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Federal reserve Bank of Dallas


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

New Pam phlet on T r u t h in L e a sing

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.
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

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 (

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


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.









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


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


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









R ich m on d , Virginia
100 North Ninth Street
P.O. Box 27622
ZIP 23261
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

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


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
• 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
+ Estimated value of car at end
of lease
Amount you are responsible for
under lease
—Value of car at beginning
of lease
$ 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

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
the leasing com pany will pay for repairs and
■ m aintenance.

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