro p ­
erty w hen you return it This paym en t is often
called a “balloon p a y m e n t” For example,
w hen you sign a three-year o p en end car
lease, the leasing com pany m ay estimate that
the car will be worth $2,000 after three years
of normal use. If the car is w orth only $1,500
w hen you return it you may have to pay a
$500 balloon paym ent.

T o help you com pare the cost of buying on
credit with the cost of open e n d leasing, you
must be told the total am o u n t you are re­
sponsible for under the lease, the value of
the property at the beginning of the lease,
an d the difference betw een the two. For
example, a three-year o pen en d car lease
might show:

36 monthly payments of $125
$4,500
+ Estimated value of car at end
of lease
2,000
Amount you are responsible for
under lease
$6,500
—Value of car at beginning
of lease
5,800
Difference
$ 700

In a closed end lease, you are not responsible
for the value of the property w hen you re­
turn it a n d will not have to m ake a balloon
p a y m e n t As a result, closed end leases
usually have higher monthly paym ents than
open end leases.
Y ou should know that in an open en d lease:
• T he leasing com pany must tell you that
you may have a balloon paym en t and how
it is calculated.
• At the end of the lease you have the right
to obtain an estimate of the property’s
worth from an in d ep en d en t appraiser.
Both parties must abide by the estimate.

Lim its o n b a llo o n p a y m en ts.
Y ou should also know that the law limits a
balloon paym ent in a n op en end lease to

First,
decide w hether you want to buy with cash,
buy on credit, or lease. W hen making your
decision, be sure to take into account such
expenses as the cost of insurance, m ainte­
nance a n d special fees.

Y ou could com pare this “difference” of $700
with the finance charge you would pay if you
bought the car on credit
• If you decide to lease, shop arou nd for the
’ best price and terms. C om pare the costs and
H advantages of open e n d an d closed end
£ leases, an d look at such options as w hether
I
the leasing com pany will pay for repairs and
■ m aintenance.
]
►
j
•

What about advertising? The law
also regulates the advertising of leases. It says
that if a leasing com pany advertises the
am o u n t or num ber of paym ents or that any