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F

ed er a l

R

e s e r v e

B

a nk

O F DALLAS
ROBERT

D. M c T E E R , J R .

DALLAS, TEXAS

p r e s id e n t
A N D C H IE F E X E C U T I V E O F F I C E R

T

O

1 n n 'T

January 8, 1997

7 5 2 6 5 -5 9 0 6

Notice 97-03

TO:

T he C hief Executive Officer of each
financial institution and others concerned
in the E leventh F ed eral R eserve D istrict
SUBJECT
Request for Public Comment on
Proposed Revisions to Regulation M
(Consumer Leasing)
DETAILS

T he B oard of G overnors of the F ederal R eserve System is requesting public
com m ent on R egulation M to im plem ent am endm ents of the C onsum er Leasing Act.
T he act requires lessors to provide uniform cost and other disclosures for car leasing and
o ther types of consum er lease transactions.
T he B oard m ust receive com m ents by February 7, 1997. Please address com ­
m ents to W illiam W. Wiles, Secretary, B oard of G overnors of the F ederal R eserve
System, 20th Street and C onstitution Avenue, N.W., W ashington, D.C. 20551. All
com m ents should refer to D ocket No. R-0952.
ATTACHMENT
A copy of the B oard’s notice (F ederal R eserve System D ocket No. R-0952) is
attached.
MORE INFORMATION
For m ore inform ation, please contact Eugene Coy at (214) 922-6201. For
additional copies of this B ank’s notice, please contact the Public Affairs D ep artm en t at
(214) 922-5254.
Sincerely yours,

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
For additional copies, bankers and others are encouraged to use one o f the following toll-free numbers in contacting the Federal

FEDERAL RESERVE SYSTEM
12 CFR Part 213
[Regulation M; Docket No. R-0952]
Consumer Leasing

AGENCY:
ACTION:

Board of Governors o f the Federal Reserve System.
Proposed Rule.

SUM M ARY: The Board is publishing for comment proposed revisions to Regulation M,
which implements the Consumer Leasing Act. The act requires lessors to provide uniform
cost and other disclosures about consumer lease transactions. The proposed revisions
primarily implement amendments to the act contained in the Economic Growth and
Regulatory Paperwork Reduction Act o f 1996, which streamline the advertising disclosures for
lease transactions. In addition, the proposal contains several technical amendments that would
be made to the regulation.
DATES: Comments must be received by February 7, 1997.
ADDRESSES: Comments should refer to Docket No. R-0952, and may be mailed to
William W. Wiles, Secretary, Board o f Governors o f the Federal Reserve System, 20th Street
and Constitution Avenue, N.W., Washington, DC 20551. Comments also may be delivered
to Room B-2222 o f the Eccles Building between 8:45 a.m. and 5:15 p.m. weekdays, or to the
guard station in the Eccles Building courtyard on 20th Street, N.W. (between Constitution
Avenue and C Street) at any time. Comments may be inspected in Room MP-500 o f the
Martin Building between 9:00 a.m. and 5:00 p.m. weekdays, except as provided in 12 CFR
261.8 o f the Board’s rules regarding the availability o f information.
FOR FURTHER INFORMATION CONTACT: Kyung H. Cho-Miller or Obrea O.
Poindexter, Staff Attorneys, Division o f Consumer and Community Affairs, Board o f
Governors o f the Federal Reserve System, Washington, DC 20551, at (202) 452-2412 or
452-3667. Users o f Telecommunications Device for the Deaf only may contact Dorothea
Thompson, at (202) 452-3544.
SUPPLEMENTARY INFORMATION:
I. Background on the Consumer Leasing Act and Regulation M
The Consumer Leasing Act (CLA), 15 U.S.C. 1667-1667e, was enacted into law in
1976 as an amendment to the Truth in Lending Act (TILA), 15 U.S.C. 1601 et seq. The
CLA generally applies to consumer leases o f personal property in which the contractual
obligation does not exceed $25,000 and has a term o f more than four months. An automobile

lease is the most common type o f consumer lease covered by the act. U nder the act, lessors
are required to provide uniform cost and other information about consumer lease transactions.
The Board was given rulewriting authority, and its Regulation M (12 CFR part 213)
implements the CLA. An official staff commentary interprets the regulation.
The Board recently ompleted a review o f Regulation M, pursuant to its policy o f
periodically reviewing its regulations, and approved a final rule in September 1996
substantially revising the regulation to update the disclosure requirements and to carry out
more effectively the purposes o f the Act (61 FR 52246, October 7, 1996).
II. Proposed Regulatory Provisions
This proposed rulemaking contains a few technical amendments to the regulation. For
example, the model clause for providing a description o f the leased property is added and the
example o f an annual charge as an other charge is deleted on the open- and closed-end model
forms. All the proposed technical amendments are discussed in detail in the section-bysection analysis.
In the September 1996 final rule, the advertising provisions implemented amendments
to the CLA contained in the Riegle Community Development and Regulatory Improvement
Act o f 1994 (Pub. L. 103-325, 108 Stat. 2160), allowing a toll-free number or a print
advertisement to substitute for certain lease disclosures in radio commercials (which was
expanded in the final rule to television commercials).
The advertisement provisions were amended and streamlined on September 30, 1996,
when the Congress enacted the Economic Growth and Regulatory Paperwork Reduction Act
o f 1996 (Pub. L. 104-208, 110 Stat. 3009)(the 1996 Act). The Board’s proposed rule
implements the statutory changes, which are discussed in detail below in § 213.7.
III. Section-by-Section Analysis
SECTION 213.4 Content o f disclosures.
4(n) Fees and taxes.
In the September 1996 final rule, paragraph 4(n) o f this section stated that the lessor
must disclose the total dollar amount o f all official and license fees, registration, title, or taxes
required to be paid "to the lessor" in connection with the lease. Adding "paid to the lessor"
narrowed the scope o f the disclosure from the previous requirement. No substantive
change to the requirement was intended. Thus, the phrase "to the lessor"- would be deleted
from this section.
4(o) Insurance.
The Board proposes to revise the captions for paragraph 4 (o )(l) and (2) to change the
focus from voluntary and required insurance. The new captions more accurately reflect the

requirement for the insurance disclosure—that insurance obtained through the lessor or through
a third party, regardless o f whether it is required or voluntary, must be disclosed.
SECTION 213.5 Renegotiations, extensions, and assumptions.
5(d) Exceptions.
Under Regulation M, new disclosures generally are required where a covered lease
transaction is renegotiated or extended; however, under paragraph 5(d)(1) new disclosures are
not required if the "lease charge" is reduced in a renegotiation or an extension o f an existing
lease. This exception was moved from the official staff commentary to the regulation in the
final rule approved in September 1996. For clarity and consistency in terminology throughout
the regulation, the Board proposes to replace the term "lease charge" w ith the term "rent
charge."
SECTION 213.7 Advertising.
The advertising provisions in Regulation M currently require additional disclosure if an
advertisement states any o f the following terms: the amount o f any payment; the number o f
required payments; or a statement o f any capitalized cost reduction or other payment required
prior to or at consummation, or that no payment is required. Under the amendments to the
CLA contained in the 1996 Act, an advertisement that states the number o f required payments
would no longer trigger additional disclosures.
The 1996 Act also changes the items that must be disclosed (to the extent applicable)
when a triggering term is stated in an advertisement. The current disclosures and the changes
made by the 1996 Act are as follows:
(1)

That the transaction advertised is a lease. No change was made in this
disclosure.

(2)

The total amount due at lease signing, or that no payment is required. This
disclosure has been expanded to also include amounts due at delivery if
delivery occurs after consummation.

(3)

The number, amounts, due dates or periods o f scheduled payments, and total o f
such payments under the lease. The total o f scheduled payments is eliminated
as a required disclosure.

(4)

A statement o f whether or not the lessee has the option to purchase the leased
property, and where the lessee has the option to purchase at the end o f the lease
term, the purchase-option price. This disclosure has been eliminated entirely.

(5)

A statement o f the amount, or the method for determining the amount, o f the
lessee’s liability (if any) at the end o f the lease term. This disclosure has been
eliminated entirely.

(6)

For an open-end lease,
difference between the
value at the end o f the
short statement that an

a statement o f the lessee’s liability (if any) for the
residual value o f the lease property and its realized
lease term. This disclosure was simplified to require a
additional charge may be imposed.

The 1996 Act also adds as an additional disclosure o f a statement on whether or not a security
deposit is required.
7(b) Clear and conspicuous standard.
7(b)(1) Am ount due at lease signing.
The general rule in this paragraph states that any reference to a charge that is part o f
the total amount due at lease signing may not be more prominent than the disclosure o f the
total amount due at lease signing. The amount o f any capitalized cost reduction (or no
capitalized cost reduction) is provided as an example o f an amount that is a part o f the total
amount due at lease signing. The Board proposes to delete this example from this paragraph
and to move it to the official staff commentary.
7(d) Advertisement of terms that require additional disclosure.
7(d)(1) Triggering terms.
Pursuant to the 1996 Act, the Board proposes to delete paragraph 7(d)(l)(ii). Merely
stating in an advertisement the number o f required lease payments, for example, "36
payments," no longer "triggers" the additional disclosures in paragraph 7(d)(2). Paragraph
7(d)(l)(iii) would be redesignated as paragraph 7(d)(1)(H).
7(d)(2) Additional terms.
An advertisement stating any item listed in paragraph 7(d)(1) is required to state the
additional disclosures in paragraph 7(d)(2), as applicable. As discussed previously, the 1996
Act amends many o f the required additional disclosures in this paragraph. The following
proposed changes implement the statutory amendments.
The 1996 Act expands the disclosure o f the total amount due at lease signing in
paragraph 7(d)(2)(ii) to include "amounts paid at delivery, whichever occurs later." Prior to
the amendments, a delivery charge paid after consummation was not included in the total
amount due at lease signing in § 213.4(b) or in this section. Under the proposed changes to
implement the statutory amendment, the delivery charge would be included in the total even if
it was paid after consummation. The Board does not propose to expand the disclosure under
§ 213.4 to parallel the new advertising rule.
The total o f scheduled payments disclosure from paragraph 7(d)(2)(iii), all of
paragraph 7(d)(2)(iv), and all o f paragraph 7(d)(2)(v) will be deleted. A statement o f whether
or not a security deposit is required is added by the statute and proposed as paragraph
7(d)(iv). For an open-end lease, the amended statute requires a statement that an extra charge
may be imposed at the end o f the lease term; the regulatory provision is redesignated as
paragraph 7(d)(2)(v).

7(f) Alternative disclosures—television or radio advertisements.
7(f)(1) Toll-free number or print advertisement.
The 1996 Act deletes the "total o f scheduled payments" as a required additional
disclosure under section 184(a), the general advertising disclosures, but not in section 184(c),
which governs radio advertisements. Section 105(a) o f the TIL A provides that the Board’s
regulations "may contain such classifications, differentiations, or other provisions, and may
provide for such adjustments and exceptions for any class o f transactions, as in the judgm ent
o f the Board are necessary or proper to effectuate the purposes o f [the CLA], to prevent
circumvention or evasion thereof, or to facilitate compliance therewith." The Board does not
believe that the Congress intended to require more disclosures for radio advertisements than
other advertisements. Accordingly, the Board proposes to delete the disclosure o f the "total o f
scheduled payments" from section 184(c) on radio advertisements pursuant to its exception
authority under section 105(a).
Appendices
Lessors are required to provide a description o f leased property under the CLA and
§ 213.4(a) o f Regulation M. The Board proposes to amend the model forms for open- and
closed-end leases disclosures to add among the nonsegregated disclosures a model clause for
describing leased property.
The Board proposes to amend the model forms for open- and closed-end leases by
deleting "annual tax" as an example o f an other charge. Third-party fees or charges paid to
the lessor but not retained by the lessor such as taxes are not included in the "other charges"
disclosure.
IV. Form of Comment Letters
Comment letters should refer to Docket No. R-0952 and, when possible, should use a
standard Courier typeface with a type size o f 10 or 12 characters per inch. This will enable
the Board to convert the text to machine-readable form through electronic scanning, and will
facilitate automated retrieval o f comments for review. Also, if accompanied by an original
document in paper form, comments may be submitted on 3 1/2 inch or 5 1/4 inch computer
diskettes in any IBM-compatible DOS-based format.
The comment period ends on February 7, 1997. Normally, the Board provides a 60day comment period, in keeping with the Board’s policy statement on rulemaking (44 FR
3957, January 19, 1979). The proposed regulatory revisions primarily implement changes in
the law made by the 1996 Act that streamline the advertising provisions and, in addition,
make a few technical changes to Regulation M. The Board believes that it is desirable to
ensure that a final rule takes effect along with the final rule approved in September 1996,

which requires issuing a final rule by April 1, 1997. Accordingly, the Board is providing an
abbreviated comment period.
V. Regulatory Flexibility Analysis
In accordance with section 3(a) o f the Regulatory Flexibility Act (5 U.S.C. 603), the
Board’s Office o f the Secretary has reviewed the proposed amendments to Regulation M.
Overall, the amendments are not expected to have any significant impact on small entities.
The proposed regulatory revisions, primarily required to implement the 1996 Act, ease
compliance by streamlining the advertising provisions. A final regulatory flexibility analysis
will be conducted after consideration o f comments received during the public comment
period.
VI. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act o f 1995 (44 U.S.C. 3506; 5 CFR
1320 Appendix A .l), the Board reviewed the proposed rule under the authority delegated to
the Board by the Office o f Management and Budget. Comments on the collections o f
information should be sent to the Office o f Management and Budget, Paperwork Reduction
Project (7100-0202), Washington, DC 20503, with copies o f such comments to be sent to
Mary M. McLaughlin, Chief, Financial Reports Section, Division o f Research and Statistics,
Mail Stop 97, Board o f Governors o f the Federal Reserve System, Washington, DC 20551.
The respondents are individuals or businesses that regularly lease, offer to lease, or
arrange for the lease o f personal property under a consumer lease. The purpose o f the
disclosures associated with Regulation M is to ensure that lessees o f personal property receive
meaningful information that enables them to compare lease terms with other leases and, where
appropriate, with credit transactions. Records, required to evidence compliance with the
regulation, must be retained for twenty-four months. The revisions to the collection o f
information requirements in this proposed rule are found in 12 CFR 213.4, 213.5, and 213.7
and appendices A -l and 2.
Regulation M applies to all types o f financial institutions, not just state member banks.
Under the Paperwork Reduction Act, however, the Federal Reserve accounts for the
paperwork burden associated with Regulation M only for state member banks. Any estimates
o f paperwork burden for institutions other than state member banks affected by the
amendments would be provided by the federal agency or agencies that supervise those lessors.
The Federal Reserve has found that few state member banks engage in consumer leasing and
that while the prevalence o f leasing has increased in recent years, it has not increased
substantially among state member banks. It also has found that among state member banks
that engage in consumer leasing, only a very few advertise consumer leases.
The proposed revisions to section 213.4 and 213.5 are estimated to have no effect on
the hour burden that the regulation imposes. The proposed revisions to section 213.7, while
more substantive, are expected to have no net effect on the hour burden.

The current hour burden for state member banks, as o f the September 1996 final rule,
is estimated to be eighteen minutes for the disclosures and twenty-five minutes for
advertising. It is estimated that there will be 310 respondents and an average frequency o f
120 responses per respondent each year. The total amount o f annual hour burden at all state
member banks is estimated to be 11,179 hours. Start-up cost burden associated with the
September 1996 final rule was estimated to be $12,000 per respondent, amounting to a total
o f $3,720,000 for state member banks. The Federal Reserve estimates that this amount is
sufficient to cover any costs o f the proposed rule.
The disclosures made by lessors to consumers under Regulation M are mandatory (15
U.S.C. 1667 et seq.). Because the Federal Reserve does not collect any information, no issue
o f confidentiality under the Freedom o f Information Act arises. Consumer lease information
in advertisements is available to the public. Disclosures o f the costs, liabilities, and terms o f
consumer lease transactions relating to specific leases are not publicly available.
An agency may not conduct or sponsor, and an organization is not required to respond
to, this information collection unless it displays a currently valid OMB control number. The
OMB control number is 7100-0202.
Comments are invited on: (a) whether the proposed revised collection o f information is
necessary for the proper performance o f the Federal Reserve’s functions; including whether
the information has practical utility; (b) the accuracy o f the Federal Reserve’s estimate o f the
burden o f the proposed revised information collection, including the cost o f compliance; (c)
ways to enhance the quality, utility, and clarity o f the information to be collected; and (d)
ways to minimize the burden o f information collection on respondents, including through the
use o f automated collection techniques or other forms o f information technology.
List o f Subjects in 12 CFR Part 213
Advertising, Federal Reserve System, Reporting and recordkeeping requirements, Truth
in Lending.
Certain conventions have been used to highlight the proposed revisions to the
regulation. New language is shown inside bold-faced arrows, while language that would be
deleted is set o ff with bold-faced brackets.
For the reasons set forth in the preamble, the Board proposes to amend 12 CFR Part
213 as follows:
PART 213 ~ CONSUMER LEASING (REGULATION M)
1. The authority citation for part 213 continues to read as follows:
Authority: 15 U.S.C. 1604.

2. Section 213.4 would be amended as follows:
a. Paragraph (n) would be revised; and
b. The headings o f Paragraphs (o )(l) and (o)(2) would be revised.
The revisions read as follows:
§ 213.4 Content o f disclosures.
it it it it it

(n) Fees and taxes. The total dollar amount for all official and license fees,
registration, title, or taxes required to be paid [to the lessor] in connection with the lease.
(0) Insurance. * * *
(1) (Voluntary insurance.l ► Through the lessor. <

* * *

(2) [Required insurance.l ► Through a third party . <

* * *

it it it it it

3. Section 213.5 would be amended by revising paragraph (d)(1) to read as follows:
§ 213.5 Renegotiations, extensions, and assumptions.
it it it it it

(d) Exceptions. * * *
(1) A reduction in the [lease] ► rent •< charge;
*

*

it it it

4. Section 213.7 would be amended as follows:
a. Paragraph (b)(1) would be revised;
b. Under paragraph (d)(1), paragraph (d)(l)(i) would be revised, paragraph (d)(1)(H)
would be deleted, and paragraph (d)(l)(iii) would be redesignated as (d)(1)(H);
c. Under paragraph (d)(2), paragraphs (d)(2)(H) and (d)(2)(iii) would be revised,
paragraph (d)(2)(iv) would be removed, paragraphs (d)(2)(v) and (d)(2)(vi) would be revised
and redesignated as paragraphs (d)(2)(iv) and (d)(2)(v), respectively.
The revisions read as follows:
§ 213.7 Advertising.
* * * * *
(b) Clear and conspicuous standard. * * *
(1)
Amount due at lease signing. Except for the statement o f a periodic payment, any
affirmative or negative reference to a charge that is a part o f the total amount due at lease
signing under paragraph 7(d)(2)(H) o f this section [, such as the amount o f any capitalized
cost reduction (or no capitalized cost reduction is required),] shall not be more prominent than
the disclosure o f the total amount due at lease signing.

(d) Advertisement o f terms that require additional disclosure. (1) Triggering term s.
An advertisement that states any o f the following items shall contain the disclosures required
by paragraph (d)(2) o f this section, except as provided in paragraphs (e) and (f) o f this
section:
(1) The amount o f any payment; ►or-*
[(ii) The number o f required payments; or]
[(iii)] ►(ii)-* A statement o f any capitalized cost reduction or other payment required
prior to or at consummation, or that no payment is required.
(2) Additional terms. An advertisement stating any item listed in paragraph (d)(1) o f
this section shall also state the following items:
(i) That the transaction advertised is a lease;
(ii) The total amount due at lease signing ► o r delivery, whichever is later•«, or that no
payment is required;
(iii) The number, amounts, ►and-* due dates or periods o f scheduled paymentsj, and
total o f such payments] under the lease;
[(iv) A statement o f whether or not the lessee has the option to purchase the leased
property, and where the lessee has the option to purchase at the end o f the lease term, the
purchase-option price. The method o f determining the purchase-option price may be
substituted in disclosing the lessee’s option to purchase the leased property prior to the end o f
the lease term;]
l(v)] ►(iv)-* A statement o f ► whether or not a security deposit is required-* [the
amount, or the method for determining the amount, o f the lessee’s liability (if any) at the end
o f the lease term that] ; and
Kv0] ►(v)-* A statement [of the lessee’s liability] ►th a t an extra charge may be
imposed at the end o f the lease term where the lessee is liable-* (if any) for the difference
between the residual value o f the leased property and its realized value at the end o f the lease
term.

5. Appendix A to part 213 is amended by revising Appendix A -l and Appendix A-2 to read as
follows:

-

10 -

Appendix A -l Model Open-End or Finance Vehicle Lease Disclosures

Federal Consumer Leasing Act Disclosures
Date
Lessqf(s)

Lessee (s)
O th er Charges (not part of your monthly
payment)

Amount Due at
Lease Signing

M onthly Payments

(Itemized below)*

Your first monthly payment of $ ____________
is due on ___________________ , followed by
due on
_payments of $ .
the
. of each month. The total of your
monthly payments is S .

Disposition fee (if you do
not purchase the vehicle)
[[Annual tax]

Total of Payments
(The amount you will have
paid by the end of the lease)

$ ____________
____________
You will owe an additional
amount if the actual value of
the vehicle is less than the
residual value.

Total $_

* Itemization o f Amount Due at Lease Signing
How the Amount Due at Lease Signing will be paid:

Amount Due At Lease Signing:

________________
________________
________________

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 m onthly payment is determined as shown below:
) and any items
Gross capitalized cost. The agreed upon value o f the vehicle ($ .
you pay over the lease term (such as service contracts, insurance, and any outstanding prior loan
or lease b alan ce).........................................................................................................................................................................
If you want an itemization o f this amount, please check this box. (ZD
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 s t....................................................................................................................................
Adjusted capitalized cost. The amount used in calculating your base monthly paym ent...........................................
Residual value. The value o f the vehicle at the end o f the lease used in calculating your base monthly p ay m 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 te rm .....................................................................................
Rent charge. The amount charged in addition to the depreciation and any amortized am ounts................................
Total of base monthly payments. The depreciation and any amortized amounts plus the rent c h a rg e ...................
Lease term . The number o f months in your le a se .......... ....................................................................................................
Base monthly p aym ent.............................................................................................................................................................
Monthly sales/use t a x ........................................................................................................................................ ....................
Total monthly payment

+
+
=S

Rent and other charges. The total amount of rent and other charges imposed in connection with your-lease S

Early Term ination. 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 o f Lease T erm . [You have an option to purchase the vehicle at the end of the lease term for S ____________
[and a purchase option fee o f $ _________________ ].] [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.

-11
Appendix A -l Model Open-End or Finance Vehicle Lease Disclosures

Page 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. The total amount you will pay for official and license fees, registration, title, and taxes over the term of your lease, whether
included with your monthly payments or assessed otherwise: $ ________________
Insurance. The following types and amounts of insurance will be acquired in connection with this lease:

------------- 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.
End o f Term Liability, (a) The residual value ($ _____________ ) of the vehicle is based on a reasonable, good faith estimate of the value of the vehicle at
end of the lease term. If the actual value of 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 entitled to a credit or refund of any surplus.] If the actual value of the vehicle is less than the residual value, you will be
liable for any difference up to $ _______________ (3 times the monthly payment). For any difference in excess of that amount, you will be liable only if:
1. Excessive use or damage [as described in paragraph___ ] [representing more than normal wear 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 of the lease term to make a higher payment.
Should we bring a lawsuit against you, we must prove that our original estimate of the value of the leased property at the end of the lease term was reasonable am
was made in good faith. For example, we might prove that the actual was less than the original estimated value, although the original estimate was reasonable,
because of an unanticipated decline in value for that type of vehicle. We must also pay your attorney’s fees.
(b) 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 of us, a
professional appraisal of th e___________ value of 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 determining unreasonable or excess wear and use of 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:

W arranties. 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 term ination is:

(b) We may terminate this lease before the end of 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 of the vehicle at termination, 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 of us. a professional appraisal of th e __________________value of 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 of the following type in the property listed below to secure performance of 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 of the term.
The price will be [$ _____________________ /[the method of determining the price].] [You do not have an option to purchase the leased vehicle.)

-

12 -

Appendix A-2 Model Closed-End or Net Vehicle Lease Disclosures

Federal Consumer Leasing Act Disclosures
D a te ________________________
Lessor(s) _____________________________________________________

T otal of Payments
(The amount you will have
paid by the end of the lease)

O th er Charges (not part of your monthly
payment)

A m ount Due a t
Lease Signing

M onthly Paym ents

(Itemized below)*

Your first monthly payment of $
is due on
. followed bv
payments of $
due on
the
of each month. The total of your
monthlv payments is S

$

Lessee(s) _______________

Disposition fee (if you do
not purchase the vehicle)
[[Annual tax]

$
]
$

Total

S

* Item ization of A m ount Due a t Lease Signing
How the A m ount Due a t Lease Signing will be

A m ount Due A t Lease Signing:
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

S ________________

$ _____
_____
_____

Total

$ _____

Your m onthly paym ent is determ ined as show n below:
G ross capitalized cost. The agreed upon value o f the vehicle ( $ _________________ ) and any items
you pay over the lease term (such as service contracts, insurance, and any outstanding prior loan
or lease b alance)..........................................................................................................................................................................................

$

If you want an itemization of this amount, please check this box. O
C apitalized cost reduction. The amount o f any net trade-in allowance, rebate, noncash credit, or cash you pay
that reduces the gross capitalized c o s t....................................................................................................................................................
A djusted capitalized cost. The amount used in calculating your base monthly paym ent...........................................................
Residual value. The value of the vehicle at the end of the lease used in calculating your base monthly p ay m en t................
D epreciation an d any am ortized am ounts. The amount charged for the vehicle's decline in value
ss

through normal use and for other items paid over the lease te rm .....................................................................................................
R ent charge. The amount charged in addition to the depreciation and any amortized am o u nts................................................
T otal of base m onthly paym ents. The depreciation and any amortized amounts plus the rent ch a rg e...................................
Lease term . The number of months in your le a se ...............................................................................................................................
Base m onthly p a y m e n t........................................................ ........ ...........................................................................................................
M onthlv sales/use t a x ...............................................................................................................................................................................

+
.................................. ................................................................................................................................ =$

T otal m onthly p a y m e n t...........................................................................................................................................................................

E arly T erm ination. You m ay have to pay a substantial charge if you end this lease early. The charge m ay be up to several
thousand d ollars. The actual charge will depend on when the lease is term inated. T he earlier you end the lease, the greater
this charge is likely to be.
Excessive W ear 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 O ption a t E nd of Lease T erm . [You have an option to purchase the vehicle at the end of the lease term for S ____________
[and a purchase option fee o f S __________________].) [You do not have an option to purchase the vehicle at the end of the lease term.]
O th er Im po rtant T erm s. 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.

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Appendix A-2 Model Closed-End or Net Vehicle Lease Disclosures

Page 2

[The following provisions are the nonsegregated disclosures required under Regulation M.]

Year

Make

D escrbtion o f Leased Prooertv
Model
Body Style

Vehicle ID #

Official Fees and Taxes. The total amount you will pay for official and license fees, registration, title, and taxes over the term of your lease, whether
included with your monthly payments or assessed otherwise: $ ________________
Insurance. The following types and amounts of insurance will be acquired in connection with this lease:

------------- We (lessor) will provide the insurance coverage quoted above for a total premium cost of S _________________
------------- You (lessee) agree to provide insurance coverage in the amount and types indicated above.
S tandards for W ear an d Use. The following standards are applicable for determining unreasonable or excess wear and use of the leased vehicle:

M aintenance.
[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:

W arranties. The leased vehicle is subject to the following express warranties:

Early T erm ination an d 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 of 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 of the vehicle at termination, 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 of us, a professional appraisal of th e__________________value of 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 of the following type in the property listed below to secure performance of your obligations under this lease:

Late Paym ents. The charge for late payments is:
O ption to Purchase Leased Property P rior to the E nd of the Lease. (You have an option to purchase the leased vehicle prior to the end of the term.
The price will be [$ _____________________ /[the method of determining the price).) [You do not have an option to purchase the leased vehicle.)

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["THIS SIGNATURE PAGE PERTAINS TO THE PROPOSED RULE REGULATION M;
DOCKET NO. R-0952, CONSUMER LEASING"]
By order o f the Board o f Governors o f the Federal Reserve System, December 17, 1996.
(signed) William W. Wiles

William W. Wiles,
Secretary o f the Board.