Full text of District Notices (Federal Reserve Bank of Dallas) : Request for Public Comment on Revised Proposal to Permit Electronic Delivery of Federally Mandated Disclosures, Notice 1999-79

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Federal Reserve Bank
of Dallas

l l★K

DALLAS, TEXAS
75265-5906

September 22, 1999
Notice 99-79

TO: The Chief Executive Officer of each
financial institution and others concerned
in the Eleventh Federal Reserve District
SUBJECT
Request for Public Comment on
Revised Proposals to Permit Electronic Delivery of
Federally Mandated Disclosures
DETAILS
The Board of Governors of the Federal Reserve System has requested public comment on revised proposals to permit electronic delivery of federally mandated disclosures under
the following five consumer protection regulations:
•

Regulation B (Equal Credit Opportunity) – Docket No. R-1040;

•

Regulation E (Electronic Fund Transfers) – Docket No. R-1041;

•

Regulation M (Consumer Leasing) – Docket No. R-1042;

•

Regulation Z (Truth in Lending) – Docket No. R-1043; and

•

Regulation DD (Truth in Savings) – Docket No. R-1044.

The Board previously published an interim rule to Regulation E and proposed
changes to Regulations B, M, Z, and DD to permit financial institutions and others to use electronic communication to provide disclosures if the applicant agrees to such delivery. In response
to comments received on the proposals, the Board has published for comment alternative proposals on the electronic delivery of disclosures, together with proposed commentaries that would
provide further guidance on electronic communication issues. The interim rule to Regulation E
remains in effect.

For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal
Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012;
Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

-2-

The Board must receive comments by October 29, 1999. Please address comments to
Jennifer J. Johnson, Secretary, Board of Governors of the Federal Reserve System, 20th Street
and Constitution Avenue, N.W., Washington, DC 20551. All comments should refer to the
respective docket numbers on the previous page.
MORE INFORMATION
A copy of the Board’s notice as it appears on pages 49688–752, Vol. 64, No. 177 of
the Federal Register dated September 14, 1999, can be located at the following Internet address:
http://www.access.gpo.gov/su_docs/aces/aces140.html
To access all five proposals, place a check mark by “proposed rules,” enter the Federal Register
issue date (9/14/99), enter the search terms “Federal Reserve System,” and hit the “submit”
button. Also, you may obtain a copy of the proposals by contacting the Public Affairs Department at (214) 922-5254.
For more information regarding Regulations B, E, M, Z, and DD, please contact
Eugene Coy in the Banking Supervision Department at (214) 922-6201.

49688

Proposed Rules

Federal Register
Vol. 64, No. 177
Tuesday, September 14, 1999

This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.

FEDERAL RESERVE SYSTEM
12 CFR Part 202
[Regulation B; Docket No. R–1040]

Equal Credit Opportunity
Board of Governors of the
Federal Reserve System.
ACTION: Proposed rule.
AGENCY:

SUMMARY: The Board is requesting
comment on proposed revisions to
Regulation B, which implements the
Equal Credit Opportunity Act. The
Board previously published a proposed
rule that permits creditors to use
electronic communication (for example,
communication via personal computer
and modem) to provide disclosures
required by the act and regulation, if the
applicant agrees to such delivery. (A
similar rule was also proposed under
various other consumer financial
services regulations administered by the
Board.) In response to comments
received on the proposals, the Board is
publishing for comment an alternative
proposal on the electronic delivery of
disclosures, together with proposed
commentary that would provide further
guidance on electronic communication
issues. The Board is also publishing for
comment proposed revisions to allow
disclosures in other languages.
DATES: Comments must be received by
October 29, 1999.
ADDRESSES: Comments, which should
refer to Docket No. R–1040, may be
mailed to Ms. Jennifer J. Johnson,
Secretary, Board of Governors of the
Federal Reserve System, 20th Street and
Constitution Avenue, NW, Washington,
DC 20551. Comments addressed to Ms.
Johnson may also be delivered to the
Board’s mail room between 8:45 a.m.
and 5:15 p.m. weekdays, and to the
security control room at all other times.
The mail room and the security control
room, both in the Board’s Eccles
building, are accessible from the
courtyard entrance on 20th Street
between Constitution Avenue and C
Street, NW. Comments may be

inspected in room MP–500 between
9:00 a.m. and 5:00 p.m., pursuant to
§ 261.12, except as provided in § 261.14
of the Board’s Rules Regarding the
Availability of Information, 12 CFR
261.12 and 261.14.
FOR FURTHER INFORMATION CONTACT: Jane
E. Ahrens, Senior Counsel, or Natalie E.
Taylor, Staff Attorney, Division of
Consumer and Community Affairs, at
(202) 452–3667 or (202) 452–2412.
Users of Telecommunications Device for
the Deaf (TDD) only, contact Diane
Jenkins at (202) 452–3544.
SUPPLEMENTARY INFORMATION:
I. Background
The Equal Credit Opportunity Act
(ECOA), 15 U.S.C. 1691 et seq., makes
it unlawful for creditors to discriminate
in any aspect of a credit transaction on
the basis of sex, race, color, religion,
national origin, marital status, age
(provided the applicant has the capacity
to contract), because all or part of an
applicant’s income derives from public
assistance, or because an applicant has
in good faith exercised any right under
the Consumer Credit Protection Act.
The Board’s Regulation B (12 CFR part
202) implements the act.
The ECOA and Regulation B require
a number of disclosures to be provided
in writing, presuming that creditors
provide paper documents. Under many
laws that call for information to be in
writing, information in electronic form
is considered to be ‘‘written.’’
Information produced, stored, or
communicated by computer is also
generally considered to be a writing,
where visual text is involved.
In May 1996, the Board revised
Regulation E (Electronic Fund
Transfers) following a comprehensive
review. During that process, the Board
determined that electronic
communication for delivery of
information required by federal laws
governing financial services could
effectively reduce compliance costs
without adversely affecting consumer
protections. Consequently, the Board
simultaneously issued a proposed rule
to permit financial institutions to use
electronic communication to deliver
disclosures that Regulation E requires to
be given in writing. (61 FR 19696, May
2, 1996.) The 1996 proposal required
that disclosures be provided in a form
the consumer may retain, a requirement
that institutions could satisfy by

providing information in a format that
may be printed or downloaded. The
proposed rule also allowed consumers
to request a paper copy of a disclosure
for up to one year after its original
delivery.
Following a review of the comments,
on March 25, 1998, the Board issued an
interim rule under Regulation E (the
‘‘interim rule’’), 63 FR 14528. The Board
also published proposals under
Regulations DD (Truth in Savings), 63
FR 14533, M (Consumer Leasing), 63 FR
14538, Z (Truth in Lending), 63 FR
14548, and B (Equal Credit
Opportunity), 63 FR 14552,
(collectively, the ‘‘March 1998 proposed
rules’’). The rules would apply to
financial institutions, creditors, lessors,
and other entities that are required to
give disclosures to consumers and
others. (For ease of reference, this
background section uses the terms
‘‘financial institutions,’’ ‘‘institutions,’’
and ‘‘consumers.’’) The interim rule and
the March 1998 proposed rules were
similar to the May 1996 proposed rule;
however, they did not require financial
institutions to provide paper copies of
disclosures to a consumer upon request
if the consumer previously agreed to
receive disclosures electronically. The
Board believed that most institutions
would accommodate consumer requests
for paper copies when feasible or
redeliver disclosures electronically; and
the Board encouraged financial
institutions to do so.
The March 1998 proposed rules and
the interim rule permitted financial
institutions to provide disclosures
electronically if the consumer agreed,
with few other requirements. The rule
was intended to provide flexibility and
did not specify any particular method
for obtaining a consumer’s agreement.
Whether the parties had an agreement
would be determined by state law. The
proposals and the interim rule did not
preclude a financial institution and a
consumer from entering into an
agreement electronically, nor did they
prescribe a formal mechanism for doing
so.
The Board received approximately
200 written comments on the interim
rule and the March 1998 proposed rules.
The majority of comments were
submitted by financial institutions and
their trade associations. Industry
commenters generally supported the use
of electronic communication to deliver

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
information required by the ECOA and
Regulation B. Nevertheless, many
sought specific revisions and additional
guidance on how to comply with the
disclosure requirements in particular
transactions and circumstances.
Industry commenters were especially
concerned about the condition that a
consumer had to ‘‘agree’’ to receive
information by electronic
communication, because the rule did
not specify a method for establishing
that an ‘‘agreement’’ was reached. These
commenters believed that relying on
state law created uncertainty about what
constitutes an agreement and, therefore,
potential liability for noncompliance.
To avoid uncertainty over which state’s
laws apply, some commenters urged the
Board to adopt a federal minimum
standard for agreements or for informed
consent to receive disclosures by
electronic communication. These
commenters believed that such a
standard would avoid the compliance
burden associated with tailoring legally
binding ‘‘agreements’’ to the contract
laws of all jurisdictions where
electronic communication may be sent.
Consumer advocates generally
opposed the March 1998 interim rule
and proposed rules. Without additional
safeguards, they believed, consumers
may not be provided with adequate
information about electronic
communication before an ‘‘agreement’’
is reached. They also believed that
promises of lower costs could induce
consumers to agree to receive
disclosures electronically without a full
understanding of the implications. To
avoid such problems, they urged the
Board, for example, either to require
institutions to disclose to consumers
that their account with the institution
will not be adversely affected if they do
not agree to receive electronic
disclosures, or to permit institutions to
offer electronic disclosures only to
consumers who initiate contact with the
institution through electronic
communication. They also noted that
some consumers will likely consent to
electronic disclosures believing that
they have the technical capability to
retrieve information electronically, but
might later discover that they are unable
to do so. They questioned consumers’
willingness and ability to access and
retain disclosures posted on Internet
websites, and expressed their
apprehension that the goals of federally
mandated disclosure laws will be lost.
Consumer advocates and others were
particularly concerned about the use of
electronic disclosures in connection
with home-secured loans and certain
other transactions that consumers
typically consummate in person (citing

as examples automobile loans and
leases, short-term ‘‘payday’’ loans, or
home improvement financing contracts
resulting from door-to-door sales). They
asserted that there is little benefit to
eliminating paper disclosures in such
transactions and that allowing
electronic disclosures in those cases
could lead to abusive practices.
Accordingly, consumer advocates and
others believed that paper disclosures
should always accompany electronic
disclosures in mortgage loans and
certain other transactions, and that
consumers should have the right to
obtain paper copies of disclosures upon
request for all types of transactions
(deposit account, credit card, loan or
lease, and other transactions).
A final issue raised by consumer
advocates was the integrity of
disclosures sent electronically. They
stated that there may be instances when
the consumer and the institution
disagree on the terms or conditions of
an agreement and consumers may need
to offer electronic disclosures as proof of
the agreed-upon terms and to enforce
rights under consumer protection laws.
Thus, to assure that electronic
documents have not been altered and
that they accurately reflect the
disclosures originally sent, consumer
advocates recommended that the Board
require that electronic disclosures be
authenticated by an independent third
party.
The Board’s Consumer Advisory
Council considered the electronic
delivery of disclosures in 1998 and
again in 1999. Many Council members
shared views similar to those expressed
in written comment letters on the 1998
proposals. For example, some Council
members expressed concern that the
Board was moving too quickly in
allowing electronic disclosures for
certain transactions, and suggested that
the Board might go forward with
electronic disclosures for deposit
accounts while proceeding more slowly
on credit and lease transactions. Others
expressed concern about consumer
access and consumers’ ability to retain
electronic disclosures. They believed
that, without specific guidance from the
Board, institutions would provide
electronic disclosures without knowing
whether consumers could retain or
access the disclosures, and without
establishing procedures to address
technical malfunctions or nondelivery.
The Council also discussed the integrity
and security of electronic documents.
II. Overview of Proposed Revisions
Based on a review of the comments
and further analysis, the Board is
requesting comment on a modified

49689

proposed rule that is more detailed than
the interim rule and March 1998
proposed rules. It is intended to provide
specific guidance for creditors that
choose to use electronic communication
to comply with Regulation B’s
requirements to provide written
disclosures, and to ensure effective
delivery of disclosures to applicants
through this medium. Though detailed,
the proposal provides flexibility for
compliance with the electronic
communication rules. The modified
proposal recognizes that some
disclosures may warrant different
treatment under the rule. Where written
disclosures are made to consumers who
are transacting business in person, these
disclosures generally would have to be
made in paper form. The modified
proposal for Regulation B would not
contain this in-person exception as the
Board does not believe the exception is
necessary given the timing and delivery
provision for providing information, as
discussed below under 4(e)(2).
The Board is soliciting comment on a
modified approach that addresses both
industry and consumer group concerns.
Under the proposal, creditors would
have to provide specific information
about how the applicant can receive and
retain electronic disclosures—through a
standardized disclosure statement—
before obtaining applicants’ acceptance
of such delivery, with some exceptions.
If they satisfy these requirements and
obtain applicants’ affirmative consent,
creditors would be permitted to use
electronic communication. As a general
rule a creditor would be permitted to
offer the option of receiving electronic
disclosures to all applicants, whether
they initially contact the creditor by
electronic communication or otherwise.
Creditors would have the option of
delivering disclosures to an e-mail
address designated by the applicant or
making disclosures available at another
location such as the creditor’s website,
for printing or downloading. If the
disclosures are posted at a website
location, creditors generally must notify
applicants at an e-mail address about
the availability of the information.
(Creditors may offer consumers the
option of receiving alert notices at a
postal address.) The disclosures must
remain available at that site for 90 days.
Disclosures provided electronically
would be subject to a ‘‘clear and
conspicuous’’ standard, must be in a
form that the applicant can retain, and
would be subject to the format and
timing rules in Regulation B. For
example, a creditor that provides
electronic disclosures and denies an
applicant’s credit request must provide
an electronic adverse action notice

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within 30 days after receiving a
completed application.
Creditors generally must provide a
means for applicants to confirm the
availability of equipment to receive and
retain electronic disclosure documents.
A creditor would not otherwise have a
duty to verify applicants’ actual ability
to receive, print, or download the
disclosures. Some commenters
suggested that creditors should be
required to verify delivery by return
receipt. The Board solicits comment on
the need for such a requirement and the
feasibility of that approach.
As previously mentioned, consumer
advocates and others have expressed
concerns that electronic documents can
be altered more easily than paper
documents. The issue of the integrity
and security of electronic documents
affects electronic commerce in general
and is not unique to the written
disclosures required under the
consumer protection laws administered
by the Board. Applicants’ ability to
enforce rights under the consumer
protection laws could be impaired in
some cases, however, if the authenticity
of disclosures that they retain cannot be
demonstrated. Signatures, notary seals,
and other established verification
procedures are used to detect alterations
for transactions memorialized in paper
form. The development of similar
devices for electronic communication
should reduce uncertainty over time
about the ability to use electronic
documents for resolving disputes.
The Board’s rules require creditors to
retain evidence of compliance with
Regulation B. Specific comment is
solicited on the feasibility of complying
with a requirement that creditors
provide disclosures in a format that
cannot be altered without detection, or
have systems in place capable of
detecting whether or not information
has been altered, as well as the
feasibility of requiring use of
independent certification authorities to
verify disclosure documents.
Elsewhere in today’s Federal Register,
the Board is publishing similar
proposals for comment under
Regulations E, M, Z, and DD. In a
separate notice the Board is publishing
an interim rule under Regulation DD,
which implements the Truth in Savings
Act, to permit depository institutions to
use electronic communication to deliver
disclosures on periodic statements. For
ease of reference, the Board has assigned
new docket numbers to the modified
proposals published today.
III. Section-by-Section Analysis
Pursuant to its authority under
section 703 of the ECOA, the Board

proposes to amend Regulation B to
permit creditors to use electronic
communication to provide disclosures
and other information required by the
act and regulation to be in writing.
Below is a section-by-section analysis of
the rules for providing disclosures by
electronic communication, including
references to proposed commentary
provisions.
Section 202.4 General Rules
4(e) Electronic Communication
4(e)(1) Definition. The definition of
the term ‘‘electronic communication’’ in
the March 1998 proposed rule remains
unchanged. Section 202.4(e)(1) limits
the term to a message transmitted
electronically that can be displayed on
equipment as visual text, such as a
message that is displayed on a computer
monitor screen. Most commenters
supported the term as defined in the
March 1998 proposed rule. Some
commenters favored a more expansive
definition that would encompass
communications such as audio and
voice response telephone systems.
Because the proposal is intended to
permit electronic communication to
satisfy the statutory requirement for
written disclosures, the Board believes
visual text is an essential element of the
definition.
Commenters asked the Board to
clarify the coverage of certain types of
communications. A few commenters
asked about communication by
facsimile. Facsimiles are initially
transmitted electronically; the
information may be received either in
paper form or electronically through
software that allows a consumer to
capture the facsimile, display it on a
monitor, and store it on a computer
diskette or drive. Thus, information sent
by facsimile may be subject to the
provisions governing electronic
communication. When disclosures are
sent by facsimile, a creditor should
comply with the requirements for
electronic communication unless it
knows that the disclosures will be
received in paper form. Proposed
comment 4(e)(1)-1 contains this
guidance.
4(e)(2) Electronic Communication
between Creditor and Applicant.
Section 202.4(e)(2) would permit
creditors to provide disclosures using
electronic communication, if the
creditor complies with provisions in
new § 202.4(e)(3), discussed below.
1. Presenting Disclosures in a Clear and
Conspicuous Format
Currently, Regulation B does not
expressly require creditors to present

required information in a clear and
conspicuous format. In contrast,
Regulations DD (Truth in Savings), E
(Electronic Fund Transfers), M
(Consumer Leasing), and Z (Truth in
Lending) all require that information be
provided in a clear and conspicuous (or
conspicuous or clear and readily
understandable) format. Because clarity
requirements for written disclosures
(whether electronic or not) exist for
those regulations, the Board requested
comment in the March 1998 proposed
rule on whether these requirements
should be extended to electronic
communication under Regulation B.
Also, the Board recently issued a
proposed rule for Regulation B as part
of its periodic review of regulations. As
part of the review, the Board requested
comment on whether the ‘‘clear and
conspicuous’’ requirement should apply
to all—paper or electronic—disclosures
and information required by Regulation
B. (64 FR 44581, August 16, 1999).
Most commenters to the March 1998
proposed rule suggested that the Board
adopt the clear and conspicuous
requirement for electronic
communication under Regulation B.
These commenters noted that the
requirements for electronic
communication should be consistent
among the regulations, and that
extension of this requirement to
Regulation B would not be burdensome.
A few commenters, however, suggested
that either the Board adopt the clear and
conspicuous requirement for all
disclosures under the regulation—paper
or electronic—or that it leave the
requirement as it is. They argued that
imposing a different standard for paper
and electronic disclosures might result
in applicants receiving disclosures in
different formats based on how they
apply for credit and for what product
they apply.
The proposal would extend a ‘‘clear
and conspicuous’’ requirement to
electronic communication under
Regulation B, consistent with the
proposed changes to Regulation B
discussed above. See § 202.4(d) of the
August 16, 1999 proposed rule for
Regulation B (64 FR 44581). The Board
does not intend to discourage or
encourage specific types of
technologies. Regardless of the
technology, however, disclosures
provided electronically must be
presented in a clear and conspicuous
format.
When applicants consent to receive
disclosures electronically and they
confirm that they have the equipment to
do so, creditors generally would have no
further duty to determine that
applicants are able to receive the

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disclosures. Creditors do have the
responsibility of ensuring the proper
equipment is in place in instances
where the creditor controls the
equipment. Proposed comment 4(e)(2)–
1 contains this guidance.
2. Providing Disclosures in a Form the
Applicant May Keep
Currently under Regulation B, only
one notice (§ 202.9(a)(3)(i)(B), regarding
business credit) must be provided in a
form the applicant may retain. On the
other hand, Regulations DD, E, M, and
Z all require that information be
provided in a retainable form. In the
March 1998 proposed rule, the Board
requested comment on whether a
retainability requirement should be
extended to electronic communication
under Regulation B generally.
Most commenters supported a
retainability requirement for electronic
communication under Regulation B.
These commenters noted that the
requirements for electronic
communication should be as consistent
as practicable for all of the regulations,
and that extension of this requirement
would not be burdensome. Some
commenters, however, supported
leaving the requirement as it is. They
believe a retainability requirement for
disclosures sent by electronic
communication would discourage the
use of electronic communication by
creating different rules for disclosures
sent by mail and those sent by
electronic communication. As part of its
August 1999 proposed rule for
Regulation B, discussed above, the
Board requested comment on whether a
‘‘retainability’’ requirement should
apply to all—paper or electronic—
disclosures and information required by
Regulation B. See § 202.4(d) of the
August 16, 1999 Regulation B proposed
rule (64 FR 44581).
Under the 1998 proposals and interim
rule, a creditor would satisfy the
retainability requirement by providing
information that can be printed or
downloaded. The modified proposal
adopts the same approach but also
provides that the information must be
sent to a specified location to ensure
that applicants have an adequate
opportunity to retain the information.
Applicants communicate
electronically with creditors through a
variety of means and from various
locations. Depending on the location (at
home, at work, in a public place such
as a library), an applicant may not have
the ability at a given time to preserve
ECOA disclosures presented on-screen.
Therefore, when a creditor provides
disclosures by electronic
communication, to satisfy the retention

requirements, the creditor must send the
disclosures to an applicant’s e-mail
address or other location where
information may be retrieved at a later
date. Proposed comment 4(e)(2)–2
contains this guidance; see also the
discussion under § 202.4(e)(4), below. In
instances where a creditor controls an
electronic terminal used to provide
electronic disclosures, a creditor may
provide equipment for the applicant to
print a paper copy in lieu of sending the
information to the applicant’s e-mail
address or posting the information at
another location such as the creditor’s
website. See proposed comment 4(e)(2)–
1.
3. Timing
Creditors must ensure that electronic
disclosures comply with all relevant
timing requirements of the regulation.
For example, under §§ 202.9(a)(1) and
(2), a creditor must send a written notice
within 30 days after receiving a
completed application, if the creditor
takes adverse action.
To illustrate the timing requirements
for electronic communication, assume
that a consumer is interested in
obtaining a loan and uses a personal
computer at home to access the
creditor’s website on the Internet. The
creditor provides disclosures to the
consumer about the use of electronic
communication (the § 202.4(e)(3)
disclosures discussed below) and the
consumer responds affirmatively. If the
creditor’s procedures permit the
consumer to apply for a loan at that
time, and the creditor denies the credit
request, the written notice required by
§ 202.9 must be provided. Under the
proposal, the creditor would satisfy the
regulation’s timing requirements if,
within 30 days of receiving the
completed application, an adverse
action notice is sent to the applicant’s
e-mail address, or is posted on the
creditor’s website and the applicant is
informed that the notice is available.
If an applicant is transacting business
at a creditor’s website and is at a point
in the transaction where in order to go
forward the applicant must receive
disclosures, the disclosures must appear
on the screen. By displaying the
disclosures on the screen, creditors meet
the timing and delivery requirements of
the regulation. For example, if an
applicant applies over the Internet for a
loan to purchase a principal dwelling,
the request for monitoring information
required by § 202.13(a) and the
disclosure required by § 202.13(c)
concerning the collection of the
information must appear on the screen
before the application can be sent to the
creditor for processing. The timing

49691

requirements for requesting the
information and providing the
disclosure would not be met if, in this
example, the creditor permitted the
applicant to complete the application
and apply for credit and sent the request
for monitoring information and the
applicable disclosure to an e-mail
address thereafter. Proposed comment
4(e)(2)–3 contains this guidance.
4(e)(3) Disclosure Notice. Section
202.4(e)(3) would identify the specific
steps required before a creditor could
use electronic communication to satisfy
the regulation’s disclosure
requirements. Proposed Sample Forms
C–11, C–12, C–14, and C–15 are
published to aid compliance with these
requirements.
4(e)(3)(i) Notice by Creditor. Section
202.4(e)(3)(i) outlines the information
that creditors must provide before
electronic disclosures can be given. The
creditor must: (1) Describe the
information to be provided
electronically and specify whether the
information is also available in paper
form or whether the credit product is
offered only with electronic disclosures;
(2) identify the address or location
where the information will be provided
electronically, and if it will be available
at a location other than the applicant’s
electronic address, specify for how long
and where it can be obtained once that
period ends; (3) specify any technical
requirements for receiving and retaining
information sent electronically, and
provide a means for the applicant to
confirm the availability of equipment
meeting those requirements; and (4)
provide a toll-free telephone number
and, at the creditor’s option, an
electronic or a postal address for
questions about receiving electronic
disclosures or for updating applicants’
electronic addresses, and for seeking
assistance with technical or other
difficulties (see proposed comments to
4(e)(3)(i)). The Board requests comment
on whether other information should be
disclosed regarding the use of electronic
communication and on any format
changes that might improve the
usefulness of the notice for applicants.
Under the proposal, the
§ 202.4(e)(3)(i) disclosures must be
provided, as applicable, before the
creditor uses electronic communication
to deliver any information required by
the regulation. The approach of
requiring a standardized disclosure
statement addresses, in several ways,
the concern that applicants may be
steered into using electronic
communication without fully
understanding the implications. Under
this approach, the specific disclosures
that would be delivered electronically

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must be identified, and applicants must
be informed whether there is also an
option to receive the information in
paper form. Applicants must provide an
e-mail address where one is required.
Technical requirements must also be
stated, and applicants must affirm that
their equipment meets the requirements,
and that they have the capability of
retaining electronic disclosures by
downloading or printing them (see
proposed comment 4(e)(3)–1). Thus, the
§ 202.4(e)(3)(i) disclosures should allow
applicants to make informed judgments
about receiving electronic disclosures.
Some commenters requested
clarification of whether a creditor may
use electronic communication to
provide some required disclosures
while using paper for others. The
proposed rule would permit creditors to
do so; the disclosure given under
§ 202.4(e)(3)(i) must specify which
ECOA disclosures will be provided
electronically.
Commenters requested further
guidance on a creditor’s obligation
under the regulation if the applicant
chooses not to receive information by
electronic communication. A creditor
could offer an applicant the option of
receiving disclosures in paper form, but
it would not be required to do so. A
creditor could establish credit products
for which disclosures are given only by
electronic communication. Section
202.4(e)(3)(i)(A) would require creditors
to tell applicants whether or not they
have the option to receive disclosures in
paper form. Section 202.4(e)(3)(i)(D)
would require creditors to provide a
toll-free number that applicants could
use to inform creditors if they wish to
discontinue receiving electronic
disclosures. In such cases the creditor
must inform the applicant whether the
credit product is also available with
disclosures in paper form. Proposed
sample notices in which the applicant
has an option to receive electronic or
paper disclosures (Form C–14) or
electronic disclosures only (Form C–15)
are contained in appendix C.
4(e)(3)(ii) Response by Applicant.
Proposed § 202.4(e)(3)(ii) would require
creditors to provide a means for the
applicant to affirmatively indicate that
information may be provided
electronically. Examples include a
‘‘check box’’ on a computer screen or a
signature line (for requests made in
paper form). The requirement is
intended to ensure that applicants’
consent is established knowingly and
voluntarily, and that consent to receive
electronic disclosures is not inferred
from the submission of an application
for credit. See proposed comment
4(e)(3)(ii)–1.

4(e)(3)(iii) Changes. Creditors would
be required to notify applicants about
changes to the information that is
provided in the notice required by
§ 202.4(e)(3)(i)—for example, if
upgrades to computer software are
required. Proposed comment
4(e)(3)(iii)–1 contains this guidance.
The notice must include the effective
date of the change and be provided
before that date. Proposed comment
4(e)(3)(iii)–2 would provide that the
notice must be sent a reasonable period
of time before the effective date of the
change. Although the number of days
that constitutes reasonable notice may
vary, depending on the type of change
involved, the comment would provide
creditors with a safe harbor: fifteen
days’ advance notice would be
considered a reasonable time in all
cases. The same time period is stated in
similar proposals under Regulations E,
Z, and DD published in today’s Federal
Register. Comment is requested on
whether a safe harbor of 15 days is an
appropriate time period, and whether a
uniform period for changes involving
electronic communication is desirable.
Proposed comment 4(e)(3)(iii)–3
contains guidance on delivery
requirements for the notice of change.
The notice of a change must also
include a toll-free telephone number or,
at the creditor’s option, an address for
questions about receiving electronic
disclosures. For example, a consumer
may call regarding problems related to
a change, such as an upgrade to
computer software that is not provided
by the creditor. Applicants may also use
the toll-free number if they wish to
discontinue receiving electronic
disclosures. In such cases, the creditor
must inform applicants whether the
credit product is also available with
disclosures in paper form. (See
proposed comments 4(e)(3)(iii)–4
through –6).
If the change involves providing
additional disclosures by electronic
communication, creditors generally
would be required to provide the notice
in § 202.4(e)(3)(i) and obtain the
applicant’s consent. That notice would
not be required if the creditor
previously obtained the applicant’s
consent to the additional disclosures in
its initial notice by disclosing the
possibility and specifying which
disclosures might be provided
electronically in the future. Comment is
specifically requested on this approach.
A list of additional disclosures may be
necessary to ensure that applicants’
consent is informed and knowing
(provided it does not cause confusion).
4(e)(4) Address or Location to Receive
Electronic Communication. Proposed

§ 202.4(e)(4) identifies addresses and
locations where creditors using
electronic communication may send
information to the applicant. Creditors
may send information to an applicant’s
electronic address, which is defined in
proposed comment 4(e)(4)(i)–1 as an email address that the applicant also may
use for receiving communications from
parties other than the creditor. For
notices of action taken, for example, a
creditor’s responsibility to provide
notice under § 202.9 will be satisfied
when the notice of action taken is sent
to the applicant’s electronic address in
accordance with the applicable
proposed rules concerning delivery of
disclosures by electronic
communication.
Guidance accompanying the March
1998 proposed rule provided that a
creditor would not meet delivery
requirements by simply posting
information to an Internet site such as
a creditor’s ‘‘home page’’ without
appropriate notice on how applicants
can access the information. Industry
commenters wanted to retain the
flexibility of posting disclosures on an
Internet website. They did not object to
providing a separate notice alerting
applicants about the disclosures’
availability but requested more
guidance on the issue. Consumer
advocates and others expressed concern
that the mere posting of information
inappropriately places the responsibility
to obtain disclosures on applicants, and
undermines the purpose of the delivery
requirements of the regulation.
The Board recognizes that currently,
because of security and privacy
concerns associated with data
transmissions, a number of creditors
may choose to provide disclosures at
their websites, where the applicant may
retrieve them under secure conditions.
Under § 202.4(e)(4), a creditor may make
disclosures available to an applicant at
a location other than the applicant’s
electronic address. The creditor must
notify the applicant when the
information becomes available and
identify the credit transaction involved.
The notice must be sent to the electronic
mail address designated by the
applicant; the creditor may, at its
option, permit the applicant to
designate a postal address. A proposed
sample notice (Form C–13) is published
below; see also proposed comment
4(e)(4)(ii)–1.
The Board believes it would be
inconsistent with the ECOA to require
an applicant to initiate a search—for
example, to search the website of each
creditor with whom the applicant
applied for credit—to determine
whether a disclosure has been provided.

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
The proposed approach ensures that an
applicant would not be required to
check a creditor’s website repeatedly,
for example, to learn whether the
creditor posted a notice of adverse
action.
The requirements of the regulation
would be met only if the required
information is posted on the website
and the applicant is notified of its
availability in a timely fashion. For
example, creditors must provide adverse
action notices to applicants within 30
days after receiving a completed
application. For an adverse action
notice posted on the Internet, a creditor
must both post the notice and notify the
applicant of its availability within 30
days of receiving a completed
application.
Commenters sought guidance on how
long disclosures posted at a particular
location must be available to applicants.
There is a variety of circumstances
when an applicant may not be able
immediately to access the information
due to illness, travel, or computer
malfunction, for example. Under
§ 202.4(e)(4), creditors must post
information that is sent to a location
other than the applicant’s electronic
mail address for 90 days. Proposed
comment 4(e)(4)(ii)–2 contains this
guidance.
Under the modified proposal,
creditors that post information at a
location other than the applicant’s
electronic mail address are required—
after the 90 day period—to make
disclosures available to applicants upon
request for a period of not less than 25
months, except as otherwise provided,
from the date disclosures are required to
be made, consistent with the record
retention requirements under
§ 202.12(b). (See § 202.12(b) of the
August 16, 1999 proposed rule for
Regulation B (64 FR 44581). The Board
requests comment on this approach,
including suggestions for alternative
means for providing consumers
continuing access to disclosures.
4(e)(5) Applicant Use of Electronic
Communication. Proposed § 202.4(e)(5)
would clarify applicants’ ability to
provide certain information to creditors
by electronic communication.
Regulation B provides that an applicant,
upon written request, is entitled to
receive a copy of an appraisal report
under § 202.5a and a statement of
specific reasons for adverse action
under § 202.9(a)(3)(ii). Under the
proposal, applicants generally would
have the option to use electronic
communication for these written notices
if the applicant has chosen to receive
information by electronic
communication. Because the applicant’s

electronic communication serves as
written notice, the creditor could not
also require paper notice. Creditors
could, however, specify a particular
electronic address for receiving the
notices.
The issue of the applicant’s ability to
provide certain information to creditors
by electronic communication was not
raised in the March 1998 proposed rule
for Regulation B. In issuing the March
1998 Regulation E interim rule, the
Board stated that financial institutions
could require paper confirmation of
electronic notices in the two instances
where the regulation allows written
confirmation—stop-payment notices
and notices of error. This approach was
consistent with guidance provided in
the May 1996 proposed rule, where the
Board stated that (as in the case of an
oral communication) if the consumer
sends an electronic communication to
the financial institution, the institution
could require paper confirmation from
the consumer (particularly since the
consumer was entitled to a paper copy
of a disclosure upon request under the
May 1996 proposal).
Views were mixed on whether
financial institutions should be
permitted to require paper
confirmations of electronic notices.
Many industry commenters requested
that the Board allow financial
institutions to request paper
confirmations; some stated that paper
confirmations protect both the
consumer and the financial institution.
Consumer advocates and other
commenters believed it would be unfair
to require paper confirmation of an
electronic communication from
consumers who receive electronic
communication from a financial
institution.
Based upon the comments received
and further analysis, and subject to
certain limitations discussed below, the
Board is proposing that applicants be
permitted to provide electronically any
information that an applicant is
required to provide a creditor to
exercise the applicant’s rights under the
regulation, such as the request for a
written statement of reasons. If a
creditor uses electronic communication
to provide disclosures about appraisal
rights under § 202.5a and notices under
§ 202.9, it is appropriate to allow
applicants to use electronic
communication to provide notices to the
creditor. If, however, a creditor limits its
use of electronic communication to the
delivery of information required at the
time the application is taken—the
disclosure concerning the collection of
monitoring information for homesecured loans—creditors would not be

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required to accept electronic
communication from applicants.
4(e)(5)(ii) Creditor’s Designation of
Address. Section 202.4(e)(5)(ii) would
provide that a creditor may designate
the electronic address that must be used
by an applicant for sending electronic
communication as permitted by
§ 202.4(e)(5)(i).
4(f) Foreign Language Disclosures. To
provide consistency among the
regulations, the Board would add
guidance permitting disclosures to be
made in languages other than English
(provided they are available in English
upon request). This guidance would be
set forth in proposed § 202.4(f).
Appendix C to Part 202—Sample
Notification Forms
The Board solicits comment on two
proposed sample disclosure forms and
three sample notice forms for use by
creditors to aid compliance with the
disclosure requirements of §§ 202.4(e)(3)
and (e)(4). Forms C–11 and C–12 would
implement § 202.4(e)(3), regarding the
notice that creditors must give prior to
using electronic communication to
provide required disclosures. Form C–
13 would implement § 202.4(e)(4),
regarding notices to applicants about the
availability of electronic information at
locations such as the creditor’s website.
Use of any modified version of these
forms would be in compliance as long
as the creditor does not delete
information required by the regulation
or rearrange the format in a way that
affects the substance, clarity, or
meaningful sequence of the disclosure.
For example, where a creditor combines
Regulation B and Regulation Z
disclosures for a credit card account, the
creditor may provide a single disclosure
statement about electronic delivery.
Sample Form C–14 illustrates the
disclosures under § 202.4(e)(3). The
sample assumes the creditor also offers
paper disclosures for applicants who
choose not to receive electronic
disclosures. Sample Form C–15 assumes
that applicants must accept electronic
disclosures if they want to apply for the
particular credit product.
Other issues
Preemption
A few commenters suggested that any
final rule issued by the Board permitting
electronic disclosures should explicitly
preempt any state law requiring paper
disclosures. Under § 202.11(a) of the
regulation, state laws are preempted if
they are inconsistent with the act and
regulation and only to the extent of the
inconsistency. The proposed rule would
provide creditors with the option of

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Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

giving required disclosures by electronic
communication as an alternative to
paper. There is no apparent
inconsistency with the act and
regulation if state laws require paper
disclosures. The Board will, however,
review preemption issues that are
brought to the Board’s attention. Section
202.11(b)(2) outlines the Board’s
procedures for determining whether a
specific law is preempted, which will
guide the Board in any determination
requested by a creditor, state, or other
interested party following publication of
a final rule regarding electronic
communication.
IV. Form of Comment Letters
Comment letters should refer to
Docket No. R–1040, and, when possible,
should use a standard typeface with a
type size of 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 of
comments for review. Also, if
accompanied by an original document
in paper form, comments may be
submitted on 31⁄2 inch computer
diskettes in any IBM-compatible DOSor Windows-based format.
V. Initial Regulatory Flexibility
Analysis
In accordance with section 3(a) of the
Regulatory Flexibility Act, the Board
has reviewed the proposed amendments
to Regulation B. Although the proposal
would add disclosure requirements with
respect to electronic communication,
overall, the proposed amendments are
not expected to have any significant
impact on small entities. A creditor’s
use of electronic communication to
provide disclosures required by the
regulation is optional. The proposed
rule would give creditors flexibility in
providing disclosures. A final regulatory
flexibility analysis will be conducted
after consideration of comments
received during the public comment
period.
VI. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3506;
5 CFR 1320 Appendix A.1), the Board
reviewed the proposed rule under the
authority delegated to the Board by the
Office of Management and Budget
(OMB). The Federal Reserve may not
conduct or sponsor, and an organization
is not required to respond to, this
information collection unless it displays
a currently valid OMB number. The
OMB control number is 7100–0201.
The collection of information
requirements that are relevant to this

proposed rulemaking are in 12 CFR part
202. This information is mandatory (15
U.S.C. 1691b(a)(1) and Public Law 104–
208, § 2302(a)) to evidence compliance
with the requirements of Regulation B
and the Equal Credit Opportunity Act.
The purpose of the act is to ensure that
credit is made available to all
creditworthy customers without
discrimination on the basis of race,
color, religion, national origin, sex,
marital status, age (provided the
applicant has the capacity to contract),
receipt of public assistance, or the fact
that the applicant has in good faith
exercised any right under the Consumer
Credit Protection Act (15 U.S.C. 1600 et.
seq.). The respondents/recordkeepers
are for-profit financial institutions,
including small businesses. Creditors
are also required to retain records for 12
to 25 months. This regulation applies to
all types of creditors, not just state
member banks; however, under
Paperwork Reduction Act regulations,
the Federal Reserve accounts for the
burden of the paperwork associated
with the regulation only for state
member banks. Other agencies account
for the paperwork burden on their
respective constituencies under this
regulation.
The proposed revisions would allow
creditors the option of using electronic
communication (for example, via
personal computer and modem) to
provide disclosures and other
information required by the regulation.
Although the proposal would add
disclosure requirements with respect to
electronic communication, the optional
use of electronic communication would
likely reduce the paperwork burden of
creditors. With respect to state member
banks, it is estimated that there are 988
respondents/recordkeepers and an
average frequency of 4,765 responses
per respondent each year. Therefore, the
current amount of annual burden is
estimated to be 123,892 hours. There is
estimated to be no additional annual
cost burden and no capital or start-up
cost.
Because the records would be
maintained at state member banks and
the notices are not provided to the
Federal Reserve, no issue of
confidentiality under the Freedom of
Information Act arises; however, any
information obtained by the Federal
Reserve may be protected from
disclosure under exemptions (b)(4), (6),
and (8) of the Freedom of Information
Act (5 U.S.C. 522(b)(4), (6) and (8)). The
adverse action disclosure is confidential
between creditors and the applicants
involved.
The Federal Reserve requests
comments from creditors, especially

state member banks, that will help to
estimate the number and burden of the
various disclosures that would be made
in the first year this proposed regulation
would be effective. Comments are
invited on: (a) The cost of compliance;
(b) ways to enhance the quality, utility,
and clarity of the information to be
disclosed; and (c) ways to minimize the
burden of disclosure on respondents,
including through the use of automated
disclosure techniques or other forms of
information technology. Comments on
the collection of information should be
sent to the Office of Management and
Budget, Paperwork Reduction Project
(7100–0201), Washington, DC 20503,
with copies of such comments sent to
Mary M. West, Federal Reserve Board
Clearance Officer, Division of Research
and Statistics, Mail Stop 97, Board of
Governors of the Federal Reserve
System, Washington, DC 20551.
List of Subjects in 12 CFR Part 202
Aged, Banks, banking, Civil rights,
Credit, Federal Reserve System, Marital
status discrimination, Penalties,
Religious discrimination, Reporting and
recordkeeping requirements, Sex
discrimination.
Text of Proposed Revisions
Certain conventions have been used
to highlight proposed changes to
Regulation B. New language is shown
inside bold-faced arrows.
For the reasons set forth in the
preamble, the Board proposes to amend
Regulation B, 12 CFR part 202, as set
forth below:
PART 202—EQUAL CREDIT
OPPORTUNITY (REGULATION B)
1. The authority citation for part 202
would continue to read as follows:
Authority: 15 U.S.C. 1691–1691f.

2. Section 202.4 as proposed to be
revised at 64 FR 44595, August 16,
1999, is further amended by adding new
paragraphs (e) and (f) to read as follows:
§ 202.4

General rules.

*
*
*
*
(e) Electronic communication—(1)
Definition. Electronic communication
means a message transmitted
electronically between an applicant and
a creditor in a format that allows visual
text to be displayed on equipment such
as a personal computer monitor.
(2) Electronic communication between
creditor and applicant. A creditor that
has complied with paragraph (e)(3) of
this section may provide by electronic
communication any information
required by this regulation to be in
writing.

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
(3) Disclosure notice. The disclosure
notice required by paragraph (e)(3) of
this section shall be clear and
conspicuous and in a form the
consumer may keep, and shall be
provided in a manner substantially
similar to the applicable sample notice
set forth in Appendix C of this part
(Sample Forms C–11 and C–12).
(i) Notice by creditor. A creditor shall:
(A) Describe the information to be
provided electronically and specify
whether the information is also
available in paper form or whether the
credit product is offered only with
electronic disclosures;
(B) Identify the address or location
where the information will be provided
electronically; and if it is made available
at a location other than the applicant’s
electronic address, how long the
information will be available, and how
it can be obtained once that period ends;
(C) Specify any technical
requirements for receiving and retaining
information sent electronically, and
provide a means for the applicant to
confirm the availability of equipment
meeting those requirements; and
(D) Provide a toll-free telephone
number and, at the creditor’s option, an
address for questions about receiving
electronic disclosures, for updating
applicants’ electronic addresses, and for
seeking technical or other assistance
related to electronic communication.
(ii) Response by applicant. A creditor
shall provide a means for the applicant
to accept or reject electronic disclosures.
(iii) Changes. (A) A creditor shall
notify affected applicants of any change
to the information provided in the
notice required by paragraph (e)(3)(i) of
this section. The notice shall include
the effective date of the change and
must be provided before that date. The
notice shall also include a toll-free
telephone number, and, at the creditor’s
option, an address for questions about
receiving electronic disclosures.
(B) In addition to the notice under
paragraph (e)(3)(iii)(A) of this section, if
the change involves providing
additional disclosures by electronic
communication, a creditor shall provide
the notice in paragraph (e)(3)(i) of this
section and obtain the applicant’s
consent. A notice is not required under
paragraph (e)(3)(i) if the creditor’s initial
notice states that additional disclosures
may be provided electronically in the
future and specifies which disclosures
could be provided.
(4) Address or location to receive
electronic communication. A creditor
that uses electronic communication to
provide information required by this
regulation shall:

(i) Send the information to the
applicant’s electronic address; or
(ii) Post the information for at least 90
days at a location such as a website, and
send a notice to the applicant when the
information becomes available.
Thereafter the information shall be
available upon request for a period of
not less than 25 months, except as
otherwise provided, from the date
disclosures are required to be made. The
notice required by this paragraph
(e)(4)(ii) shall identify the credit product
or application involved, shall be sent to
an electronic address designated by the
applicant (or to a postal address, at the
creditor’s option), and shall be
substantially similar to the sample
notice set forth in Appendix C of this
part (Sample Form C–13).
(5) Applicant use of electronic
communication. (i) General. An
applicant may use electronic
communication to exercise any right
under § 202.5a and § 202.9(a)(3) if the
applicant has consented to receive
information required by these sections
by electronic communication.
(ii) Creditor’s designation of address.
A creditor may designate the electronic
address or location that applicants must
use if they send electronic
communication under this paragraph.
(f) Foreign language disclosures.
Disclosures may be made in languages
other than English, provided they are
available in English upon request.fi
3. Appendix C to Part 202 as proposed
to be revised at 64 FR 44616, August 16,
1999, is further amended by adding new
Forms C–11, C–12, C–13, C–14, and C–
15 to read as follows:
Appendix C to Part 202—Sample
Notification Forms
*

Form C–11—Sample Disclosures for
Electronic Communication (Disclosures
Available in Paper or Electronically)
You can choose to receive important
information required by the Equal Credit
Opportunity Act in paper or electronically.
Read this notice carefully and keep a copy
for your records.
• You can choose to receive the following
information in paper form or electronically:
(description of specific disclosures to be
provided electronically).
• How would you like to receive this
information
b I want paper disclosures.
b I want electronic disclosures.
• øWe may provide the following
additional disclosures electronically in the
future: (description of specific disclosures).¿
• øIf you choose electronic disclosures,
this information will be available at: (specify
location) for lll days. After that, the
information will be available upon request
(state how to obtain the information). When

49695

the information is posted, we will send you
a message at the electronic mail address you
designate here: (applicant’s electronic mail
address).¿
øIf you choose electronic disclosures this
information will be sent to the electronic
mail address that you designate here:
(applicant’s electronic mail address).¿
• To receive this information you will
need: (list hardware and software
requirements).
Do you have access to a computer that
satisfies these requirements?
b Yes
b No
• Do you have access to a printer, or the
ability to download information, in order to
keep copies for your records?
b Yes
b No
• To update your electronic address, if you
have questions about receiving disclosures,
or need technical or other assistance
concerning these disclosures, contact us at
(telephone number).
Form C–12—Sample Disclosures for
Electronic Communication (Disclosures
Available Only Electronically)
You will receive important information
required by the Equal Credit Opportunity Act
electronically.
Read this notice carefully and keep a copy
for your records.
• The following information will be
provided electronically: (description of
specific disclosures to be provided
electronically).
• This credit product is not available
unless you accept electronic disclosures.
• øWe may provide the following
additional disclosures electronically in the
future: (description of specific disclosures).¿
• øIf you choose electronic disclosures,
this information will be available at: (specify
location) for lll days. After that, the
information will be available upon request
(state how to obtain the information). When
the information is posted, we will send you
a message at the electronic mail address you
designate here: (applicant’s electronic mail
address).¿
øIf you choose electronic disclosures this
information will be sent to the electronic
mail address that you designate here:
(applicant’s electronic mail address).¿
• To receive this information you will
need: (list hardware and software
requirements).
Do you have access to a computer that
satisfies these requirements?
b Yes
b No
• Do you have access to a printer, or the
ability to download information, in order to
keep copies for your records?
b Yes
b No
Do you want this credit product with
electronic disclosures?
b Yes
b No
• To update your electronic address, if you
have questions about receiving disclosures,
or need technical or other assistance
concerning these disclosures, contact us at
(telephone number).
Form C–13—Sample Notice for Delivery of
Information Posted at Certain Locations
Information about your (identify loan
application or credit transaction) is now

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available at øwebsite address or other
location¿. The information discusses
(describe the disclosure). It will be available
for lll days.
BILLING CODE 6210–01–P

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

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BILLING CODE 6210–01–C

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
4. Supplement I to Part 202, as
proposed to be revised at 64 FR 44618,
August 16, 1999, is further amended
under Section 202.4—General Rules by
adding a new paragraph 4(e) Electronic
Communication to read as follows:
Supplement I to Part 202—Official Staff
Interpretations
*

Section 202.4—General Rules

fl 4(e) Electronic Communication
4(e)(1) Definition.
1. Coverage. Information transmitted by
facsimile may be received in paper form or
electronically, although the party initiating
the transmission may not know at the time
the disclosures are sent which form will be
used. A creditor that provides disclosures by
facsimile should comply with the
requirements for electronic communication
unless the creditor knows that the
disclosures will be received in paper form.
4(e)(2) Electronic communication between
creditor and applicant.
1. Disclosures provided on creditor’s
equipment. Creditors that control equipment
providing electronic disclosures to applicants
(for example, computer terminals in a
creditor’s lobby or kiosks located in public
places) must ensure that the equipment
satisfies the regulation’s requirements to
provide disclosures in a clear and
conspicuous format and in a form the
consumer may keep. A creditor that controls
the equipment may provide a printer for
applicants’ use in lieu of sending the
information to the applicant’s electronic mail
address or posting the information at another
location such as the creditor’s website.
2. Retainability. Creditors must provide
electronic disclosures in a retainable format
(for example, they can be printed or
downloaded). Applicants may communicate
electronically with creditors through a
variety of means and from various locations.
Depending on the location (at home, at work,
in a public place such as a library), an
applicant may not have the ability at a given
time to preserve ECOA disclosures presented
on-screen. To ensure that applicants have an
adequate opportunity to retain the
disclosures, the creditor also must send them
to the applicant’s designated electronic mail
address or to another location, for example,
on the creditor’s website, where the
information may be retrieved at a later date.
3. Timing and delivery. When an applicant
applies for credit on the Internet, for
example, in order to meet the timing and
delivery requirements, creditors must ensure
that disclosures applicable at that time
appear on the screen and are in a retainable
format. The delivery requirements would not
be met if disclosures do not either appear on
the screen or if the applicant is allowed to
apply for credit before receiving the
disclosures. For example, a creditor can
provide a link to electronic disclosures
appearing on a separate page as long as
applicants cannot bypass the link and they
are required to access the disclosures before
completing the application.

4(e)(3) Disclosure notice.
1. Applicant’s affirmative responses. Even
though an applicant accepts electronic
disclosures in accordance with
§ 202.4(e)(3)(ii), a creditor may deliver
disclosures by electronic communication
only if the applicant provides an electronic
address where one is required, and responds
affirmatively to questions about technical
requirements and the ability to print or
download information (see sample forms C–
14 and C–15 in appendix C to this part).
Paragraph 4(e)(3)(i)
1. Toll-free telephone number. The number
must be toll-free for nonlocal calls made from
an area code other than the one used in the
creditor’s dialing area. Alternatively, a
creditor may provide any telephone number
that allows an applicant to call for
information and reverse the telephone
charges.
2. Creditor’s address. Creditors have the
option of providing either an electronic or
postal address for applicants’ use in addition
to the toll-free telephone number.
3. Discontinuing electronic disclosures.
Applicants may use the toll-free number (or
optional address) if they wish to discontinue
receiving electronic disclosures. In such
cases, the creditor must inform applicants
whether the credit product is also available
with disclosures in paper form.
Paragraph 4(e)(3)(ii)
1. Nature of consent. Applicants must
agree to receive disclosures by electronic
communication knowingly and voluntarily.
An agreement to receive electronic
disclosures is not implied from an
applicant’s submission of an application for
credit.
Paragraph 4(e)(3)(iii)
1. Examples. Examples of changes include
a change in technical requirements, such as
upgrades to software affecting the creditor’s
disclosures provided on the Internet.
2. Timing for notices. A notice of a change
must be sent a reasonable period of time
before the effective date of the change. The
length of a reasonable notice period may
vary, depending on the type of change
involved; however, fifteen days is a
reasonable time for providing notice in all
cases.
3. Delivery of notices. A creditor meets the
delivery requirements if the notice of a
change is sent to the address provided by the
applicant for receiving other disclosures. For
example, if the applicant provides an
electronic address to receive a notice of
action taken, the same electronic address
may be used for the change notice. The
applicant’s postal address must be used,
however, if the applicant consented to
additional disclosures by electronic
communication when receiving the initial
notice under § 202.4(e)(3)(i), but provided a
postal address to receive the notice of action
taken.
4. Toll-free number. See comment
4(e)(3)(i)–1.
5. Creditor’s address. See comment
4(e)(3)(i)–2.
6. Applicant inquiries. Applicants may use
the toll-free number (or optional address) for

49699

questions or assistance with problems related
to a change, such as an upgrade to computer
software, that is not provided by the creditor.
Applicants may also use the toll-free number
if they wish to discontinue receiving
electronic disclosures; in such cases, the
creditor must inform applicants whether the
credit product is also available with
disclosures in paper form.
4(e)(4) Address or location to receive
electronic communication.
Paragraph 4(e)(4)(i)
1. Electronic address. An applicant’s
electronic address is an electronic mail
address that may be used by the applicant for
receiving communications transmitted by
parties other than the creditor.
Paragraph 4(e)(4)(ii)
1. Identifying application or transaction
involved. A creditor is not required to
identify a loan application or credit
transaction by reference to a number. For
example, where the applicant has not applied
for credit with the creditor before, and no
confusion would result, the creditor may
refer to ‘‘your credit card application,’’ or
‘‘your home equity line application.’’
2. Availability. Information that is not sent
to an applicant’s electronic mail address
must be available for at least 90 days from
the date the information becomes available or
from the date the notice required by
§ 202.4(e)(4)(ii) is sent to the applicant,
whichever occurs later.fi

By order of the Board of Governors of the
Federal Reserve System, August 31, 1999.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 99–23137 Filed 9–13–99; 8:45 am]
BILLING CODE 6210–01–P

FEDERAL RESERVE SYSTEM
12 CFR Part 205
[Regulation E; Docket No. R–1041]

Electronic Fund Transfers
Board of Governors of the
Federal Reserve System.
ACTION: Proposed rule.
AGENCY:

The Board is requesting
comment on proposed revisions to
Regulation E, which implements the
Electronic Fund Transfer Act. The
Board previously published an interim
rule that permits financial institutions
to use electronic communication (for
example, communication via personal
computer and modem) to provide
disclosures required by the act and
regulation, if the consumer agrees to
such delivery. (A similar rule was also
proposed under various other consumer
financial services and fair lending
regulations administered by the Board.)
In response to comments received on
the interim rule (and the proposals), the
SUMMARY:

Section 202.4—General Rules

49699

FEDERAL RESERVE SYSTEM
12 CFR Part 205
[Regulation E; Docket No. R–1041]

Electronic Fund Transfers
Board of Governors of the
Federal Reserve System.
ACTION: Proposed rule.
AGENCY:

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Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

Board is publishing for comment an
alternative proposal on the electronic
delivery of disclosures, together with
proposed commentary that would
provide further guidance on electronic
communication issues. The interim rule
remains in effect. The Board is also
publishing for comment technical
amendments involving error resolution
notices.
DATES: Comments must be received by
October 29, 1999.
ADDRESSES: Comments, which should
refer to Docket No. R–1041, may be
mailed to Jennifer J. Johnson, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue, NW, Washington,
DC 20551. Comments addressed to Ms.
Johnson also may be delivered to the
Board’s mail room between 8:45 a.m.
and 5:15 p.m. weekdays, and to the
security control room at all other times.
The mail room and the security control
room, both in the Board’s Eccles
Building, are accessible from the
courtyard entrance on 20th Street
between Constitution Avenue and C
Street, NW. Comments may be
inspected in room MP–500 between
9:00 a.m. and 5:00 p.m., pursuant to
§ 261.12, except as provided in § 261.14
of the Board’s Rules Regarding the
Availability of Information, 12 CFR
261.12 and 261.14.
FOR FURTHER INFORMATION CONTACT:
Michael L. Hentrel, Staff Attorney, or
John C. Wood, Senior Attorney, Division
of Consumer and Community Affairs, at
(202) 452–2412 or (202) 452–3667.
Users of Telecommunications Device for
the Deaf (TDD) only, contact Diane
Jenkins at (202) 452–3544.
SUPPLEMENTARY INFORMATION:
I. Background
The Electronic Fund Transfer Act
(EFTA), 15 U.S.C. 1693 et seq., provides
a basic framework establishing the
rights, liabilities, and responsibilities of
participants in electronic fund transfer
(EFT) systems. The Board’s Regulation E
(12 CFR part 205) implements the act.
Types of transfers covered by the act
and regulation include transfers
initiated through an automated teller
machine (ATM), point-of-sale terminal,
automated clearinghouse, telephone
bill-payment plan, or home-banking
program. The act and regulation
prescribe restrictions on the unsolicited
issuance of ATM cards and other access
devices; disclosure of terms and
conditions of an EFT service;
documentation of EFTs by means of
terminal receipts and periodic account
statements; limitations on consumer
liability for unauthorized transfers;

procedures for error resolution; and
certain rights related to preauthorized
EFTs.
The EFTA and Regulation E require a
number of disclosures to be provided in
writing, presuming that institutions
provide paper documents. Under many
laws that call for information to be in
writing, information in electronic form
is considered to be ‘‘written.’’
Information produced, stored, or
communicated by computer is also
generally considered to be a writing,
where visual text is involved.
In May 1996, the Board revised
Regulation E (Electronic Fund
Transfers) following a comprehensive
review. During that process, the Board
determined that electronic
communication for delivery of
information required by federal laws
governing financial services could
effectively reduce compliance costs
without adversely affecting consumer
protections. Consequently, the Board
simultaneously issued a proposed rule
to permit financial institutions to use
electronic communication to deliver
disclosures that Regulation E requires to
be given in writing. (61 FR 19696, May
2, 1996.) The 1996 proposal required
that disclosures be provided in a form
the consumer may retain, a requirement
that institutions could satisfy by
providing information in a format that
may be printed or downloaded. The
proposed rule also allowed consumers
to request a paper copy of a disclosure
for up to one year after its original
delivery.
Following a review of the comments,
on March 25, 1998, the Board issued an
interim rule under Regulation E (the
‘‘interim rule’’), 63 FR 14528. The Board
also published proposals under
Regulations DD (Truth in Savings), 63
FR 14533, M (Consumer Leasing), 63 FR
14538, Z (Truth in Lending), 63 FR
14548, and B (Equal Credit
Opportunity), 63 FR 14552,
(collectively, the ‘‘March 1998 proposed
rules’’). The rules would apply to
financial institutions, creditors, lessors,
and other entities that are required to
give disclosures to consumers and
others. (For ease of reference this
background section uses the terms
‘‘financial institutions,’’ ‘‘institutions,’’
and ‘‘consumers.’’) The interim rule and
the March 1998 proposed rules were
similar to the May 1996 proposed rule;
however, they did not require financial
institutions to provide paper copies of
disclosures to a consumer upon request
if the consumer previously agreed to
receive disclosures electronically. The
Board believed that most institutions
would accommodate consumer requests
for paper copies when feasible or

redeliver disclosures electronically; and
the Board encouraged financial
institutions to do so.
The March 1998 proposed rules and
the interim rule permitted financial
institutions to provide disclosures
electronically if the consumer agreed,
with few other requirements. The rule
was intended to provide flexibility and
did not specify any particular method
for obtaining a consumer’s agreement.
Whether the parties had an agreement
would be determined by state law. The
proposals and the interim rule did not
preclude a financial institution and a
consumer from entering into an
agreement electronically, nor did they
prescribe a formal mechanism for doing
so.
The Board received approximately
200 written comments on the interim
rule and the March 1998 proposed rules.
The majority of comments were
submitted by financial institutions and
their trade associations. Industry
commenters generally supported the use
of electronic communication to deliver
information required by the EFTA and
Regulation E. Nevertheless, many
sought specific revisions and additional
guidance on how to comply with the
disclosure requirements in particular
transactions and circumstances.
Industry commenters were especially
concerned about the condition that a
consumer had to ‘‘agree’’ to receive
information by electronic
communication, because the rule did
not specify a method for establishing
that an ‘‘agreement’’ was reached. These
commenters believed that relying on
state law created uncertainty about what
constitutes an agreement and, therefore,
potential liability for noncompliance.
To avoid uncertainty over which state’s
laws apply, some commenters urged the
Board to adopt a federal minimum
standard for agreements or for informed
consent to receive disclosures by
electronic communication. These
commenters believed that such a
standard would avoid the compliance
burden associated with tailoring legally
binding ‘‘agreements’’ to the contract
laws of all jurisdictions where
electronic communication may be sent.
Consumer advocates generally
opposed the March 1998 interim rule
and proposed rules. Without additional
safeguards, they believed, consumers
may not be provided with adequate
information about electronic
communication before an ‘‘agreement’’
is reached. They also believed that
promises of lower costs could induce
consumers to agree to receive
disclosures electronically without a full
understanding of the implications. To
avoid such problems, they urged the

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
Board, for example, either to require
institutions to disclose to consumers
that their account with the institution
will not be adversely affected if they do
not agree to receive electronic
disclosures, or to permit institutions to
offer electronic disclosures only to
consumers who initiate contact with the
institution through electronic
communication. They also noted that
some consumers will likely consent to
electronic disclosures believing that
they have the technical capability to
retrieve information electronically, but
might later discover that they are unable
to do so. They questioned consumers’
willingness and ability to access and
retain disclosures posted on Internet
websites, and expressed their
apprehension that the goals of federally
mandated disclosure laws will be lost.
Consumer advocates and others were
particularly concerned about the use of
electronic disclosures in connection
with home-secured loans and certain
other transactions that consumers
typically consummate in person (citing
as examples automobile loans and
leases, short-term ‘‘payday’’ loans, or
home improvement financing contracts
resulting from door-to-door sales). They
asserted that there is little benefit to
eliminating paper disclosures in such
transactions and that allowing
electronic disclosures in those cases
could lead to abusive practices.
Accordingly, consumer advocates and
others believed that paper disclosures
should always accompany electronic
disclosures in mortgage loans and
certain other transactions, and that
consumers should have the right to
obtain paper copies of disclosures upon
request for all types of transactions
(deposit account, credit card, loan or
lease, and other transactions).
A final issue raised by consumer
advocates was the integrity of
disclosures sent electronically. They
stated that there may be instances when
the consumer and the institution
disagree on the terms or conditions of
an agreement and consumers may need
to offer electronic disclosures as proof of
the agreed-upon terms and to enforce
rights under consumer protection laws.
Thus, to assure that electronic
documents have not been altered and
that they accurately reflect the
disclosures originally sent, consumer
advocates recommended that the Board
require that electronic disclosures be
authenticated by an independent third
party.
The Board’s Consumer Advisory
Council considered the electronic
delivery of disclosures in 1998 and
again in 1999. Many Council members
shared views similar to those expressed

in written comment letters on the 1998
proposals. For example, some Council
members expressed concern that the
Board was moving too quickly in
allowing electronic disclosures for
certain transactions, and suggested that
the Board might go forward with
electronic disclosures for deposit
accounts while proceeding more slowly
on credit and lease transactions. Others
expressed concern about consumer
access and consumers’ ability to retain
electronic disclosures. They believed
that, without specific guidance from the
Board, institutions would provide
electronic disclosures without knowing
whether consumers could retain or
access the disclosures, and without
establishing procedures to address
technical malfunctions or nondelivery.
The Council also discussed the integrity
and security of electronic documents.
II. Overview of Proposed Revisions
Based on a review of the comments
and further analysis, the Board is
requesting comment on a modified
proposed rule that is more detailed than
the interim rule and March 1998
proposed rules. It is intended to provide
specific guidance for institutions that
choose to use electronic communication
to comply with Regulation E’s
requirements to provide written
disclosures, and to ensure effective
delivery of disclosures to consumers
through this medium. Though detailed,
the proposal provides flexibility for
compliance with the electronic
communication rules. The modified
proposal recognizes that some
disclosures may warrant different
treatment under the rule. Where written
disclosures are made to consumers who
are transacting business in person, these
disclosures generally would have to be
made in paper form.
The Board is soliciting comment on a
modified approach that addresses both
industry and consumer group concerns.
Under the proposal, financial
institutions would have to provide
specific information about how the
consumer can receive and retain
electronic disclosures—through a
standardized disclosure statement—
before obtaining consumers’ acceptance
of such delivery, with some exceptions.
If they satisfy these requirements and
obtain consumers’ affirmative consent,
financial institutions would be
permitted to use electronic
communication. As a general rule an
institution would be permitted to offer
the option of receiving electronic
disclosures to all consumers, whether
they initially contact the institution by
electronic communication or otherwise.
To address concerns about potential

49701

abuses, however, the proposal provides
that if a consumer contracts for an EFT
service in person, initial disclosures
must be given in paper form.
Financial institutions would have the
option of delivering disclosures to an email address designated by the
consumer or making disclosures
available at another location such as the
institution’s website, for printing or
downloading. If the disclosures are
posted at a website location, financial
institutions generally must notify
consumers at an e-mail address about
the availability of the information.
(Financial institutions may offer
consumers the option of receiving alert
notices at a postal address.) The
disclosures must remain available at
that site for 90 days.
Disclosures provided electronically
would be subject to the ‘‘clear and
readily understandable’’ standard, and
the existing format, timing, and
retainability rules in Regulation E. For
example, to satisfy the timing
requirement, if disclosures are due at
the time a consumer contracts for an
EFT service, the disclosures would have
to appear on the screen before the
consumer could complete the
transaction.
Financial institutions generally must
provide a means for consumers to
confirm the availability of equipment to
receive and retain electronic disclosure
documents. A financial institution
would not otherwise have a duty to
verify consumers’ actual ability to
receive, print, or download the
disclosures. Some commenters
suggested that institutions should be
required to verify delivery by return
receipt. The Board solicits comment on
the need for such a requirement and the
feasibility of that approach.
As previously mentioned, consumer
advocates and others have expressed
concerns that electronic documents can
be altered more easily than paper
documents. The issue of the integrity
and security of electronic documents
affects electronic commerce in general
and is not unique to the written
disclosures required under the
consumer protection laws administered
by the Board. Consumers’ ability to
enforce rights under the consumer
protection laws could be impaired in
some cases, however, if the authenticity
of disclosures that they retain cannot be
demonstrated. Signatures, notary seals,
and other established verification
procedures are used to detect alterations
for transactions memorialized in paper
form. The development of similar
devices for electronic communication
should reduce uncertainty over time

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Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

about the ability to use electronic
documents for resolving disputes.
The Board’s rules require financial
institutions to retain evidence of
compliance with Regulation E. Specific
comment is solicited on the feasibility
of complying with a requirement that
financial institutions provide
disclosures in a format that cannot be
altered without detection, or have
systems in place capable of detecting
whether or not information has been
altered, as well as the feasibility of
requiring use of independent
certification authorities to verify
disclosure documents.
The interim rule for Regulation E
adopted by the Board in 1998 remains
in effect. To the extent the interim rule
is modified when final action is taken
on the current proposal, the Board will
provide a reasonable time period before
the mandatory compliance date for any
new requirements.
Elsewhere in today’s Federal Register,
the Board is publishing similar
proposals for comment under
Regulations B, M, Z, and DD. In a
separate notice the Board is publishing
an interim rule under Regulation DD,
which implements the Truth in Savings
Act, to permit depository institutions to
use electronic communication to deliver
disclosures on periodic statements. For
ease of reference, the Board has assigned
new docket numbers to the modified
proposals published today.
III. Section-by-Section Analysis
Pursuant to its authority under
section 904 of the EFTA, the Board
proposes to amend Regulation E to
permit institutions to use electronic
communication to provide the
information required by this regulation
in writing. Below is a section-by-section
analysis of the rules for providing
disclosures by electronic
communication, including references to
proposed commentary provisions.
Section 205.4 General Disclosure
Requirements; Jointly Offered Services
4(a) Form of Disclosures
4(a)(2) Foreign Language Disclosures
To provide consistency among the
regulations, the guidance currently
contained in comment 4(a)–2 permitting
disclosures to be made in languages
other than English (provided they are
available in English upon request)
would be set forth in a new
§ 205.4(a)(2).
4(c) Electronic Communication
4(c)(1) Definition
The definition of the term ‘‘electronic
communication’’ in the interim rule

remains unchanged. Section 205.4(c)(1)
limits the term to a message transmitted
electronically that can be displayed on
equipment as visual text, such as a
message that is displayed on a computer
monitor screen. Most commenters
supported the term as defined in the
interim rule. Some commenters favored
a more expansive definition that would
encompass communications such as
audio and voice response telephone
systems. Because the proposal is
intended to permit electronic
communication to satisfy the statutory
requirement for written disclosures, the
Board believes visual text is an essential
element of the definition.
Commenters asked the Board to
clarify the coverage of certain types of
communications. A few commenters
asked about communication by
facsimile. Facsimiles are initially
transmitted electronically; the
information may be received either in
paper form or electronically through
software that allows a consumer to
capture the facsimile, display it on a
monitor, and store it on a computer
diskette or drive. Thus, information sent
by facsimile may be subject to the
provisions governing electronic
communication. When disclosures are
sent by facsimile, a financial institution
should comply with the requirements
for electronic communication unless it
knows that the disclosures will be
received in paper form. Proposed
comment 4(c)(1)–1 contains this
guidance.
4(c)(2) Electronic Communication
between Financial Institution and
Consumer
Section 205.4(c)(2)(i) would permit
financial institutions to provide
disclosures using electronic
communication, if the institution
complies with provisions in new
§ 205.4(c)(3), discussed below.
1. Presenting Disclosures in a Clear and
Readily Understandable Format
The Board does not intend to
discourage or encourage specific types
of technologies. Regardless of the
technology, however, disclosures
provided electronically must be
presented in a clear and readily
understandable format as is the case for
all written disclosures under the act and
regulation. See § 205.4(a).
When consumers consent to receive
disclosures electronically and they
confirm that they have the equipment to
do so, financial institutions generally
would have no further duty to
determine that consumers are able to
receive the disclosures. Institutions do
have the responsibility of ensuring the

proper equipment is in place in
instances where the institution controls
the equipment. Proposed comment
4(c)(2)-1 contains this guidance.
2. Providing Disclosures in a Form the
Consumer May Keep
As with other written disclosures,
information provided by electronic
communication must be in a form the
consumer can retain. Under the 1998
proposals and interim rule, a financial
institution would satisfy this
requirement by providing information
that can be printed or downloaded. The
modified proposal adopts the same
approach but also provides that the
information must be sent to a specified
location to ensure that consumers have
an adequate opportunity to retain the
information.
Consumers communicate
electronically with financial institutions
through a variety of means and from
various locations. Depending on the
location (at home, at work, in a public
place such as a library), a consumer may
not have the ability at a given time to
preserve EFTA disclosures presented
on-screen. Therefore, when a financial
institution provides disclosures by
electronic communication, to satisfy the
retention requirements, the institution
must send the disclosures to a
consumer’s e-mail address or other
location where information may be
retrieved at a later date. Proposed
comment 4(c)(2)–2 contains this
guidance; see also the discussion under
§ 205.4(c)(4), below. In instances where
an institution controls an electronic
terminal used to provide electronic
disclosures, an institution may provide
equipment for the consumer to print a
paper copy in lieu of sending the
information to the consumer’s e-mail
address or posting the information at
another location such as the
institution’s website. See proposed
comment 4(c)(2)–1.
3. Timing
Institutions must ensure that
electronic disclosures comply with all
relevant timing requirements of the
regulation. For example, initial
disclosures must be provided at the time
a consumer contracts for an EFT service
or before the first transaction. The rule
ensures that consumers have an
opportunity to read important
information about costs and other terms
before contracting for or using the
service.
To illustrate the timing requirements
for electronic communication, assume
that an existing customer of a bank is
interested in signing up for an on-line
bill-payment service and uses a personal

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
computer at home to access the bank’s
website on the Internet. The bank
provides disclosures to the consumer
about the use of electronic
communication (the § 205.4(c)(3)
disclosures discussed below) and the
consumer responds affirmatively. If the
bank’s procedures permit the consumer
to sign up for and use the EFT service
at that time, disclosures required under
§ 205.7 would have to be provided.
Thus, the disclosures must
automatically appear on the screen or
the consumer must be required to access
the information before contracting for
the service (or before the first
transaction). The timing requirements
for providing initial disclosures would
not be met if, in this example, the bank
permitted the consumer to sign up for
and immediately use an EFT service and
sent initial disclosures to an e-mail
address thereafter. Proposed comment
4(c)(2)–3 contains this guidance.
On the other hand, assume that a
consumer requests an EFT service and
the institution delays processing the
consumer’s request until the required
disclosures have been delivered by email. In that case the information would
not have to also appear on the screen;
delivery to the consumer’s e-mail
address would be sufficient. In either
case, the consumer must receive the
disclosures before contracting for the
service or before the first transaction.
4(c)(2)(ii) In-Person Exception
The proposal contains an exception to
the general rule allowing information
required by Regulation E to be provided
by electronic communication; where the
exception applies, paper disclosures
would be required. The exception,
contained in § 205.4(c)(2)(ii), seeks to
address concerns about potential abuses
where consumers are transacting
business in person but are offered
disclosures in electronic form. In such
transactions, there is a general
expectation that consumers would be
given paper copies of disclosures along
with paper copies of other documents
evidencing the transaction.
Under § 205.4(c)(2)(ii), if a consumer
contracts for an EFT service in person,
the financial institution must provide
initial disclosures in paper form. For
example, if a consumer signs up for an
ATM card while opening an account at
a financial institution, initial
disclosures are required before
contracting for the card (or the first
transaction) and they must be provided
in paper form; directing the consumer to
disclosures posted on the institution’s
website would not be sufficient. An
institution also complies if a consumer
signs up for an EFT service on the

Internet and is sent disclosures
electronically at or around that time,
even though the institution’s procedures
requires the consumer to visit the
institution at a later time to complete
the transaction (for example, to
complete a signature card). Proposed
comment 4(c)(2)(ii)–1 contains this
guidance.
4(c)(3) Disclosure Notice
Section 205.4(c)(3) would identify the
specific steps required before an
institution could use electronic
communication to satisfy the
regulation’s disclosure requirements.
Proposed Model Forms A–6 and A–7,
and Sample Forms A–9 and A–10 are
published to aid compliance with these
requirements.
4(c)(3)(i) Notice by Financial Institution
Section 205.4(c)(3)(i) outlines the
information that financial institutions
must provide before electronic
disclosures can be given. The financial
institution must: (1) describe the
information to be provided
electronically and specify whether the
information is also available in paper
form or whether the EFT service is
offered only with electronic disclosures;
(2) identify the address or location
where the information will be provided
electronically, and if it will be available
at a location other than the consumer’s
electronic address, specify for how long
and where it can be obtained once that
period ends; (3) specify any technical
requirements for receiving and retaining
information sent electronically, and
provide a means for the consumer to
confirm the availability of equipment
meeting those requirements; and (4)
provide a toll-free telephone number
and, at the institution’s option, an
electronic or postal address for
questions about receiving electronic
disclosures or for updating consumers’
electronic addresses, and for seeking
assistance with technical or other
difficulties (see proposed comments to
4(c)(3)(i)). The Board requests comment
on whether other information should be
disclosed regarding the use of electronic
communication and on any format
changes that might improve the
usefulness of the notice for consumers.
The Board also solicits comment on
the benefits of requiring an annual
notice in paper form to consumers who
receive disclosures by electronic
communication. The notice would
contain general information about
receiving electronic disclosures
including, for example, a reminder of
the toll-free number where consumers
may contact the institution if they have

49703

questions regarding their electronic
disclosures.
Under the proposal, the
§ 205.4(c)(3)(i) disclosures must be
provided, as applicable, before the
financial institution uses electronic
communication to deliver any
information required by the regulation.
The approach of requiring a
standardized disclosure statement
addresses, in several ways, the concern
that consumers may be steered into
using electronic communication
without fully understanding the
implications. Under this approach, the
specific disclosures that would be
delivered electronically must be
identified, and consumers must be
informed whether there is also an
option to receive the information in
paper form. Consumers must provide an
e-mail address where one is required.
Technical requirements must also be
stated, and consumers must affirm that
their equipment meets the requirements,
and that they have the capability of
retaining electronic disclosures by
downloading or printing them (see
proposed comment 4(c)(3)–1). Thus, the
§ 205.4(c)(3)(i) disclosures should allow
consumers to make informed judgments
about receiving electronic disclosures.
Some commenters requested
clarification of whether a financial
institution may use electronic
communication to provide some
required disclosures while using paper
for others. The proposed rule would
permit institutions to do so; the
disclosure given under § 205.4(c)(3)(i)
must specify which EFTA disclosures
will be provided electronically.
Commenters requested further
guidance on a financial institution’s
obligation under the regulation if the
consumer chooses not to receive
information by electronic
communication. A financial institution
could offer a consumer the option of
receiving disclosures in paper form, but
it would not be required to do so. A
financial institution could establish
accounts or services for which
disclosures are given only by electronic
communication. Section
205.4(c)(3)(i)(A) would require financial
institutions to tell consumers whether
or not they have the option to receive
disclosures in paper form. Section
205.4(c)(3)(i)(D) would require financial
institutions to provide a toll-free
number that consumers could use to
inform institutions if they wish to
discontinue receiving electronic
disclosures. In such cases the institution
must inform the consumer whether the
EFT service is also available with
disclosures in paper form. Proposed
sample disclosure statements in which

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Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

the consumer has an option to receive
electronic or paper disclosures (Form
A–9) or electronic disclosures only
(Form A–10) are contained in appendix
A.
4(c)(3)(ii) Response by Consumer
Proposed § 205.4(c)(3)(ii) would
require financial institutions to provide
a means for the consumer to
affirmatively indicate that disclosures
may be provided electronically.
Examples include a ‘‘check box’’ on a
computer screen or a signature line (for
requests made in paper form). The
requirement is intended to ensure that
consumers’ consent is established
knowingly and voluntarily, and that
consent to receive electronic disclosures
is not inferred from consumers’ use of
the account or acceptance of general
account terms. See proposed comment
4(c)(3)(ii)–1.
4(c)(3)(iii) Changes
Financial institutions would be
required to notify consumers about
changes to the information that is
provided in the notice required by
§ 205.4(c)(3)(i)—for example, if
upgrades to computer software are
required. Proposed comment
4(c)(3)(iii)–1 contains this guidance.
The notice must include the effective
date of the change and be provided
before that date. Proposed comment
4(c)(3)(iii)–2 would provide that the
notice must be sent a reasonable period
of time before the effective date of the
change. Although the number of days
that constitutes reasonable notice may
vary, depending on the type of change
involved, the comment would provide
institutions with a safe harbor: fifteen
days’ advance notice would be
considered a reasonable time in all
cases. The same time period is stated in
similar proposals under Regulations B,
Z, and DD published in today’s Federal
Register. Comment is requested on
whether a safe harbor of 15 days is an
appropriate time period, and whether a
uniform period for changes involving
electronic communication is desirable.
An alternative approach would adopt
notice requirements that are consistent
with change-in-terms requirements
under the respective regulations. Under
this approach, for example, the safe
harbor would be 21 days under § 205.8
for Regulation E, 15 days under § 226.9
for Regulation Z, and 30 days under
§ 230.5 for Regulation DD. Proposed
comment 4(c)(3)(iii)–3 contains
guidance on delivery requirements for
the notice of change.
The notice of a change must also
include a toll-free telephone number or,
at the institution’s option, an address for

questions about receiving electronic
disclosures. For example, a consumer
may call regarding problems related to
a change, such as an upgrade to
computer software that is not provided
by the institution. Consumers may also
use the toll-free number if they wish to
discontinue receiving electronic
disclosures. In such cases, the
institution must inform consumers
whether the EFT service is also
available with disclosures in paper
form. (See proposed comments
4(c)(3)(iii)–4 through –6.)
If the change involves providing
additional disclosures by electronic
communication, institutions generally
would be required to provide the notice
in § 205.4(c)(3)(i) and obtain the
consumer’s consent. That notice would
not be required if the institution
previously obtained the consumer’s
consent to the additional disclosures in
its initial notice by disclosing the
possibility and specifying which
disclosures might be provided
electronically in the future. Comment is
specifically requested on this approach.
A list of additional disclosures may be
necessary to ensure that consumers’
consent is informed and knowing
(provided it does not cause confusion).
4(c)(4) Address or Location to Receive
Electronic Communication
Proposed § 205.4(c)(4) identifies
addresses and locations where
institutions using electronic
communication may send information
to the consumer. Institutions may send
information to a consumer’s electronic
address, which is defined in proposed
comment 4(c)(4)(i)–1 as an e-mail
address that the consumer also may use
for receiving communications from
parties other than the financial
institution. For notices of preauthorized
transfers, for example, a financial
institution’s responsibility to provide
notice under § 205.10(d) will be
satisfied when the information is sent to
the consumer’s electronic address in
accordance with the applicable
proposed rules concerning delivery of
disclosures by electronic
communication.
Guidance accompanying the interim
rule provided that an institution would
not meet delivery requirements by
simply posting information to an
Internet site such as a financial
institution’s ‘‘home page’’ without
appropriate notice on how consumers
can access the information. Industry
commenters wanted to retain the
flexibility of posting disclosures on an
Internet website. They did not object to
providing a separate notice alerting
consumers about the disclosures’

availability but requested more
guidance on the issue. Consumer
advocates and others expressed concern
that the mere posting of information
inappropriately places the responsibility
to obtain disclosures on consumers, and
undermines the purpose of the delivery
requirements of the regulation.
The Board recognizes that currently,
because of security and privacy
concerns associated with data
transmissions, a number of institutions
may choose to provide disclosures at
their websites, where the consumer may
retrieve them under secure conditions.
Under § 205.4(c)(4), a financial
institution may make disclosures
available to a consumer at a location
other than the consumer’s electronic
address. The institution must notify the
consumer when the information
becomes available and identify the
account involved. The notice must be
sent to the electronic mail address
designated by the consumer; the
financial institution may, at its option,
permit the consumer to designate a
postal address. A proposed model form
(Model Form A–8) is published below;
see also proposed comment 4(c)(4)(ii)–1.
The Board believes it would be
inconsistent with the EFTA to require a
consumer to initiate a search—for
example, to search the website of each
financial institution with which an
account is held—to determine whether
a disclosure has been provided. The
proposed approach ensures that a
consumer would not be required to
check an institution’s website
repeatedly, for example, to learn
whether the institution posted a change
in a term that affects an EFT service
used by the consumer.
The requirements of the regulation
would be met only if the required
disclosure is posted on the website and
the consumer is notified of its
availability in a timely fashion. For
example, financial institutions must
provide a change-in-terms notice to
consumers at least 21 days in advance
of the change. (12 CFR 205.8(a).) For a
change-in-terms notice posted on the
Internet, an institution must both post
the notice and notify consumers of its
availability at least 21 days in advance
of the change.
Commenters sought guidance on how
long disclosures posted at a particular
location must be available to consumers.
There is a variety of circumstances
when a consumer may not be able
immediately to access the information
due to illness, travel, or computer
malfunction, for example. Under
§ 205.4(c)(4), institutions must post
information that is sent to a location
other than the consumer’s electronic

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
mail address for 90 days. Proposed
comment 4(c)(4)(ii)–2 contains this
guidance.
Under the modified proposal,
institutions that post information at a
location other than the consumer’s
electronic mail address are required—
after the 90 day period—to make
disclosures available to consumers upon
request for a period of not less than two
years from the date disclosures are
required to be made, consistent with the
record retention requirements under
§ 205.13(b). The Board requests
comment on this approach, including
suggestions for alternative means for
providing consumers continuing access
to disclosures.
4(c)(5) Consumer Use of Electronic
Communication
Proposed § 205.4(c)(5) would clarify
consumers’ ability to provide certain
information to financial institutions by
electronic communication. Regulation E
provides that a consumer may allege an
error or stop payment of a preauthorized
EFT by notifying the institution orally
or in writing; the institution may require
written confirmation of an oral notice of
error or stop-payment order. The revised
proposal differs from guidance
accompanying the interim rule; under
the proposal, consumers generally
would have the option to use electronic
communication for these written notices
(including written confirmations) if the
consumer has chosen to receive
information by electronic
communication. Because the
consumer’s electronic communication
serves as written confirmation, the
financial institution could not also
require paper confirmation. Institutions
could, however, specify a particular
electronic address for receiving the
notices.
In issuing the March 1998 interim
rule, the Board stated that financial
institutions could require paper
confirmation of electronic notices in the
two instances where the regulation
allows written confirmation—stoppayment notices and notices of error.
This approach was consistent with
guidance provided in the May 1996
proposed rule, where the Board stated
that (as in the case of an oral
communication) if the consumer sends
an electronic communication to the
financial institution, the institution
could require paper confirmation from
the consumer (particularly since the
consumer was entitled to a paper copy
of a disclosure upon request under the
May 1996 proposal).
Views were mixed on whether
financial institutions should be
permitted to require paper

confirmations of electronic notices.
Many industry commenters requested
that the Board allow financial
institutions to request paper
confirmations; some stated that paper
confirmations protect both the
consumer and the financial institution.
Consumer advocates and other
commenters believed it would be unfair
to require paper confirmation of an
electronic communication from
consumers who receive electronic
communication from a financial
institution.
Based upon the comments received
and further analysis, and subject to
certain limitations discussed below, the
Board is proposing that consumers be
permitted to provide electronically any
information that a consumer is required
to provide a financial institution to
preserve the consumer’s rights under
the regulation, such as the stop-payment
notice and the notice of error. If an
institution uses electronic
communication to provide disclosures
to consumers on a continuing basis,
such as change-in-terms notices or
periodic statements, it is appropriate to
allow consumers to use electronic
communication to provide notices to the
institution. If, however, an institution
limits its use of electronic
communication to the delivery of initial
disclosures (that is, if all subsequent
disclosures regarding the EFT service
are provided in paper form), institutions
would not be required to accept
electronic communication from
consumers.
4(c)(5)(ii) Institution’s Designation of
Address
Section 205.4(c)(5)(ii) would provide
that an institution may designate the
electronic address that must be used by
a consumer for sending electronic
communication as permitted by
§ 205.4(c)(5)(i).
Appendix A to Part 205—Model
Disclosure Clauses and Forms
The Board solicits comment on three
proposed model forms and two sample
forms for use by financial institutions to
aid compliance with the disclosure
requirements of §§ 205.4(c)(3) and (c)(4).
Model Forms A–6 and A–7 would
implement § 205.4(c)(3), regarding the
notice that financial institutions must
give prior to using electronic
communication to provide required
disclosures. Model Form A–8 would
implement § 205.4(c)(4), regarding
notices to consumers about the
availability of electronic disclosures at
locations such as the financial
institution’s website. Use of any
modified version of these forms would

49705

be in compliance as long as the
institution does not delete information
required by the regulation or rearrange
the format in a way that affects the
substance, clarity, or meaningful
sequence of the disclosure. For example,
institutions that combine Regulation E
and Regulation DD disclosures on a
deposit account can modify the model
form to provide a single disclosure
statement about electronic delivery of
those disclosures.
Sample Form A–9 illustrates the
disclosures under § 205.4(c)(3) for an
electronic banking service. The sample
assumes that the institution also offers
paper disclosures for consumers who
choose not to receive electronic
disclosures. Sample Form A–10
assumes that consumers must accept
electronic disclosures if they want to
contract for the EFT service.
Additional Issues
1. Signature Requirements
Section 205.10(b) requires that
preauthorized EFTs be authorized only
by a writing signed or similarly
authenticated by the consumer. The
phrase ‘‘or similarly authenticated’’ was
added in the 1996 review of Regulation
E. The Official Staff Commentary to
Regulation E states that an example of
a consumer’s authorization that is not in
the form of a signed writing but is
instead ‘‘similarly authenticated’’ is a
consumer’s authorization under
§ 205.10(b) for using a home-banking
system. The Board indicated in the
supplementary information to the 1996
final rule that the authentication
method should provide the same
assurance as a signature in a paperbased system. Since the publication of
the amended regulation and
accompanying commentary, the Board
has been asked to give further guidance
on this issue. In the supplementary
information to the March 1998 interim
rule, the Board expressed interest in
learning about other ways in which
authentication in an electronic
environment might occur in lieu of a
consumer’s signature.
Some commenters provided
alternatives for verifying a consumer’s
identity, including alphanumeric codes
(combinations of letters and numbers) or
combinations of unique identifiers (such
as account numbers combined with a
number representing algorithms of the
account numbers). In the supplementary
information to the March 1998 interim
rule, the Board cited security codes and
digital signatures as examples of
authentication devices that might meet
the requirements of authentication and
signatures. Many commenters stated

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Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

their concern that the Board approved
only these or similar methods. These
commenters urged the Board to take a
flexible approach to this requirement.
They suggested that the Board’s implied
or explicit endorsement of any
particular method could hinder the
development of new technologies.
Further, these commenters requested
that the Board take a ‘‘wait and see’’
approach to this issue, to allow the
industry to develop alternatives that
will result in more security for
consumers.
To avoid unduly influencing the
development of electronic
authentication methods and to
encourage innovation and flexibility,
the Board will limit its guidance to the
general principle that a home-banking
or other electronic communication
system must use an authentication
device that provides the same assurance
as a signature in a paper-based system.
2. Preemption
A few commenters suggested that any
final rule issued by the Board permitting
electronic disclosures should explicitly
preempt any state law requiring paper
disclosures. Under § 205.12(b) of the
regulation, state laws are preempted if
they are inconsistent with the act and
regulation and only to the extent of the
inconsistency. The proposed rule would
provide financial institutions with the
option of giving required disclosures by
electronic communication as an
alternative to paper. There is no
apparent inconsistency with the act and
regulation if state laws require paper
disclosures. The Board will, however,
review preemption issues that are
brought to the Board’s attention. Section
205.12(b)(1) outlines the Board’s
procedures for determining whether a
specific law is preempted, which will
guide the Board in any determination
requested by a state, financial
institution, or other interested party
following publication of a final rule
regarding electronic communication.
3. Technical Amendment to Error
Resolution Notice
In September 1998, the Board revised
the time periods for investigating
alleged errors involving point-of-sale
and foreign-initiated transactions. (63
FR 52115, September 29, 1998.) The
amendments to § 205.11 require
financial institutions to provisionally
credit an account within 10 business
days (rather than 20). At the same time,
the Board extended the time periods to
provisionally credit funds and
investigate claims involving new
accounts. The amended rule permits
institutions to take up to 20 business

days to provisionally credit funds and
up to 90 calendar days to complete the
investigation. The Board proposes to
revise the model error resolution notices
contained in Appendix A (Forms A–3
and A–5) to conform with § 205.11 as
amended.
IV. Form of Comment Letters
Comment letters should refer to
Docket No. R–1041, and, when possible,
should use a standard typeface with a
type size of 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 of
comments for review. Also, if
accompanied by an original document
in paper form, comments may be
submitted on 31⁄2 inch computer
diskettes in any IBM-compatible DOS-or
Windows-based format.
V. Initial Regulatory Flexibility
Analysis
In accordance with section 3(a) of the
Regulatory Flexibility Act and section
904(a)(2) of the EFTA, the Board has
reviewed the proposed amendments to
Regulation E. Although the proposal
would add disclosure requirements with
respect to electronic communication,
overall, the proposed amendments are
not expected to have any significant
impact on small entities. A financial
institution’s use of electronic
communication to provide disclosures
required by the regulation is optional.
The proposed rule would give financial
institutions flexibility in providing
disclosures. A final regulatory flexibility
analysis will be conducted after
consideration of comments received
during the public comment period.
VI. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3506;
5 CFR Part 1320 Appendix A.1), the
Board reviewed the proposed rule under
the authority delegated to the Board by
the Office of Management and Budget
(OMB). The Federal Reserve may not
conduct or sponsor, and an organization
is not required to respond to, this
information collection unless it displays
a currently valid OMB number. The
OMB control number is 7100–0200.
The collection of information
requirements that are relevant to this
proposed rulemaking are in 12 CFR Part
205 and in Appendix A. This
information is mandatory (15 U.S.C.
1693 et seq.) to evidence compliance
with the requirements of the Regulation
E and the Electronic Fund Transfer Act
(EFTA). The revised requirements
would be used to ensure adequate

disclosure of basic terms, costs, and
rights relating to services affecting
consumers using certain home-banking
services and consumers receiving
certain disclosures by electronic
communication. The respondents/
recordkeepers are for-profit financial
institutions, including small businesses.
Institutions are also required to retain
records for 24 months. This regulation
applies to all types of depository
institutions, not just state member
banks; however, under Paperwork
Reduction Act regulations, the Federal
Reserve accounts for the burden of the
paperwork associated with the
regulation only for state member banks.
Other agencies account for the
paperwork burden on their respective
constituencies under this regulation.
The proposed revisions would allow
institutions the option of using
electronic communication (for example,
via personal computer and modem) to
provide disclosures required by the
regulation. Although the proposal
would add disclosure requirements with
respect to electronic communication,
the optional use of electronic
communication would likely reduce the
paperwork burden of financial
institutions. With respect to state
member banks, it is estimated that there
are 851 respondents/recordkeepers and
an average frequency of 85,808
responses per respondent each year.
Therefore the current amount of annual
burden is estimated to be 462,839 hours.
There is estimated to be no additional
annual cost burden and no capital or
start-up cost.
Because the records would be
maintained at state member banks and
the notices are not provided to the
Federal Reserve, no issue of
confidentiality under the Freedom of
Information Act arises; however, any
information obtained by the Federal
Reserve may be protected from
disclosure under exemptions (b)(4), (6),
and (8) of the Freedom of Information
Act (5 U.S.C. 522 (b)(4), (6) and (8)). The
disclosures and information about error
allegations are confidential between
institutions and the customer.
The Federal Reserve requests
comments from institutions, especially
state member banks, that will help to
estimate the number and burden of the
various disclosures that would be made
in the first year this proposed regulation
would be effective. Comments are
invited on: (a) the cost of compliance;
(b) ways to enhance the quality, utility,
and clarity of the information to be
disclosed; and (c) ways to minimize the
burden of disclosure on respondents,
including through the use of automated
disclosure techniques or other forms of

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
be provided in paper form, unless the
consumer requested the service by
electronic communication and
disclosures were provided in
compliance with paragraph (c)(3)(i) and
(c)(3)(ii) of this section at or around that
time.
(3) Disclosure notice. The disclosure
notice required by this paragraph shall
be provided in a manner substantially
similar to the applicable model form set
forth in Appendix A of this part (Model
List of Subjects in 12 CFR Part 205
Forms A–6 and A–7).
(i) Notice by financial institution. A
Banks, banking, Consumer protection,
Electronic fund transfers, Reporting and financial institution shall:
(A) Describe the information to be
record keeping requirements.
provided electronically and specify
Text of Proposed Revisions
whether the information is also
Certain conventions have been used
available in paper form or whether the
to highlight proposed changes to
electronic fund transfer service is
Regulation E. New language is shown
offered only with electronic disclosures;
(B) Identify the address or location
inside bold-faced arrows, deletions
where the information will be provided
inside bold-faced brackets.
electronically; and if it is made available
For the reasons set forth in the
preamble, the Board proposes to amend at a location other than the consumer’s
electronic address, how long the
Regulation E, 12 CFR part 205, as set
information will be available, and how
forth below:
it can be obtained once that period ends;
(C) Specify any technical
PART 205—ELECTRONIC FUND
requirements for receiving and retaining
TRANSFERS (REGULATION E)
information sent electronically, and
1. The authority citation for part 205
provide a means for the consumer to
would continue to read as follows:
confirm the availability of equipment
Authority: 15 U.S.C. 1693–1693r.
meeting those requirements; and
(D) Provide a toll-free telephone
2. Section 205.4 is amended by
redesignating paragraph (a) as paragraph number and, at the institution’s option,
an address for questions about receiving
(a)(1), adding a new paragraph (a)(2),
electronic disclosures, for updating
and revising paragraph (c) to read as
consumers’ electronic addresses, and for
follows:
seeking technical or other assistance
§ 205.4 General disclosure requirements;
related to electronic communication.
jointly offered services.
(ii) Response by consumer. A
(a) fl(1)fi Form of disclosures. * * * financial institution shall provide a
fl(2) Foreign language disclosures.
means for the consumer to accept or
Disclosures may be made in languages
reject electronic disclosures.
other than English, provided they are
(iii) Changes. (A) A financial
available in English upon request.fi
institution shall notify affected
consumers of any change to the
*
*
*
*
*
information provided in the notice
fl(c) Electronic communication. (1)
required by paragraph (c)(3)(i) of this
Definition. Electronic communication
section. The notice shall include the
means a message transmitted
effective date of the change and must be
electronically between a financial
provided before that date. The notice
institution and a consumer in a format
shall also include a toll-free telephone
that allows visual text to be displayed
number, and, at the institution’s option,
on equipment such as a personal
an address for questions about receiving
computer monitor.
(2) Electronic communication between electronic disclosures.
(B) In addition to the notice under
financial institution and consumer. (i)
paragraph (c)(3)(iii)(A) of this section, if
General. Except as provided in
the change involves providing
paragraph(c)(2)(ii) of this section, a
additional disclosures by electronic
financial institution that has complied
with paragraph (c)(3) of this section may communication, a financial institution
shall provide the notice in paragraph
provide by electronic communication
(c)(3)(i) of this section and obtain the
any information required by this
consumer’s consent. A notice is not
regulation to be in writing.
required under paragraph (c)(3)(i) of this
(ii) In-person exception. When a
section if the institution’s initial notice
consumer contracts for an electronic
states that additional disclosures may be
fund transfer service in person, the
disclosures required under § 205.7 shall provided electronically in the future
information technology. Comments on
the collection of information should be
sent to the Office of Management and
Budget, Paperwork Reduction Project
(7100–0200), Washington, DC 20503,
with copies of such comments sent to
Mary M. West, Federal Reserve Board
Clearance Officer, Division of Research
and Statistics, Mail Stop 97, Board of
Governors of the Federal Reserve
System, Washington, DC 20551.

49707

and specifies which disclosures could
be provided.
(4) Address or location to receive
electronic communication. A financial
institution that uses electronic
communication to provide information
required by this Regulation E (12 CFR
Part 205) shall:
(i) Send the information to the
consumer’s electronic address; or
(ii) Post the information for at least 90
days at a location such as a website, and
send a notice to the consumer when the
information becomes available.
Thereafter the information shall be
available upon request for a period of
not less than two years from the date
disclosures are required to be made. The
notice required by this paragraph (c)(4)
shall identify the account involved,
shall be sent to an electronic address
designated by the consumer (or to a
postal address, at the financial
institution’s option), and shall be
substantially similar to the model form
set forth in Appendix A of this part
(Model Form A–8).
(5) Consumer use of electronic
communication. (i) General. A
consumer may use electronic
communication to assert any right under
§ 205.10(c) and § 205.11 if the consumer
has consented to receive information
required by this regulation by electronic
communication, except when the
consumer consented to receive only the
disclosures required under § 205.7 by
electronic communication.
(ii) Institution’s designation of
address. A financial institution may
designate the electronic address or
location that consumers must use if they
send electronic communication under
this paragraph.fi
3. Appendix A to Part 205 is amended
by:
a. Revising the table of contents at the
beginning of the appendix;
b. Revising Appendices A–3 and A–
5; and
c. Adding new Appendices A–6, A–7,
A–8, A–9, and A–10.
The revisions and additions read as
follows:
Appendix A to Part 205—Model
Disclosure Clauses and Forms
A–1—Model Clauses for Unsolicited Issuance
(§ 205.5(b)(2))
A–2—Model Clauses for Initial Disclosures
(§ 205.7(b))
A–3—Model Forms for Error-Resolution
Notice (§§ 205.7(b)(10) and 205.8(b))
A–4—Model Form for Service-Providing
Institutions (§ 205.14(b)(1)(ii))
A–5—Model Forms for Government Agencies
(§ 205.15(d)(1) and (2))

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Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

flA–6—Model Disclosures for Electronic
Communication (§ 205.4(c)(3))
(Disclosures Available in Paper or
Electronically)
A–7—Model Disclosures for Electronic
Communication (§ 205.4(c)(3))
(Disclosures Available Only
Electronically)
A–8—Model Notice for Delivery of
Information Posted at Certain Locations
(§ 205.4(c)(4))
A–9—Sample Form for Electronic
Communication (§ 205.4(c)(3))
(Disclosures Available in Paper or
Electronically)
A–10—Sample Form for Electronic
Communication (§ 205.4(c)(3))
(Disclosures Available Only
Electronically)fi

A–3—MODEL FORMS FOR ERROR
RESOLUTION NOTICE (§§ 205.7(b)(10) and
205.8(b))
(a) Initial and annual error resolution
notice §§ 205.7(b)(10) and 205.8(b)). In case
of errors or questions about your electronic
transfers telephone us at [insert telephone
number] or write us at [insert address] as
soon as you can, if you think your statement
or receipt is wrong or if you need more
information about a transfer listed on the
statement or receipt. We must hear from you
no later than 60 days after we sent the FIRST
statement on which the problem or error
appeared.
(1) Tell us your name and account number
(if any).
(2) Describe the error or the transfer you
are unsure about, and explain as clearly as
you can why you believe it is an error or why
you need more information.
(3) Tell us the dollar amount of the
suspected error.
If you tell us orally, we may require that
you send us your complaint or question in
writing within 10 business days.
We will determine whether an error
occurred within 10 business days after we
hear from you and will correct any error
promptly. If we need more time, however, we
may take up to 45 days to investigate your
complaint or question. If we decide to do
this, we will credit your account within 10
business days for the amount you think is in
error, so that you will have the use of the
money during the time it takes us to
complete our investigation. If we ask you to
put your complaint or question in writing
and we do not receive it within 10 business
days, we may not credit your account.
flFor errors involving new accounts,
point-of-sale, and foreign-initiated
transactions, we may take up to 90 days to
investigate your complaint or question. For
new accounts, we may take up to 20 business
days to credit your account for the amount
you think is in error.fi
We will tell you the results within three
business days after completing our
investigation. If we decide that there was no
error, we will send you a written
explanation.
You may ask for copies of the documents
that we used in our investigation.

A–5—MODEL FORMS FOR GOVERNMENT
AGENCIES (§ 205.15(d)(1) AND (2))
(1) Disclosure by government agencies of
information about obtaining account
balances and account histories
§ 205.15(d)(1)(i) and (ii). You may obtain
information about the amount of benefits you
have remaining by calling øtelephone
number¿. That information is also available
[on the receipt you get when you make a
transfer with your card at (an ATM)(a POS
terminal)¿øwhen you make a balance inquiry
at an ATM¿øwhen you make a balance
inquiry at specified locations¿.
You also have the right to receive a written
summary of transactions for the 60 days
preceding your request by calling øtelephone
number¿. øOptional: Or you may request the
summary by contacting your caseworker.¿
(2) Disclosure of error resolution
procedures for government agencies that do
not provide periodic statements
§ 205.15(d)(1)(iii) and (d)(2)). In case of errors
or questions about your electronic transfers
telephone us at øtelephone number¿ or write
us at øaddress¿ as soon as you can, if you
think an error has occurred in your
øEBT¿øagency’s name for program¿ account.
We must hear from you no later than 60 days
after you learn of the error. You will need to
tell us:
• Your name and øcase¿ øfile¿ number.
• Why you believe there is an error, and
the dollar amount involved.
• Approximately when the error took
place.
If you tell us orally, we may require that
you send us your complaint or question in
writing.
øWe will generally complete our
investigation within 10 business days and
correct any error promptly.¿
flWe will determine whether an error
occurred within 10 business days after we
hear from you and will correct any error
promptly. If we need more time, however, we
may take up to 45 days to investigate your
complaint or question. If we decide to do
this, we will credit your account within 10
business days for the amount you think is in
error, so that you will have the use of the
money during the time it takes us to
complete our investigation. If we ask you to
put your complaint or question in writing
and we do not receive it within 10 business
days, we may not credit your account.
For errors involving new accounts, pointof-sale, and foreign-initiated transactions, we
may take up to 90 days to investigate your
complaint or question. For new accounts, we
may take up to 20 business days to credit
your account for the amount you think is in
error.fi øIn some cases, an investigation may
take longer, but you will have the use of the
funds in question after the 10 business days.¿
If we ask you to put your complaint or
question in writing and we do not receive it
within 10 business days, we may not credit
your account during the investigation.
øFor errors involving transactions at pointof-sale terminals in food stores, the periods
referred to above are 20 business days instead
of 10 business days.¿
If we decide that there was no error, we
will send you a written explanation within
three business days after we finish our

investigation. You may ask for copies of the
documents that we used in our investigation.
If you need more information about our
error resolution procedures, call us at
øtelephone number¿øthe telephone number
shown above¿.
flA–6—MODEL DISCLOSURES FOR
ELECTRONIC COMMUNICATION
(§ 205.4(c)(3)) (Disclosures Available in
Paper or Electronically)
You can choose to receive important
information required by the Electronic Fund
Transfer Act in paper or electronically.
Read this notice carefully and keep a copy
for your records.
• You can choose to receive the following
information in paper form or electronically:
(description of specific disclosures to be
provided electronically).
• How would you like to receive this
information
b I want paper disclosures.
b I want electronic disclosures.
• øWe may provide the following
additional disclosures electronically in the
future: (description of specific disclosures).¿
• øIf you choose electronic disclosures,
this information will be available at: (specify
location) for ll days. After that, the
information will be available upon request
(state how to obtain the information). When
the information is posted, we will send you
a message at the electronic mail address you
designate here: (consumer’s electronic mail
address).¿
øIf you choose electronic disclosures this
information will be sent to the electronic
mail address that you designate here:
(consumer’s electronic mail address).¿
• To receive this information you will
need: (list hardware and software
requirements). Do you have access to a
computer that satisfies these requirements?
b Yes
b No
• Do you have access to a printer, or the
ability to download information, in order to
keep copies for your records?
b Yes
b No
• To update your electronic address, if you
have questions about receiving disclosures,
or need technical or other assistance
concerning these disclosures, contact us at
(telephone number).
A–7—MODEL DISCLOSURES FOR
ELECTRONIC COMMUNICATION
(§ 205.4(c)(3)) (Disclosures Available Only
Electronically)
You will receive important information
required by the Electronic Fund Transfer Act
electronically.
Read this notice carefully and keep a copy
for your records.
• The following information will be
provided electronically: (description of
specific disclosures to be provided
electronically).
• This electronic fund transfer service is
not available unless you accept electronic
disclosures.
• øWe may provide the following
additional disclosures electronically in the
future: (description of specific disclosures).¿
• øIf you choose electronic disclosures,
this information will be available at: (specify

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
location) for ll days. After that, the
information will be available upon request
(state how to obtain the information). When
the information is posted, we will send you
a message at the electronic mail address you
designate here: (consumer’s electronic mail
address).¿
øIf you choose electronic disclosures this
information will be sent to the electronic
mail address that you designate here:
(consumer’s electronic mail address).¿
• To receive this information you will
need: (list hardware and software

requirements). Do you have access to a
computer that satisfies these requirements?
b Yes
b No
• Do you have access to a printer, or the
ability to download information, in order to
keep copies for your records?
b Yes
b No
• Do you want this electronic fund transfer
service with electronic disclosures?
b Yes
b No
• To update your electronic address, if you
have questions about receiving disclosures,
or need technical or other assistance

49709

concerning these disclosures, contact us at
(telephone number).
A–8—MODEL NOTICE FOR DELIVERY OF
INFORMATION POSTED AT CERTAIN
LOCATIONS (§ 205.4(c)(4))
Information about your (identify account)
is now available at [website address or other
location]. The information discusses
(describe the disclosure). It will be available
for ll days.
BILLING CODE 6210–01–P

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BILLING CODE 6210–01–C

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Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

4. In Supplement I to Part 205, under
Section 205.4—General Disclosure
Requirements; Jointly Offered Services,
the following amendments are made:
a. Under paragraph 4(a) Form of
Disclosures, paragraph 2. is removed;
and
b. A new paragraph 4(c) Electronic
Communication is added.
The additions read as follows:
Supplement I To Part 205—Official
Staff Interpretations
*

SECTION 205.4—GENERAL DISCLOSURE
REQUIREMENTS; JOINTLY OFFERED
SERVICES

fl4(c) Electronic Communication
Paragraph 4(c)(1)—Definition
1. Coverage. Information transmitted by
facsimile may be received in paper form or
electronically, although the party initiating
the transmission may not know at the time
the disclosures are sent which form will be
used. A financial institution that provides
disclosures by facsimile should comply with
the requirements for electronic
communication unless the institution knows
that the disclosures will be received in paper
form.
Paragraph 4(c)(2)—Electronic
Communication between Financial
Institution and Consumer
1. Disclosures provided on institution’s
equipment. Institutions that control
equipment providing electronic disclosures
to consumers (for example, computer
terminals in an institution’s lobby or kiosks
located in public places) must ensure that the
equipment satisfies the regulation’s
requirements to provide disclosures in a clear
and readily understandable format and in a
form the consumer may keep. A financial
institution that controls the equipment may
provide a printer for consumers’ use in lieu
of sending the information to the consumer’s
electronic mail address or posting the
information at another location such as the
institution’s website.
2. Retainability. Institutions must provide
electronic disclosures in a retainable format
(for example, they can be printed or
downloaded). Consumers may communicate
electronically with financial institutions
through a variety of means and from various
locations. Depending on the location (at
home, at work, in a public place such as a
library), a consumer may not have the ability
at a given time to preserve EFTA disclosures
presented on-screen. To ensure that
consumers have an adequate opportunity to
retain the disclosures, the institution also
must send them to the consumer’s designated
electronic mail address or to another
location, for example, on the institution’s
website, where the information may be
retrieved at a later date.
3. Timing and delivery. When a consumer
signs up for and is able to use an EFT service
on the Internet, for example, in order to meet
the timing and delivery requirements,

institutions must ensure that disclosures
applicable at that time appear on the screen
and are in a retainable format. The delivery
requirements would not be met if disclosures
do not either appear on the screen or if the
consumer is allowed to sign up for and use
an EFT service before receiving the
disclosures. For example, an institution can
provide a link to electronic disclosures
appearing on a separate page as long as
consumers cannot bypass the link and they
are required to access the disclosures before
completing the sign-up process or using the
EFT service.
Paragraph 4(c)(2)(ii)—In-person Exception
1. Initial disclosures in paper form. If a
consumer contracts for an EFT service in
person the financial institution generally
must provide initial disclosures in paper
form. For example, if a consumer visits a
financial institution’s branch office to sign up
for an ATM card while opening an account,
initial disclosures are required before the
consumer contracts for the service or before
the first transaction and they must be
provided in paper form; directing the
consumer to disclosures posted on the
institution’s website would not be sufficient.
If, however, a consumer makes a request on
the Internet to open an account and obtain
an ATM card, a financial institution may
send disclosures electronically at or around
that time even though the financial
institution’s procedures require the consumer
to visit a branch office at a later time to
complete the agreement (for example, to
execute a signature card).
Paragraph 4(c)(3)—Disclosure Notice
1. Consumer’s affirmative responses. Even
though a consumer accepts electronic
disclosures in accordance with
§ 205.4(c)(3)(ii), a financial institution may
deliver disclosures by electronic
communication only if the consumer
provides an electronic address where one is
required, and responds affirmatively to
questions about technical requirements and
the ability to print or download information
(see Sample Forms A–9 and A–10) in
appendix A to this part.
Paragraph 4(c)(3)(i)—Notice by Financial
Institution
1. Toll-free telephone number. The number
must be toll-free for nonlocal calls made from
an area code other than the one used in the
institution’s dialing area. Alternatively, a
financial institution may provide any
telephone number that allows a consumer to
call for information and reverse the
telephone charges.
2. Institution’s address. Financial
institutions have the option of providing
either an electronic or postal address for
consumers’ use in addition to a toll-free
telephone number.
3. Discontinuing electronic disclosures.
Consumers may use the toll-free number (or
optional address) if they wish to discontinue
receiving electronic disclosures. In such
cases, the institution must inform consumers
whether the EFT service is also available
with disclosures in paper form.

Paragraph 4(c)(3)(ii)—Response by Consumer
1. Nature of consent. Consumers must
agree to receive disclosures by electronic
communication knowingly and voluntarily.
An agreement to receive electronic
disclosures is not implied from consumers’
use of an account or acceptance of general
account terms. Paragraph 4(c)(3)(iii)—
Changes
1. Examples. Examples of changes include
a change in technical requirements, such as
upgrades to computer software affecting the
institution’s disclosures provided on the
Internet.
2. Timing for notices. A notice of a change
must be sent a reasonable period of time
before the effective date of the change. The
length of a reasonable notice period may
vary, depending on the type of change
involved; however, fifteen days is a
reasonable time for providing notice in all
cases.
3. Delivery of notices. An institution meets
the delivery requirements if the notice of a
change is sent to the address provided by the
consumer for receiving other disclosures. For
example, if the consumer provides an
electronic address to receive notices about
periodic statements posted at the institution’s
website, the same electronic address may be
used for the change notice. The consumer’s
postal address must be used, however, if the
consumer consented to additional
disclosures by electronic communication
when receiving the initial notice under
§ 205.4(c)(3)(i), but provided a postal address
to receive periodic statements in paper form.
4. Toll-free number. See comment
4(c)(3)(i)–1.
5. Institution’s address. See comment
4(c)(3)(i)–2.
6. Consumer inquiries. Consumers may use
the toll-free number (or optional address) for
questions or assistance with problems related
to a change, such as an upgrade to computer
software that is not provided by the
institution. Consumers may also use the tollfree number if they wish to discontinue
receiving electronic disclosures; in such
cases, the institution must inform consumers
whether the EFT service is also available
with disclosures in paper form.
Paragraph 4(c)(4)—Address or Location to
Receive Electronic Communication
Paragraph 4(c)(4)(i)
1. Electronic address. A consumer’s
electronic address is an electronic mail
address that may be used by the consumer for
receiving communications transmitted by
parties other than the financial institution.
Paragraph 4(c)(4)(ii)
1. Identifying account involved. A financial
institution is not required to identify an
account by reference to the account number.
For example, where the consumer does not
have multiple accounts, and no confusion
would result, the financial institution may
refer to ‘‘your checking account,’ or when the
consumer has multiple accounts the
institution may use a truncated account
number.
2. Availability. Information that is not sent
to a consumer’s electronic mail address must
be available for at least 90 days from the date
the information becomes available or from

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
the date the notice required by
§ 205.4(c)(4)(ii) is sent to the consumer,
whichever occurs later.

By order of the Board of Governors of the
Federal Reserve System, August 31, 1999.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 99–23139 Filed 9–13–99; 8:45 am]
BILLING CODE 6210–01–P

FEDERAL RESERVE SYSTEM
12 CFR Part 213
[Regulation M; Docket No. R–1042]

Consumer Leasing
Board of Governors of the
Federal Reserve System.
ACTION: Proposed rule.
AGENCY:

SUMMARY: The Board is requesting
comment on proposed revisions to
Regulation M, which implements the
Consumer Leasing Act. The Board
previously published a proposed rule
that permits lessors to use electronic
communication (for example,
communication via personal computer
and modem) to provide disclosures
required by the act and regulation, if the
consumer agrees to such delivery. (A
similar rule was also proposed under
various other consumer financial
services and fair lending regulations
administered by the Board.) In response
to comments received on the proposals,
the Board is publishing for comment an
alternative proposal on the electronic
delivery of disclosures, together with
proposed commentary that would
provide further guidance on electronic
communication issues.
DATES: Comments must be received by
October 29, 1999.
ADDRESSES: Comments, which should
refer to Docket No. R–1042, may be
mailed to Jennifer J. Johnson, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue, N.W.,
Washington, DC 20551. Comments
addressed to Ms. Johnson may also be
delivered to the Board’s mail room
between 8:45 a.m. and 5:15 p.m.
weekdays, and to the security control
room at all other times. The mail room
and the security control room, both in
the Board’s Eccles Building, are
accessible from the courtyard entrance
on 20th Street between Constitution
Avenue and C Street, N.W. Comments
may be inspected in room MP–500
between 9:00 a.m. and 5:00 p.m.,
pursuant to § 261.12, except as provided
in § 261.14 of the Board’s Rules

Regarding the Availability of
Information, 12 CFR 261.12 and 261.14.
FOR FURTHER INFORMATION CONTACT:
Kyung H. Cho-Miller, Staff Attorney, or
Jane Ahrens, Senior Counsel, Division
of Consumer and Community Affairs,
Board of Governors of the Federal
Reserve System, at (202) 452–3667.
Users of Telecommunications Device for
the Deaf (TDD) only, contact Diane
Jenkins at (202) 452–3544.
SUPPLEMENTARY INFORMATION:
I. Background
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 requires lessors to
provide consumers with uniform cost
and other disclosures about consumer
lease transactions. The act generally
applies to consumer leases of personal
property in which the contractual
obligation does not exceed $25,000 and
has a term of more than four months. An
automobile lease is the most common
type of consumer lease covered by the
act. The Board’s Regulation M (12 CFR
part 213) implements the act.
The CLA and Regulation M require
disclosures to be provided to consumers
in writing, presuming that lessors
provide paper documents. Under many
laws that call for information to be in
writing, information in electronic form
is considered to be ‘‘written.’’
Information produced, stored, or
communicated by computer is also
generally considered to be a writing,
where visual text is involved.
In May 1996, the Board revised
Regulation E (Electronic Fund
Transfers) following a comprehensive
review. During that process, the Board
determined that electronic
communications for delivery of
information required by federal laws
governing financial services could
effectively reduce compliance costs
without adversely affecting consumer
protections. Consequently, the Board
simultaneously issued a proposed rule
to permit financial institutions to use
electronic communication to deliver
disclosures that Regulation E requires to
be given in writing. (61 FR 19696, May
2, 1996.) The 1996 proposal required
that disclosures be provided in a form
the consumer may retain, a requirement
that institutions could satisfy by
providing information in a format that
may be printed or downloaded. The
proposed rule also allowed consumers
to request a paper copy of a disclosure
for up to one year after its original
delivery.
Following a review of the comments,
on March 25, 1998, the Board issued an

49713

interim rule under Regulation E (the
‘‘interim rule’’), 63 FR 14528. The Board
also published proposals under
Regulations DD (Truth in Savings), 63
FR 14533, M (Consumer Leasing), 63 FR
14538, Z (Truth in Lending), 63 FR
14548, and B (Equal Credit
Opportunity), 63 FR 14552,
(collectively, the ‘‘March 1998 proposed
rules’’). The rules would apply to
financial institutions, creditors, lessors,
and other entities that are required to
give disclosures to consumers and
others. (For ease of reference this
background section uses the terms
‘‘financial institutions,’’ ‘‘institutions,’’
and ‘‘consumers.’’) The interim rule and
the March 1998 proposed rules were
similar to the May 1996 proposed rule;
however, they did not require financial
institutions to provide paper copies of
disclosures to a consumer upon request
if the consumer previously agreed to
receive disclosures electronically. The
Board believed that most institutions
would accommodate consumer requests
for paper copies when feasible or
redeliver disclosures electronically; and
the Board encouraged financial
institutions to do so.
The March 1998 proposed rules and
the interim rule permitted financial
institutions to provide disclosures
electronically if the consumer agreed,
with few other requirements. The rule
was intended to provide flexibility and
did not specify any particular method
for obtaining a consumer’s agreement.
Whether the parties had an agreement
would be determined by state law. The
proposals and the interim rule did not
preclude a financial institution and a
consumer from entering into an
agreement electronically, nor did they
prescribe a formal mechanism for doing
so.
The Board received approximately
200 written comments on the interim
rule and the March 1998 proposed rules.
The majority of comments were
submitted by financial institutions and
their trade associations. Industry
commenters generally supported the use
of electronic communication to deliver
information required by the CLA and
Regulation M. Nevertheless, many
sought specific revisions and additional
guidance on how to comply with the
disclosure requirements in particular
transactions and circumstances.
Industry commenters were especially
concerned about the condition that a
consumer had to ‘‘agree’’ to receive
information by electronic
communication, because the rule did
not specify a method for establishing
that an ‘‘agreement’’ was reached. These
commenters believed that relying on
state law created uncertainty about what

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
the date the notice required by
§ 205.4(c)(4)(ii) is sent to the consumer,
whichever occurs later.

FEDERAL RESERVE SYSTEM
12 CFR Part 213
[Regulation M; Docket No. R–1042]

Consumer Leasing
Board of Governors of the
Federal Reserve System.
ACTION: Proposed rule.
AGENCY:

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Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

constitutes an agreement and, therefore,
potential liability for noncompliance.
To avoid uncertainty over which state’s
laws apply, some commenters urged the
Board to adopt a federal minimum
standard for agreements or for informed
consent to receive disclosures by
electronic communication. These
commenters believed that such a
standard would avoid the compliance
burden associated with tailoring legally
binding ‘‘agreements’’ to the contract
laws of all jurisdictions where
electronic communications may be sent.
Consumer advocates generally
opposed the March 1998 interim rule
and proposed rules. Without additional
safeguards, they believed, consumers
may not be provided with adequate
information about electronic
communications before an ‘‘agreement’’
is reached. They also believed that
promises of lower costs could induce
consumers to agree to receive
disclosures electronically without a full
understanding of the implications. To
avoid such problems, they urged the
Board, for example, either to require
institutions to disclose to consumers
that their account with the institution
will not be adversely affected if they do
not agree to receive electronic
disclosures, or to permit financial
institutions to offer electronic
disclosures only to consumers who
initiate contact with the institution
through electronic communication.
They also noted that some consumers
will likely consent to electronic
disclosures believing that they have the
technical capability to retrieve
information electronically, but might
later discover that they are unable to do
so. They questioned consumers’
willingness and ability to access and
retain disclosures posted on Internet
websites, and express their
apprehension that the goals of federally
mandated disclosure laws will be lost.
Consumer advocates and others were
particularly concerned about the use of
electronic disclosures in connection
with home-secured loans and certain
other transactions that consumers
typically consummate in person (citing
as examples automobile loans and
leases, short-term ‘‘payday’’ loans, or
home improvement financing contracts
resulting from door-to-door sales). They
asserted that there is little benefit to
eliminating paper disclosures in such
transactions and that allowing
electronic disclosures in those cases
could lead to abusive practices.
Accordingly, consumer advocates and
others believed that paper disclosures
should always accompany electronic
disclosures in mortgage loans and
certain other transactions, and that

consumers should have the right to
obtain paper copies of disclosures upon
request for all types of transactions
(deposit account, credit card, loan or
lease, and other transactions).
A final issue raised by consumer
advocates was the integrity of
disclosures sent electronically. They
stated that there may be instances when
the consumer and the institution
disagree on the terms or conditions of
an agreement and consumers may need
to offer electronic disclosures as proof of
the agreed-upon terms and to enforce
rights under consumer protection laws.
Thus, to assure that electronic
documents have not been altered and
that they accurately reflect the
disclosures originally sent, consumer
advocates recommended that the Board
require that electronic disclosures be
authenticated by an independent third
party.
The Board’s Consumer Advisory
Council considered the electronic
delivery of disclosures in 1998 and
again in 1999. Many Council members
shared views similar to those expressed
in written comment letters on the 1998
proposals. For example, some Council
members expressed concern that the
Board was moving too quickly in
allowing electronic disclosures for
certain transactions, and suggested that
the Board might go forward with
electronic disclosures for deposit
accounts while proceeding more slowly
on credit and lease transactions. Others
expressed concern about consumer
access and consumers’ ability to retain
electronic disclosures. They believed
that, without specific guidance from the
Board, institutions would provide
electronic disclosures without knowing
whether consumers could retain or
access the disclosures, and without
establishing procedures to address
technical malfunctions or nondelivery.
The Council also discussed the integrity
and security of electronic documents.
II. Overview of Proposed Revisions
Based on a review of the comments
and further analysis, the Board is
requesting comment on a modified
proposed rule that is more detailed than
the interim rule and March 1998
proposed rules. It is intended to provide
specific guidance for lessors that choose
to use electronic communication to
comply with Regulation M’s
requirements to provide written
disclosures, and to ensure effective
delivery of disclosures to consumers
through this medium. Though detailed,
the proposal provides flexibility for
compliance with electronic
communication rules.

The modified proposal does not
permit the electronic delivery of
Regulation M disclosures where a
consumer enters into a lease agreement
in person, and the required Regulation
M disclosures are provided at that time
(either as part of the lease agreement or
separately), those disclosures have to be
in paper form.
The Regulation M leasing disclosures
must be given to consumers before they
become obligated for a lease, and must
reflect the legal obligation. The
disclosures can be made in a separate
statement or in the lease contract or
other document evidencing the lease.
Lessors typically include the disclosures
in the lease agreement. Few lessors
currently consummate lease agreements
electronically; however, as standards are
developed for establishing legal
agreements by electronic
communication, more lease contracts
may be entered into by that means.
While leases are typically not
consummated on-line, consumers are
able to shop on-line and apply for
leases. The purpose of the Regulation M
disclosures is to ensure that consumers
have meaningful information about
lease terms and to promote comparison
shopping. Therefore, the use of
electronic communication may allow
lessors to provide Regulation M
disclosures to consumers earlier in the
leasing process.
The Board is soliciting comment on a
modified approach that addresses both
industry and consumer group concerns.
Under the proposal, lessors would have
to provide specific information about
how the consumer can receive and
retain electronic disclosures—through a
standardized disclosure statement—
before obtaining consumers’ acceptance
of such delivery, with some exceptions.
If they satisfy these requirements and
obtain consumers’ affirmative consent,
lessors would be permitted to use
electronic communications. As a general
rule a lessor would be permitted to offer
the option of receiving electronic
disclosures to all consumers, whether
they initially contact the lessor by
electronic communications, or
otherwise. To address concerns about
potential abuses, however, the proposal
provides that if a consumer
consummates a lease in person,
disclosures required to be given at that
time must be in paper form.
Lessors would have the option of
delivering disclosures to an e-mail
address designated by the consumer or
making disclosures available at another
location such as the lessor’s website, for
printing or downloading. If the
disclosures are posted at a website
location, lessors generally must notify

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
consumers at an e-mail address about
the availability of the information.
(Lessors may offer consumers the option
of receiving alert notices at a postal
address.) The disclosures must remain
available at that site for 90 days.
Disclosures provided electronically
would be subject to the ‘‘clear and
conspicuous’’ standard, and the existing
format, timing, and retainability rules in
Regulation M. For example, to satisfy
the timing requirement, if disclosures
are due at the time an electronic
transaction is being conducted, they
would have to appear on the screen
before the consumer could consummate
the transaction.
Lessors generally must provide a
means for consumers to confirm the
availability of equipment to receive and
retain electronic disclosure documents.
A lessor would not otherwise have a
duty to verify consumers’ actual ability
to receive, print, or download the
disclosures. Some commenters
suggested that lessors should be
required to verify delivery by return
receipt. The Board solicits comment on
the need for such a requirement and the
feasibility of that approach.
As previously mentioned, consumer
advocates and others have expressed
concerns that electronic documents can
be altered more easily than paper
documents. The issue of the integrity
and security of electronic documents
affects electronic commerce in general
and is not unique to the written
disclosures required under the
consumer protection laws administered
by the Board. Consumers’ ability to
enforce rights under the consumer
protection laws could be impaired in
some cases, however, if the authenticity
of disclosures that they retain cannot be
demonstrated. Signatures, notary seals,
and other established verification
procedures are used to detect alterations
for transactions memorialized in paper
form. The development of similar
devices for electronic communications
should reduce uncertainty over time
about the ability to use electronic
documents for resolving disputes.
The Board’s rules require lessors to
retain evidence of compliance with
Regulation M. Specific comment is
solicited on the feasibility of complying
with a requirement that lessors provide
disclosures in a format that cannot be
altered without detection, or have
systems in place capable of detecting
whether or not information has been
altered, as well as the feasibility of
requiring use of independent
certification authorities to verify
disclosure documents.
Elsewhere in today’s Federal Register,
the Board is publishing similar

proposals for comment under
Regulations B, E, Z, and DD. In a
separate notice the Board is publishing
an interim rule under Regulation DD,
which implements the Truth in Savings
Act, to permit depository institutions to
use electronic communication to deliver
disclosures on periodic statements. For
ease of reference, the Board has assigned
new docket numbers to the modified
proposals published today.
III. Section-by-Section Analysis
Pursuant to its authority under
section 187 of the CLA, the Board
proposes to amend Regulation M to
permit lessors to use electronic
communication to provide the
disclosures required by § 213.4. Below
is a section-by-section analysis of the
rules for providing disclosures by
electronic communication, including
references to proposed commentary
provisions.
The March 1998 proposed rule
addressed electronic communication in
§ 213.3 of the regulation, which contains
the general disclosure requirements. In
the revised proposal, the rules on
electronic communications are
contained in § 213.6 for easier reference
and to avoid complicating the general
Regulation M disclosure requirements.
Section 213.6 Requirements for
Electronic Communication
6(a)

Definition

The definition of the term ‘‘electronic
communication’’ in the March 1998
proposed rule remains unchanged.
Section 213.6(a) limits the term to a
message transmitted electronically that
can be displayed on equipment as visual
text, such as a message that is displayed
on a computer monitor screen. Most
commenters supported the term as
defined in the proposed rule. Some
commenters favored a more expansive
definition that would encompass
communications such as audio and
voice response telephone systems.
Because the proposal is intended to
permit electronic communication to
satisfy the statutory requirement for
written disclosures, the Board believes
visual text is an essential element of the
definition.
Commenters asked the Board to
clarify the coverage of certain types of
communications. A few commenters
asked about communication by
facsimile. Facsimiles are initially
transmitted electronically; the
information may be received either in
paper form or electronically through
software that allows a consumer to
capture the facsimile, display it on a
monitor, and store it on a computer

49715

diskette or drive. Thus, information sent
by facsimile may be subject to the
provisions governing electronic
communication. When disclosures are
sent by facsimile, a lessor should
comply with the requirements for
electronic communication unless it
knows that the disclosures will be
received in paper form. Proposed
comment 6(a)–1 contains this guidance.
6(b) Electronic Communication
Between Lessor and Consumer
Section 213.6(b)(1) would permit
lessors to provide disclosures using
electronic communication, if the lessor
complies with provisions in new
§ 213.6(c), discussed below.
1. Presenting disclosures in a clear
and conspicuous format. The Board
does not intend to discourage or
encourage specific types of
technologies. Regardless of the
technology, however, disclosures
provided electronically must be
presented in a clear and conspicuous
format as is the case for all written
disclosures under the act and
regulation. See § 213.3(a).
When consumers consent to receive
disclosures electronically and they
confirm that they have the equipment to
do so, lessors generally would have no
further duty to determine that
consumers are able to receive the
disclosures. Lessors do have the
responsibility of ensuring the proper
equipment is in place in instances
where the lessor controls the
equipment.
2. Providing disclosures in a form the
consumer may keep. As with other
written disclosures, information
provided by electronic communication
must be in a form the consumer can
retain. Under the 1998 proposals and
interim rule, a lessor would satisfy this
requirement by providing information
that can be printed or downloaded. The
modified proposal adopts the same
approach but also provides that the
information must be sent to a specified
location to ensure that consumers have
an adequate opportunity to retain the
information.
Consumers communicate
electronically with lessors through a
variety of means and from various
locations. Depending on the location (at
home, at work, in a public place such
as a library), a consumer may not have
the ability at a given time to preserve
CLA disclosures presented on-screen.
Therefore, when a lessor provides
disclosures by electronic
communication, to satisfy the retention
requirements, the lessor must send the
disclosures to a consumer’s e-mail
address or other location where

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information may be retrieved at a later
date. Proposed comment 6(b)–1 contains
this guidance; see also the discussion
under § 213.6(d), below. If a lessor
controlled an electronic terminal used
to provide electronic disclosures, a
lessor could provide equipment for the
consumer to print a paper copy in lieu
of sending the information to the
consumer’s electronic mail address or
posting the information at another
location such as the lessor’s website.
3. Timing. Lessors must ensure that
electronic disclosures comply with all
relevant timing requirements of the
regulation. For example, disclosures
must be provided prior to
consummation of a lease. The rule
ensures that consumers have an
opportunity to read important
information about costs and other terms
before becoming obligated.
To illustrate the timing requirements
for electronic communication, assume
that a consumer is interested in leasing
a vehicle on-line and uses a personal
computer at home to access the lessor’s
website on the Internet. The lessor
provides disclosures to the consumer
about the delivery of Regulation M
disclosures by electronic
communication (the § 213.6(c)
disclosures discussed below) and the
consumer responds affirmatively. If the
lessor’s procedures permit the consumer
to lease a vehicle at that time,
disclosures required under § 213.4
would have to be provided before the
consumer becomes obligated on-line.
Thus, the disclosures must
automatically appear on the screen or
the consumer must be required to access
the information before consummating
the lease on-line. The timing
requirements for providing disclosures
would not be met if, in this example, the
lessor permitted the consumer to
consummate the lease on-line and sent
disclosures to an e-mail address
thereafter. Proposed comment 6(b)–2
contains this guidance.
On the other hand, assume that a
consumer applies for a lease on-line and
the lessor delays processing the
consumer’s request until the required
disclosures have been delivered by email. In that case the information would
not have to also appear on the screen;
delivery to the consumer’s e-mail
address would be sufficient. In either
case, the consumer must be given the
opportunity to receive the disclosures
before consummation.
6(b)(2) In-Person Exception
The proposal contains an exception to
the general rule allowing information
required by Regulation M to be provided
by electronic communication; in these

cases, paper disclosures would be
required. The exception, contained in
§ 213.6(b)(2), seeks to address concerns
about potential abuses where consumers
are transacting business in person but
are offered disclosures in electronic
form. In such transactions, there is an
expectation that consumers would have
to be given paper copies of disclosures
along with paper copies of other
documents evidencing the transaction.
Under § 213.6(b)(2), if a consumer
consummates a lease in person, the
lessor must generally provide
disclosures in paper form. For example,
if a consumer goes to a lessor’s place of
business to consummate a lease,
disclosures are required before
consummation and they must be
provided in paper form; directing the
consumer to disclosures posted on the
lessor’s website would not be sufficient.
If, however, a consumer applies for a
lease on the Internet, a lessor may send
disclosures electronically at or around
that time, even though the lessor’s
procedures require the consumer to visit
the lessor at a later time to complete the
transaction (for example, to sign a lease
agreement). Proposed comment 6(b)(2)–
1 contains this guidance.
6(c) Disclosure Notice
Section 213.6(c) would identify the
specific steps required before a lessor
could use electronic communication to
satisfy the regulation’s disclosure
requirements. Proposed Model Forms
A–4 and A–5, and Sample Forms A–7
and A–8 are published to aid
compliance with these requirements.
6(c)(1) Notice by Lessor
Section 213.6(c)(1) outlines the
information that lessors must provide
before electronic disclosures can be
given. The lessor must: (1) Describe the
information to be provided
electronically and specify whether the
information is also available in paper
form or whether the lease is offered only
with electronic disclosures; (2) identify
the address or location where the
information will be provided
electronically; and if it will be available
at a location other than the consumer’s
electronic address, specify for how long
and where it can be obtained once that
period ends; (3) specify any technical
requirements for receiving and retaining
information sent electronically, and
provide a means for the consumer to
confirm the availability of equipment
meeting those requirements; and (4)
provide a toll-free telephone number
and, at the lessor’s option, an electronic
or a postal address for questions about
receiving electronic disclosures and for
seeking assistance with technical or

other difficulties (see proposed
comments to 6(c)(1)). The Board
requests comment on whether other
information should be disclosed
regarding the use of electronic
communication and on any format
changes that might improve the
usefulness of the notice for consumers.
Under the proposal, the § 213.6(c)(1)
disclosures must be provided, as
applicable, before the lessor uses
electronic communication to deliver the
disclosures required by § 213.4 of the
regulation. The approach of requiring a
standardized disclosure statement
addresses, in several ways, the concern
that consumers may be steered into
using electronic communication
without fully understanding the
implications. Under this approach, the
specific disclosures that would be
delivered electronically must be
identified, and consumers must be
informed whether there is also an
option to receive the information in
paper form. Consumers must provide an
e-mail address where one is required.
Technical requirements must also be
stated, and consumers must affirm that
their equipment meets the requirements,
and that they have the capability of
retaining electronic disclosures by
downloading or printing them (see
proposed comment 6(c)–1). Thus,
§ 213.6(c)(1) disclosures should allow
consumers to make informed judgments
about receiving electronic disclosures.
Commenters generally requested
guidance on when the consumer
chooses not to receive information by
electronic communication. A lessor
could offer a consumer the option of
receiving disclosures in paper form, but
it would not be required to do so. For
example, a lessor could offer particular
leases for which disclosures are given
only by electronic communication.
Section 213.6(c)(1)(i) would require
lessors to tell consumers whether or not
they have the option to receive
disclosures in paper form. Proposed
sample disclosure statements in which
the consumer has an option to receive
electronic or paper disclosures (Form
A–7) or electronic disclosures only
(Form A–8) are contained in appendix
A.
6(c)(2) Response by Consumer
Proposed § 213.6(c)(2) would require
lessors to provide a means for the
consumer to affirmatively indicate that
disclosures may be provided
electronically, for example, a ‘‘check
box’’ on a computer screen. The
requirement is intended to ensure that
consumers’ consent is established
knowingly and voluntarily.

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6(d) Address or Location To Receive
Electronic Communication
Proposed § 213.6(d) identifies
addresses and locations where lessors
using electronic communication may
send information. Lessors may send
information to a consumer’s electronic
address, which is defined in proposed
comment 6(d)(1)–1 as an e-mail address
that the consumer also may use for
receiving communications from parties
other than the lessor. For example, a
lessor’s responsibility to provide
disclosures by electronic
communication will be satisfied when
the information is sent to the
consumer’s electronic address in
accordance with the applicable
proposed rules concerning delivery of
disclosures by electronic
communication.
The Board recognizes that currently,
because of security and privacy
concerns associated with data
transmissions, a number of lessors may
choose to provide disclosures at their
websites, where the consumer may
retrieve them under secure conditions.
Under § 213.6(d), a lessor may make
disclosures available to a consumer at a
location other than the consumer’s
electronic address. The lessor must
notify the consumer when the
information becomes available and
identify the lease involved. The notice
must be sent to the electronic mail
address designated by the consumer; the
lessor may, at its option, permit the
consumer to designate a postal address.
A proposed model form (Model Form
A–6) is published below.
The requirements of the regulation
would be met only if the required
disclosure is posted on the website and
the consumer is notified of its
availability in a timely fashion. For
example, lessors must provide
disclosures to consumers prior to
consummation of a lease. (12 CFR
213.3(a)(3).)
There is a variety of circumstances
when a consumer may not be able
immediately to access the information
due to illness, travel, or computer
malfunction, for example. Under
§ 213.6(d), lessors must post information
sent to a location other than the
consumer’s electronic address for 90
days. Proposed comment 6(d)(2)–1
contains this guidance.
Under the modified proposal, lessors
that post information at a location other
than the consumer’s electronic mail
address are required—after the 90 day
period—to make disclosures available to
consumers upon request for a period of
not less than two years from the date
disclosures are required to be made,

consistent with the record retention
requirements under § 213.8. The Board
requests comments on this approach,
including suggestions for alternative
means for providing consumers
continuing access to disclosures.
Section 213.7 Advertising
7(b)

Clear and Conspicuous Standard

7(b)(1) Amount Due at Lease Signing
Under § 213.7(b)(1), in an
advertisement, lessors cannot refer to a
component of the total amount due
prior to or at consummation or by
delivery (except for the periodic
payment amount) more prominently
than the total amount due. Also, lessors
that advertise a percentage rate must
include a statement about the
limitations of the rate, which must be as
prominent as the rate. Proposed
comment 7(b)(1)–3 contains guidance
on how this rule applies in an electronic
advertisement.
7(b)(2) Advertisement of a Lease Rate
Under § 213.7(b)(2), if a lessor
includes a rate in an advertisement, the
rate cannot be more prominent than any
of the disclosures in § 213.4. Comment
7(b)(2)–1 would be revised to provide
guidance on how this rule applies in an
electronic advertisement.
7(c) Catalogs and Multi-Page
Advertisement
Stating certain credit terms in an
advertisement for a lease triggers the
disclosure of additional terms. Section
213.7(c) permits lessors using a
multiple-page advertisement to state the
additional disclosures in a table or
schedule as long as the triggering lease
terms appearing anywhere else in the
advertisement refer to the page where
the table or schedule is printed. Several
commenters asked the Board to clarify
the rules for electronic advertisements.
Section 213.7(c) would be amended to
cover electronic advertisements. Lessors
that advertise using electronic
communication generally would comply
with § 213.7(c) if the table or schedule
with the additional information is set
forth clearly and conspicuously and the
triggering lease terms appearing
anywhere else in the advertisement
clearly refer to the page or location
where the table or schedule begins.
Proposed comment 7(c)–2 contains this
guidance.
Appendix A to Part 213—Model Forms
The Board solicits comment on three
proposed model forms and two sample
forms for use by lessors to aid
compliance with the disclosure
requirements of §§ 213.6(c) and 6(c).

49717

Model Forms A–4 and A–5 would
implement § 213.6(c), regarding the
notice that lessors must give prior to
using electronic communication to
provide required disclosures. Model
Form A–6 would implement § 213.6(d),
regarding notices to consumers about
the availability of electronic disclosures
at locations such as the lessor’s website.
Use of any modified version of these
forms would be in compliance as long
as the lessor does not delete information
required by the regulation or rearrange
the format in a way that affects the
substance, clarity, or meaningful
sequence of the disclosure.
Sample Form A–7 illustrates the
disclosures under § 213.6(a)(3) for a
vehicle lease transaction. The sample
assumes that the lessor also offers paper
disclosures for consumers who choose
not to receive electronic disclosures.
Sample Form A–8 assumes that
consumers must accept electronic
disclosures if they want to contract for
the lease.
Additional Issues Raised by Electronic
Communication
Preemption
A few commenters suggested that any
final rule issued by the Board permitting
electronic disclosures should explicitly
preempt any state law requiring paper
disclosures. Under § 213.9 of the
regulation, state laws are preempted if
they are inconsistent with the act and
regulation and only to the extent of the
inconsistency. The proposed rule would
provide lessors with the option of giving
required disclosures by electronic
communication as an alternative to
paper. There is no apparent
inconsistency with the act and
regulation if state laws require paper
disclosures. The Board will, however,
review preemption issues that are
brought to the Board’s attention. Section
213.9(b) outlines the Board’s procedures
for determining whether a specific law
is preempted, which will guide the
Board in any determination requested
by a state, lessor, or other interested
party following publication of a final
rule regarding electronic
communication.
IV. Form of Comment Letters
Comment letters should refer to
Docket No. R–1042 and, when possible,
should use a standard typeface with a
type size of 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 of
comments for review. Also, if
accompanied by an original document

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in paper form, comments may be
submitted on 31⁄2-inch computer
diskettes in any IBM-compatible DOSor Windows-based format.
V. Initial Regulatory Flexibility
Analysis
In accordance with section 3(a) of the
Regulatory Flexibility Act, the Board
has reviewed the proposed amendments
to Regulation M. Although the proposal
would add disclosure requirements with
respect to electronic communication,
overall, the proposed amendments are
not expected to have any significant
impact on small entities. A lessor’s use
of electronic communication to provide
disclosures required by the regulation is
optional. The proposed rule would give
lessors flexibility in providing
disclosures. A final regulatory flexibility
analysis will be conducted after
consideration of comments received
during the public comment period.
VI. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3506;
5 CFR 1320 Appendix A.1), the Board
reviewed the proposed rule under the
authority delegated to the Board by the
Office of Management and Budget
(OMB). The Federal Reserve may not
conduct or sponsor, and an organization
is not required to respond to, this
information collection unless it displays
a currently valid OMB number. The
OMB control number is 7100–0202.
The collection of information
requirements that are relevant to this
proposed rulemaking are in 12 CFR
213.3, 213.4, 213.5, 213.7, 213.8 and in
Appendix A. This information is
mandatory (15 U.S.C. 1667 et seq.) to
evidence compliance with the
requirements of Regulation M and the
Consumer Leasing Act (CLA). The
revised requirements would be used to
ensure adequate disclosure of basic
terms, costs, and rights relating to lease
transactions, at or before the time
lessees enter into a consumer lease
transaction and when the availability of
a consumer lease on particular terms is
advertised and lessees receive certain
disclosures by electronic
communication. The respondents/
recordkeepers are for-profit lessors,
including small businesses. Lessors are
also required to retain records for 24
months. This regulation applies to all
types of lessors, not just state member
banks; however, under Paperwork
Reduction Act regulations, the Federal
Reserve accounts for the burden of the
paperwork associated with the
regulation only for state member banks.
Other agencies account for the

paperwork burden on their respective
constituencies under this regulation.
The proposed revisions would allow
lessors the option of using electronic
communication (for example, via
personal computer and modem) to
provide disclosures required by the
regulation. Although the proposal
would add disclosure requirements with
respect to electronic communication,
the optional use of electronic
communication would likely reduce the
paperwork burden of lessors. With
respect to state member banks, it is
estimated that there are 310
respondents/recordkeepers subject to
the disclosure requirements with an
average frequency of 37,200 responses
per respondent each year. It is also
estimated of the 310 respondent/
recordkeepers, approximately 15 are
subject to the advertising requirement.
This subset of respondent/recordkeepers
has an average frequency of 45
responses per respondent each year.
Therefore the current amount of annual
burden is estimated to be 11,179 hours.
There is estimated to be no additional
annual cost burden and no capital or
start-up cost.
Because the records would be
maintained at state member banks and
the notices are not provided to the
Federal Reserve, no issue of
confidentiality under the Freedom of
Information Act arises; however, any
information obtained by the Federal
Reserve may be protected from
disclosure under exemptions (b) (4), (6),
and (8) of the Freedom of Information
Act (5 U.S.C. 522(b) (4), (6) and (8)). The
disclosures and information about error
allegations are confidential between
lessors and the customer.
The Federal Reserve requests
comments from lessors, especially state
member banks, that will help to
estimate the number and burden of the
various disclosures that would be made
in the first year this proposed regulation
would be effective. Comments are
invited on: (a) The cost of compliance;
(b) ways to enhance the quality, utility,
and clarity of the information to be
disclosed; and (c) ways to minimize the
burden of disclosure on respondents,
including through the use of automated
disclosure techniques or other forms of
information technology. Comments on
the collection of information should be
sent to the Office of Management and
Budget, Paperwork Reduction Project
(7100–0202), Washington, DC 20503,
with copies of such comments sent to
Mary M. West, Federal Reserve Board
Clearance Officer, Division of Research
and Statistics, Mail Stop 97, Board of
Governors of the Federal Reserve
System, Washington, DC 20551.

List of Subjects in 12 CFR Part 213
Advertising, Federal Reserve System,
Reporting and recordkeeping
requirements, Truth in lending.
Text of Proposed Revisions
Certain conventions have been used
to highlight proposed changes to
Regulation M. New language is shown
inside bold-faced arrows and deletions
are shown in bold-faced brackets.
For the reasons set forth in the
preamble, the Board proposes to amend
Regulation M, 12 CFR part 213, as set
forth below:
PART 213—CONSUMER LEASING
(REGULATION M)
1. The authority citation for part 213
would continue to read as follows:
Authority: 15 U.S.C. 1604, 1667f.

2. Section 213.6 is added to read as
follows:
fl§ 213.6 Requirements for electronic
communication.

(a) Definition. Electronic
communication means a message
transmitted electronically between a
consumer and a lessor in a format that
allows visual text to be displayed on
equipment such as a personal computer
monitor.
(b) Electronic communication between
lessor and consumer. (1) General.
Except as provided in paragraph (b)(2)
of this section, a lessor that has
complied with paragraph (c) of this
section may provide by electronic
communication the disclosures required
by § 213.4. Disclosures required under
this section must be made clearly and
conspicuously, in writing or by
electronic communication, and in a
form the consumer may keep.
(2) In-person exception. Prior to
consummation of a lease in person,
disclosures required under § 213.4 must
be provided in paper form, unless the
consumer requested the transaction by
electronic communication and the
lessor provided disclosures in
compliance with paragraph (c) (1) and
(2) of this section at or around that time.
(c) Disclosure notice. The disclosure
notice required by this paragraph shall
be provided in a manner substantially
similar to the applicable model form in
Appendix A of this part (Model Forms
A–4 and A–5).
(1) Notice by lessor. A lessor shall:
(i) Describe the information to be
provided electronically and specify
whether the information is also
available in paper form or whether the
lease is offered only with electronic
disclosures;

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
(ii) Identify the address or location
where the information will be provided
electronically; and if it is made available
at a location other than the consumer’s
electronic address, how long the
information will be available, and how
it can be obtained once that period ends;
(iii) Specify any technical
requirements for receiving and retaining
information sent electronically, and
provide a means for the consumer to
confirm the availability of equipment
meeting those requirements; and
(iv) Provide a toll-free telephone
number and, at the lessor’s option, an
address for questions about receiving
electronic disclosures and for seeking
technical or other assistance related to
electronic communication.
(2) Response by consumer. A lessor
shall provide a means for the consumer
to accept or reject electronic disclosures.
(d) Address or location to receive
electronic communication. A lessor that
uses electronic communication to
provide the disclosures required by
§ 213.4 shall:
(1) Send the information to the
consumer’s electronic address; or
(2) Post the information for at least 90
days at a location such as a website, and
send a notice to the consumer when the
information becomes available.
Thereafter the information shall be
available upon request for a period of
not less than two years from the date
disclosures are required to be made. The
notice required by paragraph (d)(2) of
this section shall identify the lease
property in accordance with § 213.4(a),
shall be sent to an electronic address
designated by the consumer (or to a
postal address, at the lessor’s option),
and shall be substantially similar to the
model form set forth in Appendix A of
this part (Model Form A–6).fi
3. Section 213.7 is amended by
revising paragraph (c) to read as follows:
§ 213.7

Advertising.

*
*
*
*
(c) Catalogs, øand¿ multiple-page fl,
and electronicfi advertisements. A

catalog or other multiple-page
advertisementfl, or an advertisement
using electronic communicationfi that
provides a table or schedule of the
required disclosures shall be considered
a single advertisement if, for lease terms
that appear without all the required
disclosures, the advertisement refers to
the page or øpages on which¿fllocation
where fi the table or schedule appears.
*
*
*
*
*
4. Appendix A to Part 213 is amended
by adding a new Appendix A–4,
Appendix A–5, Appendix A–6,
Appendix A–7, and Appendix A–8 to
read as follows:
Appendix A to Part 213—Model Forms
*

flAppendix A–4 Model Disclosures for
Electronic Communication (§ 213.6(c))
(Disclosures Available in Paper or
Electronically)
You can choose to receive important
information required by the Consumer
Leasing Act in paper or electronically.
Read this notice carefully and keep a copy
for your records.
• You can choose to receive the following
information in paper form or electronically:
(description of Regulation M disclosures).
• How would you like to receive this
information: lll I want paper
disclosures. lll I want electronic
disclosures.
• [If you choose electronic disclosures,
this information will be available at: (specify
location) for lll days. After that, the
information will be available upon request
(state how to obtain the information). When
the information is posted, we will send you
a message at the electronic mail address you
designate here: (consumer’s electronic mail
address).]
[If you choose electronic disclosures this
information will be sent to the electronic
mail address that you designate here:
(consumer’s electronic mail address).]
• To receive this information you will
need: (list hardware and software
requirements). Do you have access to a
computer that satisfies these requirements?
lllYes lllNo
• Do you have access to a printer, or the
ability to download information, in order to

49719

keep copies for your records? lllYes
lllNo
• If you have questions about receiving
disclosures, or need technical or other
assistance concerning these disclosures,
contact us at (telephone number).
A–5 Model Disclosures for Electronic
Communication (§ 213.6(c))
(Disclosures Available Only Electronically)
You will receive important information
required by the Consumer Leasing Act
electronically.
Read this notice carefully and keep a copy
for your records.
• The following information will be
provided electronically: (description of
Regulation M disclosures).
• This lease is not available unless you
accept electronic disclosures.
• [If you choose electronic disclosures, this
information will be available at: (specify
location) for lll days. After that, the
information will be available upon request
(state how to obtain the information). When
the information is posted, we will send you
a message at the electronic mail address you
designate here: (consumer’s electronic mail
address).]
[If you choose electronic disclosures this
information will be sent to the electronic
mail address that you designate here:
(consumer’s electronic mail address).]
• To receive this information you will
need: (list hardware and software
requirements). Do you have access to a
computer that satisfies these requirements?
lllYes lllNo
• Do you have access to a printer, or the
ability to download information, in order to
keep copies for your records? lllYes
lllNo
• Do you want this lease with electronic
disclosures? lllYes lllNo
• If you have questions about receiving
disclosures, or need technical or other
assistance concerning these disclosures,
contact us at (telephone number).
A–6 Model Notice for Delivery of
Information Posted at Certain Locations
(§ 213.6(d))
Information about your (identify lease) is
now available at [website address or other
location]. The information discusses
(describe the disclosure). It will be available
for llldays.
BILLING CODE 6210–01–P

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Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

BILLING CODE 6210–01–C

49721

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Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

5. In Supplement I to Part 213, a new
Section 213.6 Requirements for
Electronic Communication is added to
read as follows:

visit the lessor at a later time to complete the
transaction (for example, to sign a lease
agreement).

Supplement I to Part 213—Official Staff
Commentary to Regulation M

1. Consumer’s affirmative responses. Even
though a consumer accepts electronic
disclosures in accordance with § 213.6(c)(2),
a lessor may deliver disclosures by electronic
communication only if the consumer
provides an electronic address where one is
required, and responds affirmatively to
questions about technical requirements and
the ability to print or download information
(see sample forms A–7 and A–8 in appendix
A to this part).

flSection 213.6—Requirements for
Electronic Communication
6(a) Definition
1. Coverage. Information transmitted by
facsimile may be received in paper form or
electronically, although the party initiating
the transmission may not know at the time
the disclosures are sent which form will be
used. A lessor that provides disclosures by
facsimile machine should comply with the
requirements for electronic communication
unless the lessor knows that the disclosures
will be received in paper form.
6(b) Electronic Communication Between
Lessor and Consumer
1. Retainability. Lessors must provide
electronic disclosures in a retainable format
(for example, they can be printed or
downloaded). Consumers may communicate
electronically with lessors through a variety
of means and from various locations.
Depending on the location (at home, at work,
in a public place such as a library), a
consumer may not have the ability at a given
time to preserve CLA disclosures presented
on-screen. To ensure that consumers have an
adequate opportunity to retain the
disclosures, the lessor also must send them
to the consumer’s designated electronic mail
address or to another location, for example,
on the lessor’s website, where the
information may be retrieved at a later date.
2. Timing and delivery. When a consumer
becomes obligated for a lease transaction on
the Internet, for example, in order to meet the
timing and delivery requirements, lessors
must ensure that disclosures applicable at
that time appear on the screen and are in a
retainable format. The delivery requirements
would not be met if disclosures do not either
appear on the screen or if the consumer is
allowed to consummate the lease before
receiving the disclosures. For example, a
lessor can provide a link to electronic
disclosures appearing on a separate page as
long as consumers cannot bypass the link
and they are required to access the
disclosures before becoming obligated on the
lease.
6(b)(2) In-Person Exception
1. Disclosures in paper form. If a consumer
consummates a lease in person, the lessor
must generally provide disclosures in paper
form. For example, if a consumer goes to a
lessor’s place of business to consummate a
lease, disclosures are required before
consummation and they must be provided in
paper form; directing the consumer to
disclosures posted on the lessor’s website
would not be sufficient. If, however, a
consumer applies for a lease on the Internet,
a lessor may send disclosures electronically
at or around that time even though the
lessor’s procedures require the consumer to

6(c)

Disclosure Notice

6(c)(1)

Notice by Lessor

1. Toll-free telephone number. The number
must be toll-free for nonlocal calls made from
an area code other than the one used in the
lessor’s dialing area. Alternatively, a lessor
may provide any telephone number that
allows a consumer to call for information and
reverse the telephone charges.
2. Lessor’s address. Lessors have the option
of providing either an electronic or postal
address for consumers’ use in addition to the
toll-free telephone number.
6(d) Address or Location To Receive
Electronic Communication.
Paragraph 6(d)(1)
1. Electronic address. A consumer’s
electronic address is an electronic mail
address that may be used by the consumer for
receiving communications transmitted by
parties other than the lessor.
Paragraph 6(d)(2)
1. Availability. Information that is not sent
to a consumer’s electronic mail address must
be available for at least 90 days from the date
the information becomes available or from
the date the notice required by § 213.6(d)(2)
is sent to the consumer, whichever occurs
later.fi

*
*
*
*
6. In Supplement I to Part 213, in
§ 213.7—Advertising, the following
amendments are made:
a. Under 7(b)(1) Amount due at Lease
Signing or Delivery, a new paragraph 3. is
added;
b. Under 7(b)(2) Advertisement of a Lease
Rate, paragraph 1. is revised; and
c. Under 7(c) Catalogs and Multi-Page
Advertisements, paragraph 12 is redesignated
as paragraph 2 and revised. The addition and
revisions read as follows:

§ 213.7

*
*

2. Cross-references. A flcatalog, multiplepage, or electronicfi ømulti-page¿
advertisement is a single advertisement
(requiring only one set of lease disclosures)
if it contains a table, chart, or schedule with
the disclosures required under
§ 213.7(d)(2)(i) through (v). If one of the
triggering terms listed in § 213.7(d)(1)
appears in a catalog fl,fiø or other¿
multiple-page fl, or electronicfi
advertisement, fl it must clearly direct the
consumer to the page or location where the
table, chart, or schedule begins. For example,
in an electronic advertisement, a term
triggering additional disclosures may be
accompanied by a link that directly connects
the consumer to the additional information
(but see comments under § 213.7(b) about the
prominence rule).fi øthe page on which the
triggering term is used must clearly refer to
the specific page where the table, chart, or
schedule begins.¿

By order of the Board of Governors of the
Federal Reserve System, August 31, 1999.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 99–23141 Filed 9–13–99; 8:45 am]
BILLING CODE 6210–01–P

FEDERAL RESERVE SYSTEM
12 CFR Part 226
[Regulation Z; Docket No. R–1043]

Truth in Lending
Board of Governors of the
Federal Reserve System.
ACTION: Proposed rule.

SUMMARY:

due at Lease Signing or

7(c) Catalogs and Multi-Page
Advertisements

Advertising

7(b)(1) Amount
Delivery

7(b)(2) Advertisement of a Lease Rate
1. Location of statement. The notice
required to accompany a percentage rate
stated in an advertisement must be placed in
close proximity to the rate without any other
intervening language or symbols. For
example, a lessor may not place an asterisk
next to the rate and place the notice
elsewhere in the advertisement. In addition,
with the exception of the notice required by
§ 213.4(s), the rate cannot be more prominent
than any § 213.4 disclosure stated in the
advertisement. flA lessor does not comply
with the prominence rule in § 213.7(b)(2) if
a rate contained in an electronic
advertisement and the required disclosures
cannot be viewed simultaneously.fi

fl3. Electronic advertisements. A lessor
that has an electronic advertisement does not
comply with the prominence rule in
§ 213.7(b)(1) if both the triggering terms and
the required disclosures cannot be viewed
simultaneously.fi

AGENCY:

The Board is requesting
comment on proposed revisions to
Regulation Z, which implements the
Truth in Lending Act. The Board
previously published a proposed rule
that permits creditors to use electronic
communication (for example,
communication via personal computer
and modem) to provide disclosures
required by the act and regulation, if the

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Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

5. In Supplement I to Part 213, a new
Section 213.6 Requirements for
Electronic Communication is added to
read as follows:

visit the lessor at a later time to complete the
transaction (for example, to sign a lease
agreement).

Supplement I to Part 213—Official Staff
Commentary to Regulation M

6(c)

Disclosure Notice

6(c)(1)

Notice by Lessor

§ 213.7

*
*

FEDERAL RESERVE SYSTEM
12 CFR Part 226
[Regulation Z; Docket No. R–1043]

Truth in Lending
Board of Governors of the
Federal Reserve System.
ACTION: Proposed rule.

SUMMARY:

due at Lease Signing or

7(c) Catalogs and Multi-Page
Advertisements

Advertising

7(b)(1) Amount
Delivery

AGENCY:

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
consumer agrees to such delivery. (A
similar rule was also proposed under
various other consumer financial
services and fair lending regulations
administered by the Board.) In response
to comments received on the proposals,
the Board is publishing for comment an
alternative proposal on the electronic
delivery of disclosures, together with
proposed commentary that would
provide further guidance on electronic
communication issues. The Board is
also publishing for comment proposed
revisions to allow disclosures in other
languages.
DATES: Comments must be received by
October 29, 1999.
ADDRESSES: Comments, which should
refer to Docket No. R–1043, may be
mailed to Jennifer J. Johnson, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue, N.W.,
Washington, DC 20551. Comments
addressed to Ms. Johnson may also be
delivered to the Board’s mail room
between 8:45 a.m. and 5:15 p.m.
weekdays, and to the security control
room at all other times. The mail room
and the security control room, both in
the Board’s Eccles Building, are
accessible from the courtyard entrance
on 20th Street between Constitution
Avenue and C Street, N.W. Comments
may be inspected in room MP–500
between 9:00 a.m. and 5:00 p.m.,
pursuant to § 261.12, except as provided
in § 261.14 of the Board’s Rules
Regarding the Availability of
Information, 12 CFR 261.12 and 261.14.
FOR FURTHER INFORMATION CONTACT: For
information pertaining to open-end
credit, John C. Wood, Senior Attorney,
or Jane E. Ahrens, Senior Counsel; for
information pertaining to closed-end
credit, Michael L. Hentrel or Kyung H.
Cho-Miller, Staff Attorneys, Division of
Consumer and Community Affairs, at
(202) 452–3667 or (202) 452–2412.
Users of Telecommunications Device for
the Deaf (TDD) only, contact Diane
Jenkins at (202) 452-3544.
SUPPLEMENTARY INFORMATION:
I. Background
The purpose of the Truth in Lending
Act (TILA), 15 U.S.C. 1601 et seq., is to
promote the informed use of consumer
credit by requiring disclosures about its
terms and cost. The Board’s Regulation
Z (12 CFR part 226) implements the act.
The act requires creditors to disclose the
cost of credit as a dollar amount (the
finance charge) and as an annual
percentage rate (the APR). Uniformity in
creditors’ disclosures is intended to
assist consumers in comparison
shopping. TILA requires additional

disclosures for loans secured by
consumers’ homes and permits
consumers to rescind certain
transactions that involve their principal
dwellings.
TILA and Regulation Z require a
number of disclosures to be provided in
writing, presuming that creditors
provide paper documents. Under many
laws that call for information to be in
writing, information in electronic form
is considered to be ‘‘written.’’
Information produced, stored, or
communicated by computer is also
generally considered to be a writing,
where visual text is involved.
In May 1996, the Board revised
Regulation E (Electronic Fund
Transfers) following a comprehensive
review. During that process, the Board
determined that electronic
communications for delivery of
information required by federal laws
governing financial services could
effectively reduce compliance costs
without adversely affecting consumer
protections. Consequently, the Board
simultaneously issued a proposed rule
to permit financial institutions to use
electronic communication to deliver
disclosures that Regulation E requires to
be given in writing. (61 FR 19696, May
2, 1996.) The 1996 proposal required
that disclosures be provided in a form
the consumer may retain, a requirement
that institutions could satisfy by
providing information in a format that
may be printed or downloaded. The
proposed rule also allowed consumers
to request a paper copy of a disclosure
for up to one year after its original
delivery.
Following a review of the comments,
on March 25, 1998, the Board issued an
interim rule under Regulation E (the
‘‘interim rule’’), 63 FR 14528. The Board
also published proposals under
Regulations DD (Truth in Savings), 63
FR 14533, M (Consumer Leasing), 63 FR
14538, Z (Truth in Lending), 63 FR
14548, and B (Equal Credit
Opportunity), 63 FR 14552,
(collectively, the ‘‘March 1998 proposed
rules’’). The rules would apply to
financial institutions, creditors, lessors,
and other entities that are required to
give disclosures to consumers and
others. (For ease of reference this
background section uses the terms
‘‘financial institutions,’’ ‘‘institutions,’’
and ‘‘consumers.’’) The interim rule and
the March 1998 proposed rules were
similar to the May 1996 proposed rule;
however, they did not require financial
institutions to provide paper copies of
disclosures to a consumer upon request
if the consumer previously agreed to
receive disclosures electronically. The
Board believed that most institutions

49723

would accommodate consumer requests
for paper copies when feasible or
redeliver disclosures electronically; and
the Board encouraged financial
institutions to do so.
The March 1998 proposed rules and
the interim rule permitted financial
institutions to provide disclosures
electronically if the consumer agreed,
with few other requirements. The rule
was intended to provide flexibility and
did not specify any particular method
for obtaining a consumer’s agreement.
Whether the parties had an agreement
would be determined by state law. The
proposals and the interim rule did not
preclude a financial institution and a
consumer from entering into an
agreement electronically, nor did they
prescribe a formal mechanism for doing
so.
The Board received approximately
200 written comments on the interim
rule and the March 1998 proposed rules.
The majority of comments were
submitted by financial institutions and
their trade associations. Industry
commenters generally supported the use
of electronic communication to deliver
information required by the TILA and
Regulation Z. Nevertheless, many
sought specific revisions and additional
guidance on how to comply with the
disclosure requirements in particular
transactions and circumstances.
Industry commenters were especially
concerned about the condition that a
consumer had to ‘‘agree’’ to receive
information by electronic
communication, because the rule did
not specify a method for establishing
that an ‘‘agreement’’ was reached. These
commenters believed that relying on
state law created uncertainty about what
constitutes an agreement and, therefore,
potential liability for noncompliance.
To avoid uncertainty over which state’s
laws apply, some commenters urged the
Board to adopt a federal minimum
standard for agreements or for informed
consent to receive disclosures by
electronic communication. These
commenters believed that such a
standard would avoid the compliance
burden associated with tailoring legally
binding ‘‘agreements’’ to the contract
laws of all jurisdictions where
electronic communications may be sent.
Consumer advocates generally
opposed the March 1998 interim rule
and proposed rules. Without additional
safeguards, they believed, consumers
may not be provided with adequate
information about electronic
communication before an ‘‘agreement’’
is reached. They also believed that
promises of lower costs could induce
consumers to agree to receive
disclosures electronically without a full

49724

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

understanding of the implications. To
avoid such problems, they urged the
Board, for example, either to require
institutions to disclose to consumers
that their account with the institution
will not be adversely affected if they do
not agree to receive electronic
disclosures, or to permit institutions to
offer electronic disclosures only to
consumers who initiate contact with the
institution through electronic
communication. They also noted that
some consumers will likely consent to
electronic disclosures believing that
they have the technical capability to
retrieve information electronically, but
might later discover that they are unable
to do so. They questioned consumers’
willingness and ability to access and
retain disclosures posted on Internet
websites, and expressed their
apprehension that the goals of federally
mandated disclosure laws will be lost.
Consumer advocates and others were
particularly concerned about the use of
electronic disclosures in connection
with home-secured loans and certain
other transactions that consumers
typically consummate in person (citing
as examples automobile loans and
leases, short-term ‘‘payday’’ loans, or
home improvement financing contracts
resulting from door-to-door sales). They
asserted that there is little benefit to
eliminating paper disclosures in such
transactions and that allowing
electronic disclosures in those cases
could lead to abusive practices.
Accordingly, consumer advocates and
others believed that paper disclosures
should always accompany electronic
disclosures in mortgage loans and
certain other transactions, and that
consumers should have the right to
obtain paper copies of disclosures upon
request for all types of transactions
(deposit account, credit card, loan or
lease, and other transactions).
A final issue raised by consumer
advocates was the integrity of
disclosures sent electronically. They
stated that there may be instances when
the consumer and the institution
disagree on the terms or conditions of
an agreement and consumers may need
to offer electronic disclosures as proof of
the agreed-upon terms and to enforce
rights under consumer protection laws.
Thus, to assure that electronic
documents have not been altered and
that they accurately reflect the
disclosures originally sent, consumer
advocates recommended that the Board
require that electronic disclosures be
authenticated by an independent third
party.
The Board’s Consumer Advisory
Council considered the electronic
delivery of disclosures in 1998 and

again in 1999. Many Council members
shared views similar to those expressed
in written comment letters on the 1998
proposals. For example, some Council
members expressed concern that the
Board was moving too quickly in
allowing electronic disclosures for
certain transactions, and suggested that
the Board might go forward with
electronic disclosures for deposit
accounts while proceeding more slowly
on credit and lease transactions. Others
expressed concern about consumer
access and consumers’ ability to retain
electronic disclosures. They believed
that, without specific guidance from the
Board, institutions would provide
electronic disclosures without knowing
whether consumers could retain or
access the disclosures, and without
establishing procedures to address
technical malfunctions or nondelivery.
The Council also discussed the integrity
and security of electronic documents.
II. Overview of Proposed Revisions
Based on a review of the comments
and further analysis, the Board is
requesting comment on a modified
proposed rule that is more detailed than
the interim rule and the March 1998
proposed rules. It is intended to provide
specific guidance for creditors that
choose to use electronic communication
to comply with Regulation Z’s
requirements to provide written
disclosures, and to ensure effective
delivery of disclosures to consumers
through this medium. Though detailed,
the proposal provides flexibility for
compliance with the electronic
communication rules. The modified
proposal recognizes that some
disclosures may warrant different
treatment under the rule. Some
disclosures are generally available to the
public—for example, credit card costs in
solicitations. Under the modified
proposal, such disclosures could be
made available electronically without
obtaining a consumer’s consent. Where
written disclosures are made to
consumers who are transacting business
in person, these disclosures generally
would have to be made in paper form.
The Board is soliciting comment on a
modified approach that addresses both
industry and consumer group concerns.
Under the proposal, creditors would
have to provide specific information
about how the consumer can receive
and retain electronic disclosures—
through a standardized disclosure
statement—before obtaining consumers’
acceptance of such delivery, with some
exceptions. If they satisfy these
requirements and obtain consumers’
affirmative consent, creditors would be
permitted to use electronic

communications. As a general rule a
creditor would be permitted to offer the
option of receiving electronic
disclosures to all consumers, whether
they initially contact the creditor by
electronic communication or otherwise.
To address concerns about potential
abuses, however, the proposal provides
that if a consumer becomes obligated for
an extension of credit in person,
disclosures must be given in paper form.
Creditors would have the option of
delivering disclosures to an e-mail
address designated by the consumer or
making disclosures available at another
location such as the creditor’s website,
for printing or downloading. If the
disclosures are posted at a website
location, creditors generally must notify
consumers at an e-mail address about
the availability of the information.
(Creditors may offer consumers the
option of receiving alert notices at a
postal address.) The disclosures must
remain available at that site for 90 days.
Disclosures provided electronically
would be subject to the ‘‘clear and
conspicuous’’ standard, and the existing
format, timing, and retainability rules in
Regulation Z. For example, to satisfy the
timing requirement, if disclosures are
due at the time an electronic transaction
is being conducted, the disclosures have
to appear on the screen before the
consumer could complete the
transaction.
Creditors generally must provide a
means for consumers to confirm the
availability of equipment to receive and
retain electronic disclosure documents.
A creditor would not otherwise have a
duty to verify consumers’ actual ability
to receive, print, or download the
disclosures. Some commenters
suggested that creditors should be
required to verify delivery by return
receipt. The Board solicits comment on
the need for such a requirement and the
feasibility of that approach.
As previously mentioned, consumer
advocates and others have expressed
concerns that electronic documents can
be altered more easily than paper
documents. The issue of the integrity
and security of electronic documents
affects electronic commerce in general
and is not unique to the written
disclosures required under the
consumer protection laws administered
by the Board. Consumers’ ability to
enforce rights under the consumer
protection laws could be impaired in
some cases, however, if the authenticity
of disclosures that they retain cannot be
demonstrated. Signatures, notary seals,
and other established verification
procedures are used to detect alterations
for transactions memorialized in paper
form. The development of similar

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
devices for electronic communications
should reduce uncertainty over time
about the ability to use electronic
documents for resolving disputes.
The Board’s rules require creditors to
retain evidence of compliance with
Regulation Z. Specific comment is
solicited on the feasibility of complying
with a requirement that creditors
provide disclosures in a format that
cannot be altered without detection, or
have systems in place capable of
detecting whether or not information
has been altered, as well as the
feasibility of requiring use of
independent certification authorities to
verify disclosure documents.
Elsewhere in today’s Federal Register,
the Board is publishing similar
proposals for comment under
Regulations B, E, M, and DD. In a
separate notice the Board is publishing
an interim rule under Regulation DD,
which implements the Truth in Savings
Act, to permit depository institutions to
use electronic communication to deliver
disclosures on periodic statements. For
ease of reference, the Board has assigned
new docket numbers to the modified
proposals published today.
III. Section-by-Section Analysis
Pursuant to its authority under
section 105 of the TILA, the Board
proposes to amend Regulation Z to
permit creditors to use electronic
communication to provide the
information required by this regulation
to be in writing. Below is a section-bysection analysis of the rules for
providing disclosures by electronic
communication, including references to
proposed commentary provisions.
The March 1998 proposed rule
addressed electronic communication in
Subpart B (open-end credit plans),
Subpart C (closed-end transactions), and
Subpart E (certain mortgage
transactions). To ease compliance, the
Board proposes to add a new Subpart F
and Appendix M to the regulation to
address in a single location all rules
affecting electronic communication for
consumer credit transactions. The
revised proposal also amends § 226.27
to allow creditors to provide disclosures
in another language so long as English
disclosures are provided upon request.
Subpart B—Open-end Credit
Section 226.5a Credit and Charge Card
Applications and Solicitations
5a(b) Required Disclosures
5a(b)(1) Annual Percentage Rate
Regulation Z requires credit and
charge card issuers to provide credit
disclosures in certain applications and
solicitations to open credit and charge

card accounts. Format and content
requirements differ for applications or
solicitations sent in direct mail
campaigns and for those made available
to the general public such as in ‘‘takeones’’ and catalogs or magazines.
Disclosures accompanying direct mail
applications and solicitations must be
presented in a table. Disclosures in a
take-one also may be presented in a
table with the same content as for direct
mail, but the act and regulation permit
alternatives for format and content.
Where terms are disclosed, card issuers
are required to disclose the periodic rate
that would apply, expressed as an APR.
For fixed rates, card issuers are required
to disclose the APR currently available
under the plan. For variable rates, the
APR disclosed in a direct mail
solicitation must be accurate within 60
days before mailing; in a take-one,
within 30 days before printing.
The supplementary information to the
March 1998 proposed rule addressed
compliance with § 226.5a in the context
of electronic communication. The Board
indicated that card issuers should
follow (1) the direct-mail rules if a card
issuer sends an application or
solicitation by electronic
communication that alerts the consumer
that the application or solicitation has
arrived, such as electronic mail, and (2)
the take-one rules if an issuer makes an
application or solicitation publicly
available, such as by posting it on an
Internet site. Thus, for applications and
solicitations posted on the Internet, the
1998 proposal would require that APRs
generally be accurate within 30 days
before the card issuer’s most recent
update of the Internet site; where direct
mail rules apply, the APR would be
accurate within 60 days before the card
issuer’s electronic mailing.
Most commenters concurred with the
Board’s guidance on when the direct
mail requirements would apply to
electronic disclosures, although a few
commenters suggested that the Board
simplify the proposal by establishing
one rule for all solicitations by
electronic communication. Regarding
the APR, several commenters asked the
Board what would constitute the ‘‘most
recent’’ update of an Internet site. For
example, commenters questioned
whether the term referred to an update
of any aspect of a creditor’s website, or
was limited to an update of the
application or solicitation. Many
commenters (including state and federal
regulators) urged the Board to provide
guidance by recommending a frequency
for updating Internet sites. Other
commenters stated that updates to
information provided on the Internet,
including the APR, should be required

49725

frequently, and within a set period of
time.
To simplify the rule and to address
commenters’ concerns, the Board is
proposing a single standard that would
apply to the accuracy of APRs contained
in applications or solicitations offered
via electronic communication. Proposed
would § 226.5a(b)(1)(iii) provides that
when a variable rate is in an application
or solicitation transmitted via electronic
communication, the rate should be one
that was in effect within the previous
30-day period. The 30-day period
should allow card issuers sufficient
flexibility in updating websites or in
preparing electronic direct mail
applications or solicitations without
adversely affecting the consumer. The
Board continues to believe that as to the
format and content of the disclosures,
applications or solicitations sent to a
consumer’s designated e-mail address
should comply with the direct mail
rules under § 226.5a(c) and that
applications and solicitations available
on a website should comply with the
take-one rules under § 226.5a(e).
Proposed comment 5a(a)(2)–7(i)
contains this guidance. The Board
requests comment on any compliance
difficulties this approach may pose, and
possible suggestions for their resolution.
Section 226.5b Requirements for
Home-Equity Plans
5b(b) Time of Disclosures
Consumers interested in an open-end
plan secured by the consumer’s
dwelling are provided with a booklet
and other disclosures generically
describing the creditor’s product when
an application is provided. Creditors
may delay the delivery of the booklet
and disclosures for up to three business
days when, among other circumstances,
applications are received by telephone.
12 CFR 226.5b(b), n. 10a.
Creditors have requested guidance on
using electronic communication to
provide the disclosures required by
§ 226.5b(b) when the consumer is
transacting business at a creditor’s
website. Some believe the timing rules
for applications by telephone should
apply. The rationale underlying the
deferral is that creditors cannot provide
the booklet and other disclosures in
written form as required by the
regulation by telephone. That problem
does not exist with on-line transactions.
Thus, the Board believes there is no
need for a delay in delivering
disclosures. If the creditor’s procedures
permit the consumer to apply for credit
on-line (and the creditor has complied
with § 226.34(c)), the booklet and loanproduct disclosures required by § 226.5b

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would have to appear on the screen
before the consumer starts the
application process. This fulfills the
rule’s purpose to ensure that consumers
have the opportunity to read important
information about costs and other terms
before the consumer completes an
application or pays a nonrefundable fee.
Proposed comment 5b(b)–7 contains
this guidance. See also the discussion
under § 226.19(b), below, for similar
guidance regarding disclosures provided
at application for certain mortgage
loans.
Section 226.16 Advertising
16(c) Catalogs and Multiple-page
Advertisements
Stating certain credit terms in an
advertisement for an open-end credit
plan triggers the disclosure of additional
terms. Section 226.16(c) permits
creditors using a multiple-page
advertisement to state the additional
disclosures in a table or schedule as
long as the triggering credit terms
appearing anywhere else in the
advertisement refer to the page where
the table or schedule is printed. Several
commenters asked the Board to clarify
the rules for electronic advertisements.
Specifically, they asked whether
creditors could utilize the multiple-page
advertisement provisions when
advertising electronically and if so,
asked for guidance on the requirement
to reference clearly where the table or
schedule begins.
Section 226.16(c) would be amended
to cover electronic advertisements.
Creditors that advertise using electronic
communication would comply with
§ 226.16(c) if the table or schedule with
the additional information is set forth
clearly and conspicuously and the
triggering credit terms appearing
anywhere else in the advertisement
clearly refer to the location where the
table or schedule begins. Proposed
comment 16(c)(1)–2 contains this
guidance.
Subpart C—Closed-end Credit
Section 226.17 General Disclosure
Requirements
17(g) Mail or Telephone Orders—Delay
in Disclosures
Section 226.17(g) allows creditors to
defer TILA disclosures when a
consumer makes a credit-purchase or
requests credit by mail, telephone, or
other ‘‘electronic means’’ without faceto-face or direct solicitation by the
creditor. In such cases, creditors may
delay providing disclosures until the
first payment due date, provided certain
information is ‘‘made available in

written form’’ before the consumer’s
request. The rationale underlying the
deferral is that creditors cannot provide
transaction-specific disclosures in
written form as required by the
regulation at the time of the consumer’s
purchase or request.
Under the March 1998 proposal,
creditors offering loan products by
‘‘electronic communication’’ (for
example, those offered on the Internet)
could not delay providing disclosures
under § 226.17(g). The rationale
underlying the proposal is that the
deferral rule in § 226.17(g) pre-dates
Internet banking; ‘‘other electronic
means’’ typically involved noninteractive, non-visual means such as
telegraph transmissions. The difficulties
in providing disclosures for credit
requests by mail or telephone are not
present for credit requests received by
electronic means of communication
using visual text. Thus, the March 1998
proposed rule provided that specific
disclosures must be provided before
transactions are consummated using
electronic communication. Most
commenters agreed with the Board’s
position, that the same limitations that
apply to requests made by telephone
should not apply to electronic means of
communication using visual text, such
as the Internet.
Several commenters disagreed with
the proposed rule and believed that
deferral of TILA disclosures should
apply to credit requests initiated by
electronic communication, even where
visual text is used, because of the
transaction-specific nature of the
disclosures such as the APR and
payment schedule. Some commenters
believed that the Board’s proposal
would require creditors to be available
at all times to prepare these
personalized disclosures. The Board
does not intend such a result. As is the
case of credit applications by other
means, creditors are not required to
respond immediately to a request for
credit. Also, advances in technology
permit creditors to provide transactionspecific disclosures by combining
information provided by a consumer
with credit programs offered by a
creditor.
Other commenters were concerned
that some devices using electronic
communication, such as automated loan
machines or automated teller machines,
may not have the same capacity to store
and provide disclosures as other means.
Machines with the capability to process
credit applications or disburse loan
proceeds are generally controlled by the
creditor or operated by a third party
retained by the creditor. Under the
March 1998 proposal, creditors have the

responsibility to ensure proper
equipment is in place where consumers
receive electronic disclosures via
equipment controlled by the creditor.
This means that the equipment it
operates or controls—including devices
such as automated loan machines or
automated teller machines—must meet
clear and conspicuous standards and
must provide a means for consumers to
retain disclosures such as printers
incorporated into terminals or a screen
message offering to transmit the
disclosure to the consumer’s electronic
mail or post office address. (See
proposed comment 34(b)–1.)
Section 226.19 Certain Residential
Mortgage Transactions
19(b) Certain Variable-rate Transactions
For certain loans with variable-rate
features (loans where the APR may
increase during the loan term) that are
secured by the consumer’s principal
dwelling, creditors must provide
consumers with a booklet and other
disclosures generically describing the
creditor’s product when an application
is provided (or a nonrefundable fee is
paid, whichever occurs earliest).
Creditors may delay the delivery of the
booklet and disclosures for up to three
business days when, among other
circumstances, applications are received
by telephone. 12 CFR 226.19(b), n. 45b.
Consistent with proposed comment
5b(b)–7 addressing certain homesecured open-end plans, comment
19(b)–2 would be restructured and
revised to address when the booklet and
disclosures required by § 226.19(b) must
be provided when an application is
received by electronic communication.
Section 226.24 Advertising
Regulation Z prescribes certain
disclosure rules for closed-end loan
advertisements, including the use of
multiple-page advertisements. Proposed
amendments concerning electronic
advertisements for open-end credit
plans under § 226.16 are discussed
above. Although specific requirements
differ somewhat for closed-end loans
and open-end credit plans, proposed
amendments for closed-end loan
advertisements are substantially similar
to those discussed above for open-end
credit plans.
24(b) Advertisement of Rate of Finance
Charge
Section 226.24(b) permits creditors to
state a simple annual rate or periodic
rate in addition to the APR, as long as
the rate is stated in conjunction with,
but not more conspicuously than, the
APR. Proposed comment 24(b)–6

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
contains guidance on how this rule
applies to rates stated in an electronic
advertisement.
24(d) Catalogs and Multiple-page
Advertisements
Section 226.24(d) permits creditors
using a multiple-page advertisement to
state the additional disclosures in a
table or schedule so long as the
triggering credit terms appearing
anywhere else in the advertisement refer
to the page where the table or schedule
is printed. Section 226.24(d) would be
amended to cover electronic
advertisements. Creditors that advertise
using electronic communication
generally would comply with
§ 226.24(d) if the table or schedule with
the additional information is set forth
clearly and the triggering credit terms
appearing anywhere else in the
advertisement clearly refers to the
location where the table or schedule
begins. Proposed comment 24(d)–4
contains this guidance.
Subpart D—Miscellaneous
Section 226.27 Spanish Language
Disclosures
Section 226.27 provides that all
disclosures required by the regulation
must be provided in English, except in
the Commonwealth of Puerto Rico,
where disclosures may be provided in
Spanish if the disclosures are available
in English upon the consumer’s request.
The proposal would revise this
provision, consistent with the language
requirements in Regulation DD (Truth in
Savings) and Regulation M (Consumer
Leasing). Creditors would be permitted
to give disclosures in another language
as long as disclosures in English are
given to a consumer who requests them.
The Board believes that a more
permissive rule could promote the
delivery of more meaningful disclosures
to some consumers.
Subpart F—Electronic Communications
Section 226.34 Requirements for
Electronic Communications
34(a) Definition
The definition of the term ‘‘electronic
communication’’ in the March 1998
proposed rule remains unchanged.
Section 226.34(a) limits the term to a
message transmitted electronically that
can be displayed on equipment as visual
text, such as a message that is displayed
on a computer monitor screen. Most
commenters supported the term as
defined in the March 1998 proposed
rule. Some commenters favored a more
expansive definition that would
encompass communications such as
audio and voice response telephone

systems. Because the proposal is
intended to permit electronic
communication to satisfy the statutory
requirement for written disclosures, the
Board believes visual text is an essential
element of the definition.
Commenters asked the Board to
clarify the coverage of certain types of
communications. A few commenters
asked about communication by
facsimile. Facsimiles are initially
transmitted electronically; the
information may be received either in
paper form or electronically through
software that allows a consumer to
capture the facsimile, display it on a
monitor, and store it on a computer
diskette or drive. Thus, information sent
by facsimile may be subject to the
provisions governing electronic
communication. When disclosures are
sent by facsimile, a creditor should
comply with the requirements for
electronic communication unless it
knows that the disclosures will be
received in paper form. Proposed
comment 34(a)–1 contains this
guidance.
34(b) Electronic Communication
between Creditor and Consumer
Section 226.34(b) would permit
creditors to provide disclosures using
electronic communication, if the
creditor complies with provisions in
new § 226.34(d), discussed below.
1. Presenting Disclosures in a Clear and
Conspicuous Format
The Board does not intend to
discourage or encourage specific types
of technologies. Regardless of the
technology, however, disclosures
provided electronically must be
presented in a clear and conspicuous
format as is the case for all written
disclosures under the act and
regulation. See §§ 226.5(a)(1),
226.17(a)(1), and 226.31(b).
When consumers consent to receive
disclosures electronically and they
confirm that they have the equipment to
do so, creditors generally would have no
further duty to determine that
consumers are able to receive the
disclosures. Creditors do have the
responsibility of ensuring the proper
equipment is in place in instances
where the creditor controls the
equipment. Proposed comment 34(b)–1
contains this guidance.
2. Providing Disclosures in a Form the
Consumer May Keep
As with other written disclosures,
information provided by electronic
communication must be in a form the
consumer can retain. Under the 1998
proposals and interim rule, a creditor

49727

would satisfy this requirement by
providing information that can be
printed or downloaded. The modified
proposal adopts the same approach but
also provides that the information must
be sent to a specified location to ensure
that consumers have an adequate
opportunity to retain the information.
Consumers communicate
electronically with creditors through a
variety of means and from various
locations. Depending on the location (at
home, at work, in a public place such
as a library), a consumer may not have
the ability at a given time to preserve
TILA disclosures presented on-screen.
Therefore, when a creditor provides
disclosures by electronic
communication, to satisfy the retention
requirements, the creditor must send the
disclosures to a consumer’s e-mail
address or other location where
information may be retrieved at a later
date. Proposed comment 34(b)–2
contains this guidance; see also the
discussion under § 226.34(e), below. In
instances where a creditor controls an
electronic terminal used to provide
electronic disclosures, a creditor may
provide equipment for the consumer to
print a paper copy in lieu of sending the
information to the consumer’s e-mail
address or posting the information at
another location such as the creditor’s
website. See proposed comment 34(b)–
1.
3. Timing
Creditors must ensure that electronic
disclosures comply with all relevant
timing requirements of the regulation.
TILA and Regulation Z require that
disclosures be given at different times,
depending on the credit product or the
stage of the credit process at which
consumers are receiving cost and other
information. For example, generic
disclosures, including educational
brochures, about home-equity lines of
credit and adjustable rate mortgage
loans must be given at application.
Disclosures, oftentimes containing
estimated costs, for home-purchase
loans must be given three days after
application. Disclosures for loans
covered by the Home Ownership and
Equity Protection Act, 15 U.S.C. 1601 et
seq., must be given three days before
consummation. Other loan disclosures
have to be given anytime prior to
becoming obligated for an extension of
credit. These timing rules ensure that
consumers have an opportunity to read
important information about costs and
other terms at different stages of the
credit process—when shopping, at or
shortly after applying for credit, or
before becoming obligated under a plan
or consummating a transaction.

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To illustrate the timing requirements
for electronic communication for an
open-end plan, assume that a consumer
is interested in opening a credit card
account with an on-line retailer and
uses a personal computer at home to
access the retailer’s website on the
Internet. The creditor provides
disclosures to the consumer about the
use of electronic communication (the
§ 226.34(d) disclosures discussed below)
and the consumer responds
affirmatively. If the creditor’s
procedures permit the consumer to open
the account and make a purchase
immediately thereafter, initial
disclosures required under § 226.6
would have to be provided. Thus, the
disclosures must automatically appear
on the screen or the consumer must be
required to access the information
before becoming obligated on the plan.
The timing requirements for providing
initial disclosures would not be met if,
in this example, the retailer permitted
the consumer simultaneously to open
the credit card account and make a
purchase and sent initial disclosures to
an e-mail address thereafter. Proposed
comment 34(b)–3 contains this
guidance.
On the other hand, if the retailer
delays processing the consumer’s
request to open a credit card account
until the required disclosures have been
delivered by e-mail, disclosures would
not have to also appear on the screen;
delivery to the consumer’s e-mail
address would be sufficient. In either
case, the consumer must receive the
disclosures before the first transaction.
Similar rules would apply for the
timing requirements for electronic
communication for a closed-end
transaction. For an installment loan, if
the creditor’s procedures permit the
consumer to consummate the loan online, disclosures required under
§ 226.18 must be provided before the
consumer becomes obligated. For
example, before consummation, the
disclosures must automatically appear
on the screen or the consumer must be
required to access the disclosures online before continuing. The timing
requirements would not be met if the
creditor permitted the consumer to
consummate the loan on-line and later
sent disclosures to an e-mail address.
34(c) In-Person Exception
The proposal contains some
exceptions to the general rule allowing
information required by Regulation Z to
be provided by electronic
communication; where the exceptions
apply, paper disclosures would be
required. The exceptions, contained in
§ 226.34(c), seek to address concerns

about potential abuses where consumers
are transacting business in person but
are offered disclosures in electronic
form. In such transactions, there is a
general expectation that consumers
would be given paper copies of
disclosures along with paper copies of
other documents evidencing the
transaction.
Under § 226.34(c), if a consumer
becomes obligated for credit in person,
the creditor must provide disclosures in
paper form. (See § 226.6 for disclosures
regarding open-end plans and § 226.18
for closed-end transactions.) The rule
would ensure that consumers have the
opportunity to consider the costs and
terms of the transaction under the
timing rules for providing disclosures
established by TILA even if the
disclosures were provided electronically
at an earlier date. Proposed comment
34(c)–1 contains this guidance. The rule
also addresses concerns by consumer
advocates that providing disclosures by
electronic communication is
inappropriate when consumers conduct
business in person and other aspects of
the transaction are paper-based. The
Board believes the burden associated
with providing paper-based disclosures
for in-person transactions is minimal,
since other documents will be provided
in paper form at that time.
In some instances, creditors may
deliver disclosures by electronic
communication even if the consumer
becomes obligated in person. Under the
proposal, if a consumer uses electronic
communication to initiate a credit
transaction not secured by a dwelling
and requests electronic disclosures as
provided in paragraph (d), the creditor
could provide disclosures
electronically. The creditor would have
complied with the timing rules under
TILA (before the first transaction for
open-end plans, before consummation
for closed-end transactions) and—
assuming the disclosures remain
accurate—would not be required to
provide disclosures in paper form if the
consumer later becomes obligated in
person. Proposed comment 34(c)–2
contains this guidance. The Board
believes this approach fosters TILA’s
purpose to promote the informed use of
credit. Consumers receiving disclosures
by electronic communication could
benefit by having additional time to
review the costs and terms of the
transaction rather than receiving them
shortly before becoming obligated for
the credit, as is often the case for inperson transactions.
For credit secured by a dwelling,
however, the proposal requires paper
disclosures if the consumer becomes
obligated in person. This is the case

even though the creditor previously
provided electronic disclosures that
remain accurate at the time the
consumer becomes obligated. The Board
believes that most home-secured loans
are consummated in person due to legal
requirements such as the need to obtain
authenticated signatures, and that most
institutions would likely provide paper
disclosures for in-person transactions in
any event. Moreover, special protection
is appropriate generally where a
consumer’s home is at risk for any
extension of credit and specifically
where predatory lending practices may
occur and the consequences could be
the loss of a consumer’s home.
Rescission Notices
TILA and Regulation Z provide that in
certain transactions secured by a
consumer’s principal dwelling, the
consumer has three business days to
rescind the transaction after becoming
obligated on the debt (§§ 226.15 and
226.23). Consumers with an ownership
interest in the dwelling used as security
must receive: (1) Cost disclosures about
the transaction, and (2) two copies of a
notice that explains consumers’
rescission rights and how to effect
rescission, including a form the
consumer may use to notify the creditor
if the consumer decides to rescind the
transaction.
In the March 1998 proposed rule, the
Board did not explicitly address the
electronic delivery of rescission notices.
Some commenters asked the Board to
clarify whether creditors could provide
rescission notices by electronic means,
and if so, whether two copies must be
sent. Other commenters questioned
whether electronic rescission notices
should be permitted in any case. One
commenter noted that because the
potential significant impact of the
rescission remedy, creditors would
likely continue to deliver paper copies
of the rescission notice even if the
notices could be delivered
electronically.
Under the proposal, creditors must
provide notices required under
§§ 226.15 and 226.23 in paper form if
the consumer either becomes obligated
under the plan or consummates the
transaction in person. This approach is
consistent with other proposed
requirements to provide paper-based
disclosures for dwelling-secured
transactions, and recognizes the
significance to both creditors and
consumers of ensuring delivery of the
notice explaining rescission rights and
the accompanying form for the
consumer’s use. See § 226.34(f)(3) for
proposed rules permitting consumers to
rescind by electronic communication if

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
the creditor designates an electronic
address for that purpose.
34(d) Disclosure Notice
Section 226.34(d) would identify the
specific steps required before a creditor
could use electronic communication to
satisfy the regulation’s disclosure
requirements. Proposed Model Forms
M–1 and M–2 and Sample Forms M–4
and M–5 are published to aid
compliance with these requirements.
34(d)(2)(i) Notice by Creditor
Section 226.34(d)(2)(i) outlines the
information that creditors must provide
before electronic disclosures can be
given. The creditor must: (1) Describe
the information to be provided
electronically and specify whether the
information is also available in paper
form or whether the transaction or
account is offered only with electronic
disclosures; (2) identify the address or
location where the information will be
provided electronically, and if it will be
available at a location other than the
consumer’s electronic address, specify
for how long and where it can be
obtained once that period ends; (3)
specify any technical requirements for
receiving and retaining information sent
electronically, and provide a means for
the consumer to confirm the availability
of equipment meeting those
requirements; and (4) provide a toll-free
telephone number and, at the creditor’s
option, an electronic or a postal address
for questions about receiving electronic
disclosures, or for updating consumers’
electronic addresses, and for seeking
assistance with technical or other
difficulties (see proposed comments to
34(d)(2)(i)). The Board requests
comment on whether other information
should be disclosed regarding the use of
electronic communication and on any
format changes that might improve the
usefulness of the notice for consumers.
The Board also solicits comment on
the benefits of requiring an annual
notice in paper form to consumers who
receive disclosures by electronic
communication. The notice would
contain general information about
receiving electronic disclosures
including, for example, a reminder of
the toll-free telephone number where
consumers may contact the creditor if
they have questions regarding their
electronic disclosures. Comment is also
requested on whether such a notice may
be for feasible for certain types of credit
(such as open-end) than others.
Under the proposal, the
§ 226.34(d)(2)(i) disclosures must be
provided, as applicable, before the
creditor uses electronic communication
to deliver any information required by

the regulation. The approach of
requiring a standardized disclosure
statement addresses, in several ways,
the concern that consumers may be
steered into using electronic
communication without fully
understanding the implications. Under
this approach, the specific disclosures
that would be delivered electronically
must be identified, and consumers must
be informed whether there is also an
option to receive the information in
paper form. Consumers must provide an
e-mail address where one is required.
Technical requirements must also be
stated, and consumers must affirm that
their equipment meets the requirements,
and that they have the capability of
retaining electronic disclosures by
downloading or printing them (see
proposed comment 34(d)–1). Thus, the
§ 226.34(d)(2)(i) disclosures should
allow consumers to make informed
judgments about receiving electronic
disclosures.
Some commenters requested
clarification of whether a creditor may
use electronic communication to
provide some required disclosures
while using paper for others. The
proposed rule would permit creditors to
do so; the disclosure given under
§ 226.34(d)(2)(i) must specify which
TILA disclosures will be provided
electronically.
Commenters requested further
guidance on a creditor’s obligation
under the regulation if the consumer
chooses not to receive information by
electronic communication. A creditor
could offer a consumer the option of
receiving disclosures in paper form, but
it would not be required to do so. A
creditor could establish accounts or
loans for which disclosures are given
only by electronic communication.
Section 226.34(d)(2)(i)(A) would require
creditors to tell consumers whether or
not they have the option to receive
disclosures in paper form. Section
226.34(d)(2)(i)(D) would require
creditors to provide a toll-free number
that consumers could use to inform
creditors if they wish to discontinue
receiving electronic disclosures. In such
cases the creditor must inform the
consumer whether credit transaction is
also available with disclosures in paper
form. Proposed sample disclosure
statements in which the consumer has
an option to receive electronic or paper
disclosures (Form M–4) or electronic
disclosures only (Form M–5) are
contained in appendix M.
34(d)(2)(ii) Response by Consumer
Proposed § 226.34(d)(2)(ii) would
require creditors to provide a means for
the consumer to affirmatively indicate

49729

that disclosures may be provided
electronically. Examples include a
‘‘check box’’ on a computer screen or a
signature line (for requests made in
paper form). The requirement is
intended to ensure that consumers’
consent is established knowingly and
voluntarily, and that consent to receive
electronic disclosures is not inferred
from consumers’ use of the account or
acceptance of general account terms.
See proposed comment 34(d)(2)(ii)–1.
34(d)(3) Changes
Creditors would be required to notify
consumers about changes to the
information that is provided in the
notice required by § 226.34(d)(2)(i)—for
example, if upgrades to computer
software are required. Proposed
comment 34(d)(3)–1 contains this
guidance.
The notice must include the effective
date of the change and be provided
before that date. Proposed comment
34(d)(3)–2 would provide that the notice
must be sent a reasonable period of time
before the effective date of the change.
Although the number of days that
constitutes reasonable notice may vary,
depending on the type of change
involved, the comment would provide
creditors with a safe harbor: fifteen
days’ advance notice would be
considered a reasonable time in all
cases. The same time period is stated in
similar proposals under Regulations B,
E, and DD published in today’s Federal
Register. Comment is requested on
whether a safe harbor of 15 days is an
appropriate time period, and whether a
uniform period for changes involving
electronic communication is desirable.
An alternative approach would adopt
notice requirements that are consistent
with change-in-terms requirements
under the respective regulations. Under
this approach, for example, the safe
harbor would be 15 days under § 226.9
for Regulation Z, 21 days under § 205.8
for Regulation E, and 30 days under
§ 230.5 for Regulation DD. Proposed
comment 34(b)(3)–3 contains guidance
on delivery requirements for the notice
of change.
The notice of a change must also
include a toll-free telephone number or,
at the creditor’s option, an address for
questions about receiving electronic
disclosures. For example, a consumer
may call regarding problems related to
a change, such as an upgrade to
computer software that is not provided
by the creditor. Consumers may also use
the toll-free number if they wish to
discontinue receiving electronic
disclosures. In such cases, the creditor
must inform consumers whether the
credit transaction is also available with

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Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

disclosures in paper form. (See
proposed comments 34(d)(3)–4 through
–6.)
If the change involves providing
additional disclosures by electronic
communication, creditors generally
would be required to provide the notice
in § 226.34(d)(2)(i) and obtain the
consumer’s consent. That notice would
not be required if the creditor
previously obtained the consumer’s
consent to the additional disclosures in
its initial notice by disclosing the
possibility and specifying which
disclosures might be provided
electronically in the future. Comment is
specifically requested on this approach.
A list of additional disclosures may be
necessary to ensure that consumers’
consent is informed and knowing
(provided it does not cause confusion).
34(d)(4) Exceptions
Section 226.5a requires creditors to
provide certain disclosures on or with a
solicitation or an application to open a
credit card account. When solicitations
or applications appear electronically,
the disclosures required by § 226.5a
should appear on the screen before the
solicitation or application appears.
Proposed comment 5a(a)(2)–7(ii)
contains this guidance. Since a
solicitation or an application is more
analogous to an advertisement than to a
transaction-specific disclosure,
however, the notices to be provided by
the creditor regarding the use of
electronic communication under
§ 226.34(d)(2)(i) would not be required.
Proposed § 226.34(d)(4) exempts a
solicitation or an application to open a
credit or charge card account from
§ 226.34(d)(1)–(d)(3).
34(e) Address or Location to Receive
Electronic Communication
Proposed § 226.34(e) identifies
addresses and locations where creditors
using electronic communication may
send information to the consumer.
Creditors may send information to a
consumer’s electronic address, which is
defined in proposed comment 34(e)(1)–
1 as an e-mail address that the consumer
also may use for receiving
communications from parties other than
the creditor. For periodic statements, for
example, a creditor’s responsibility to
provide disclosures by electronic
communication will be satisfied when
the information is sent to the
consumer’s electronic address in
accordance with the applicable
proposed rules concerning the delivery
of disclosures by electronic
communication.
Guidance accompanying the March
1998 proposed rule provided that a

creditor would not meet delivery
requirements by simply posting
information to an Internet site such as
a creditor’s ‘‘home page’’ without
appropriate notice on how consumers
can access the information. Industry
commenters wanted to retain the
flexibility of posting disclosures on an
Internet website. They did not object to
providing a separate notice alerting
consumers about the disclosures’
availability but requested more
guidance on the issue. Consumer
advocates and others expressed concern
that the mere posting of information
inappropriately places the responsibility
to obtain disclosures on consumers, and
undermines the purpose of the delivery
requirements of the regulation.
The Board recognizes that currently,
because of security and privacy
concerns associated with data
transmissions, a number of creditors
may choose to provide disclosures at
their websites, where the consumer may
retrieve them under secure conditions.
Under § 226.34(e), a creditor may make
disclosures available to a consumer at a
location other than the consumer’s
electronic address. The institution must
notify the consumer when the
information becomes available and
identify the account involved. The
notice must be sent to the electronic
mail address designated by the
consumer; the creditor may, at its
option, permit the consumer to
designate a postal address. A proposed
model form (Model Form M–3) is
published below; see also proposed
comment 34(e)(2)–1.
The Board believes it would be
inconsistent with the TILA to require a
consumer to initiate a search—for
example, to search the website of each
card issuer with whom a consumer has
a credit card account—to determine
whether a disclosure has been provided.
The proposed approach ensures that a
consumer would not be required to
check a creditor’s website repeatedly,
for example, to learn whether the
creditor posted a change in a term that
affects the consumer’s credit card
account.
The requirements of the regulation
would be met only if the required
disclosure is posted on the website and
the consumer is notified of its
availability in a timely fashion. For
example, creditors offering open-end
plans must provide a change-in-terms
notice to consumers at least 15 days in
advance of the change. (12 CFR
226.9(c).) For a change-in-terms notice
posted on the Internet, a creditor must
both post the notice and notify
consumers of its availability at least 15
days in advance of the change.

Commenters sought guidance on how
long disclosures posted at a particular
location must be available to consumers.
There is a variety of circumstances
when a consumer may not be able
immediately to access the information
due to illness, travel, or computer
malfunction, for example. Under
§ 226.34(e)(2), creditors must post
information that is sent to a location
other than the consumer’s electronic
mail address for 90 days. Proposed
comment 34(e)(2)–3 contains this
guidance.
Under the modified proposal,
creditors that post information at a
location other than the consumer’s
electronic mail address are required—
after the 90-day period—to make
disclosures available to consumers upon
request for a period of not less than two
years from the date disclosures are
required to be made, consistent with the
record retention requirements under
§ 226.25. The Board requests comments
on this approach, including suggestions
for alternative means for providing
consumers continuing access to
disclosures.
As discussed above in connection
with proposed § 226.34(b), the
provisions of proposed § 226.34(e) are
based in part upon the Regulation Z
requirement that a creditor provide
disclosures in a form that the consumer
can retain. Certain disclosures, however,
are not subject to the retainability
requirement. In particular, footnote 8 to
§ 226.5(a) excepts the disclosures under
§§ 226.5a, 226.5b(d), 226.9(a)(2),
226.9(e), and 226.10(b) from this
requirement. Proposed comment
§ 226.34(e)(2)–4 clarifies that the
existing exception applies to electronic
disclosures and that the requirements of
§ 226.34(e) would not apply to
disclosures referenced in footnote 8,
except § 226.5b(d).
The Board believes that the
disclosures required to be given along
with an application for a home equity
line of credit under § 226.5b(d) should
not be excepted from the requirements
of proposed § 226.34(e). Although the
§ 226.5b(d) disclosures are not required,
under footnote 8, to be provided in
retainable form in the context of paper,
as a practical matter consumers usually
have the opportunity to keep a copy of
these disclosures by some means;
indeed, the first disclosure listed in
§ 226.5b(d) is ‘‘a statement that the
consumer should make or otherwise
retain a copy of the disclosures.’’ In
addition, the § 226.5b(d) disclosures
contain important information that may
not be duplicated by disclosures
provided later to the consumer (such as
the § 226.6 disclosures); in contrast, the

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
disclosures under § 226.5a are mostly
repeated in the § 226.6 disclosures.
34(f) Consumer Use of Electronic
Communication
Proposed § 226.34(f) would clarify
consumers’ ability to provide certain
information to creditors by electronic
communication. For open-end accounts,
Regulation Z provides that a consumer
must submit a written request for the
refund of credit balances, that a
cardholder may inform a card issuer
about the loss or theft of a credit card
by notifying the card issuer orally or in
writing, and that a consumer with a
billing error must provide a written
notice to the creditor to initiate the
billing-error resolution process. Under
the revised proposal, consumers
generally would have the option to use
electronic communication for these
written notices if the consumer has
chosen to receive information by
electronic communication. Because the
consumer’s electronic communication
serves as written notice, the creditor
could not also require a paper notice. A
creditor could, however, specify a
particular electronic address for
receiving the notices.
The issue of consumers’ ability to
provide certain information to creditors
by electronic communication was not
raised in the March 1998 proposed rule.
The Board, however, stated in the
Regulation E interim rule that financial
institutions could require paper
confirmation of electronic notices where
the regulation allows written
confirmation. This approach was
consistent with the Regulation E 1996
proposed rule, where the Board stated
that (as in the case of an oral
communication) if the consumer sends
an electronic communication to the
financial institution, the institution
could require paper confirmation from
the consumer (particularly since the
consumer was entitled to a paper copy
of a disclosure upon request under the
Regulation E 1996 proposed rule).
Views were mixed on whether
institutions should be permitted to
require paper confirmations of
electronic notices. Many industry
commenters requested that the Board
allow institutions to request paper
confirmations; some stated that paper
confirmations protect both the
consumer and the institution. Consumer
advocates and other commenters
believed it would be unfair to require
paper confirmation of an electronic
communication from consumers who
receive electronic communication from
an institution.
Based upon the comments received
and further analysis, and subject to

certain limitations discussed below, the
Board is proposing that consumers be
permitted to use electronic
communications to comply with the
regulation.
34(f)(1) Open-end Credit
For open-end transactions, proposed
§ 226.34(f)(1) permits the consumer to
use electronic communications if a
creditor uses electronic communication
to provide periodic statements which
establishes a continuing electronic
relationship between the creditor and
consumer. If, however, a creditor limits
its use of electronic communication to
the delivery initial disclosures (that is,
if all subsequent disclosures regarding
the credit transaction are provided in
paper), creditors would not be required
to accept an electronic notice, such as
a request for refund of credit balances or
notice of lost or stolen credit card or of
a billing error, from consumers.
34(f)(2) Closed-end Credit
For closed-end transactions, a
consumer is required to submit a
written request in one instance—to
request the refund of credit balances. In
contrast to open-end transactions, the
disclosure requirements imposed on the
creditor for closed-end transactions
generally end at consummation with the
exception of variable-rate transactions.
Therefore, proposed § 226.34(f)(2)
permits a consumer to use electronic
communication to request the refund of
credit balances only if the creditor has
designated an electronic address for that
purpose.
34(f)(3) Rescission
Similar to allowing a consumer to use
electronic communication to request the
refund of credit balances in a closed-end
transaction, proposed § 226.34(f)(3)
allows a consumer to rescind by using
electronic communication if the creditor
has designated an electronic address for
that purpose. (See, also, the discussion
in § 226.34(c) regarding the use of
electronic communication to provide
rescission notices.)
34(f)(4) Creditor’s Designation of
Address
Section 226.34(f)(4) would provide
that a creditor may designate the
electronic address that must be used by
a consumer for sending electronic
communication as permitted by
§ 226.34(f)(1) through (3).
34(g) Signatures and Similar
Authentication
There are three signature
requirements under Regulation Z. Under
§ 226.4(d) consumers may elect to

49731

accept credit insurance or debt
cancellation coverage by signing or
initialing an affirmative written request
after receiving disclosures about the
insurance. Under §§ 226.15 and 226.23
(and the corresponding model forms
and official staff commentary)
consumers may cancel certain homesecured loans or waive this right by
providing a written signed notice to the
creditor. Under § 226.31(c) (and the
official staff commentary) telephone
disclosures may be provided if the
consumer initiates a change and at
consummation new disclosures are
provided and the consumer and creditor
sign a statement indicating that the
telephone disclosures were provided
three days before consummation.
Proposed § 226.34(g) would allow
consumers and creditors to similarly
authenticate signatures where required
by the regulation. A similar amendment
was made to Regulation E in the 1996
review of the regulation.
The Board indicated in the May 1996
Regulation E proposal that any
authentication method should provide
the same assurance as a signature in a
paper-based system. Since the
publication of the amended Regulation
E and its accompanying commentary,
the Board has been asked to give further
guidance on this issue. In the
supplementary information to the
March 1998 proposed rule, the Board
expressed interest in learning about
other ways in which authentication in
an electronic environment might occur
in lieu of a consumer’s signature.
Some commenters provided
alternatives for verifying a consumer’s
identity, including alphanumeric codes
(combinations of letters and numbers) or
combinations of unique identifiers (such
as account numbers combined with a
number representing algorithms of the
account numbers). In the supplementary
information to the March 1998 proposed
rule, the Board cited security codes and
digital signatures as examples of
authentication devices that might meet
the requirements of authentication and
signatures. Many commenters stated
their concern that the Board approved
only these or similar methods. These
commenters urged the Board to take a
flexible approach to this requirement.
They suggested that the Board’s implied
or explicit endorsement of any
particular method could hinder the
development of new technologies.
Further, these commenters requested
that the Board take a ‘‘wait and see’’
approach to this issue, to allow the
industry to develop alternatives that
will result in more security for
consumers.

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To avoid unduly influencing the
development of electronic
authentication methods and to
encourage innovation and flexibility,
the Board will limit its guidance to the
general principle that a home-banking
or other electronic communication
system must use an authentication
device that provides the same assurance
as a signature in a paper-based system.
Appendix M to Part 226—Electronic
Communication Model Forms and
Clauses
The Board solicits comment on three
proposed model forms and two sample
forms for use by creditors to aid
compliance with the disclosure
requirements of §§ 226.34(d) and (e).
Appendix M–1 and Appendix M–2
would implement § 226.34(d), regarding
the notices that creditors must give prior
to using electronic communication to
provide required disclosures. Appendix
M–3 would implement § 226.34(e),
regarding notices to consumers about
the availability of electronic disclosures
at locations such as the creditor’s
website. Use of any modified version of
these forms would be in compliance as
long as the creditor does not delete
information required by the regulation
or rearrange the format in a way that
affects the substance, clarity, or
meaningful sequence of the disclosure.
Sample Form M–4 illustrates the
disclosures under § 226.34(d) for a
credit account. The sample assumes that
the creditor also offers paper disclosures
for consumers who choose not to
receive electronic disclosures. Sample
Form M–5 assumes that consumers
must accept electronic disclosures if
they want to open the account or
consummate the transaction.
Additional Issue Raised by Electronic
Communication
Preemption
A few commenters suggested that any
final rule issued by the Board permitting
electronic disclosures should explicitly
preempt any state law requiring paper
disclosures. Under § 226.28 of the
regulation, state laws are preempted if
they are inconsistent with the act and
regulation and only to the extent of the
inconsistency. The proposed rule would
provide creditors with the option of
giving required disclosures by electronic
communication as an alternative to
paper. There is no apparent
inconsistency with the act and
regulation if state laws require paper
disclosures. The Board will, however,
review preemption issues that are
brought to the Board’s attention.
Appendix A outlines the Board’s

procedures for determining whether a
specific law is preempted, which will
guide the Board in any determination
requested by a state, creditor, or other
interested party following publication of
a final rule regarding electronic
communication.
IV. Form of Comment Letters
Comment letters should refer to
Docket No. R–1043, and, when possible,
should use a standard typeface with a
type size of 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 of
comments for review. Also, if
accompanied by an original document
in paper form, comments may be
submitted on 31⁄2 inch computer
diskettes in any IBM-compatible DOS-or
Windows-based format.
V. Initial Regulatory Flexibility
Analysis
In accordance with section 3(a) of the
Regulatory Flexibility Act, the Board
has reviewed the proposed amendments
to Regulation Z. Although the proposal
would add disclosure requirements with
respect to electronic communication,
overall, the proposed amendments are
not expected to have any significant
impact on small entities. A creditor’s
use of electronic communication to
provide disclosures required by the
regulation is optional. The proposed
rule would give creditors flexibility in
providing disclosures. A final regulatory
flexibility analysis will be conducted
after consideration of comments
received during the public comment
period.
VI. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3506;
5 CFR 1320 Appendix A.1), the Board
reviewed the proposed rule under the
authority delegated to the Board by the
Office of Management and Budget
(OMB). The Federal Reserve may not
conduct or sponsor, and an organization
is not required to respond to, this
information collection unless it displays
a currently valid OMB number. The
OMB control number is 7100–0199.
The collection of information
requirements that are relevant to this
proposed rulemaking are in 12 CFR Part
226 and in Appendices F, G, H, J, K, and
L. This information is mandatory (15
U.S.C. 1604(a)) to evidence compliance
with the requirements of Regulation Z
and the Truth in Lending Act (TILA).
The revised requirements would be
used to ensure adequate disclosure of
basic terms, costs, and rights relating to

credit transactions, at or before the time
consumers enter into a consumer credit
transaction and when the availability of
consumer credit on particular terms is
advertised, for consumers receiving
certain disclosures by electronic
communication. The respondents/
recordkeepers are for-profit creditors,
including small businesses. Creditors
are also required to retain records for 24
months. This regulation applies to all
types of creditors, not just state member
banks; however, under Paperwork
Reduction Act regulations, the Federal
Reserve accounts for the burden of the
paperwork associated with the
regulation only for state member banks.
Other agencies account for the
paperwork burden on their respective
constituencies under this regulation.
The proposed revisions would allow
creditors the option of using electronic
communication (for example, via
personal computer and modem) to
provide disclosures required by the
regulation. Although the proposal
would add disclosure requirements with
respect to electronic communication,
the optional use of electronic
communication would likely reduce the
paperwork burden of creditors. With
respect to state member banks, it is
estimated that there are 988
respondents/recordkeepers and an
average frequency of 134,658,472
responses per respondent each year.
Therefore the current amount of annual
burden is estimated to be 1,873,223
hours. There is estimated to be no
additional annual cost burden and no
capital or start-up cost.
Because the records would be
maintained at state member banks and
the notices are not provided to the
Federal Reserve, no issue of
confidentiality under the Freedom of
Information Act arises; however, any
information obtained by the Federal
Reserve may be protected from
disclosure under exemptions (b)(4), (6),
and (8) of the Freedom of Information
Act (5 U.S.C. 522 (b)(4), (6) and (8)). The
disclosures and information about error
allegations are confidential between
creditors and the customer.
The Federal Reserve requests
comments from creditors, especially
state member banks, that will help to
estimate the number and burden of the
various disclosures that would be made
in the first year this proposed regulation
would be effective. Comments are
invited on: (a) the cost of compliance;
(b) ways to enhance the quality, utility,
and clarity of the information to be
disclosed; and (c) ways to minimize the
burden of disclosure on respondents,
including through the use of automated
disclosure techniques or other forms of

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
information technology. Comments on
the collection of information should be
sent to the Office of Management and
Budget, Paperwork Reduction Project
(7100–0199), Washington, DC 20503,
with copies of such comments sent to
Mary M. West, Federal Reserve Board
Clearance Officer, Division of Research
and Statistics, Mail Stop 97, Board of
Governors of the Federal Reserve
System, Washington, DC 20551.
List of Subjects in 12 CFR Part 226
Advertising, Federal Reserve System,
Mortgages, Reporting and recordkeeping
requirements, Truth in lending.
Text of Proposed Revisions
Certain conventions have been used
to highlight proposed changes to
Regulation Z. New language is shown
inside bold-faced arrows, deletions
inside bold-faced brackets.
For the reasons set forth in the
preamble, the Board proposes to amend
Regulation Z, 12 CFR part 226, as set
forth below:
PART 226—TRUTH IN LENDING
(REGULATION Z)
1. The authority citation for part 226
would continue to read as follows:
Authority: 12 U.S.C. 3806; 15 U.S.C. 1604
and 1637(c)(5).

Subpart B—Open-End Credit
2. Section 226.5a is amended by
revising paragraph (b)(1)(ii) and adding
a new paragraph (b)(1)(iii) to read as
follows:
§ 226.5a Credit and charge card
applications and solicitations.

*
*
*
*
(b) Required disclosures. * * *
(1) Annual percentage rate. * * *
(ii) flUnless paragraph (b)(1)(iii) of
this section applies,fi when variable
rate disclosures are provided under
paragraph (c) of this section, an annual
percentage rate disclosure is accurate if
the rate was in effect within 60 days
before mailing the disclosures. When
variable rate disclosures are provided
under paragraph (e) of this section, an
annual percentage rate disclosure is
accurate if the rate was in effect within
30 days before printing the disclosures.
fl (iii) When variable rate disclosures
are provided by electronic
communication, an annual percentage
rate disclosure is accurate if the rate is
one that was in effect within the
previous 30-day period before the
disclosures are sent or posted.fi
*
*
*
*
*
3. Section 226.16 is amended by
revising paragraph (c) to read as follows:

§ 226.16

Advertising.

*
*
*
*
(c) Catalogs, øand¿ multiple-page fl,
and electronicfi advertisements. (1) If a
catalog or other multiple-page
advertisement fl, or an advertisement
using electronic communicationfi gives
information in a table or schedule in
sufficient detail to permit determination
of the disclosures required by paragraph
(b) of this section, it shall be considered
a single advertisement if:
(i) The table or schedule is clearly and
conspicuously set forth; and
(ii) Any statement of terms set forth in
§ 226.6 appearing anywhere else in the
catalog or advertisement clearly refers to
øthat page on which¿ flthe page or
location wherefi the table or schedule
begins.
(2) A catalog, øor¿ multiple-page fl,
or electronicfi advertisement complies
with this paragraph if the table or
schedule of terms includes all
appropriate disclosures for a
representative scale of amounts up to
the level of the more commonly sold
higher-priced property or services
offered.
*
*
*
*
*
Subpart C—Closed-End Credit
4. Section 226.17 is amended by
revising the introductory text in
paragraph (g) to read as follows:

§ 226.17

General disclosure requirements.

*
*
*
*
(g) Mail or telephone orders—delay in
disclosures. If a creditor receives a
purchase order or a request for an
extension of credit by mail, telephone,
or any other written [or electronic]
communication fl, excluding electronic
communication as described in
§ 226.34(a),fi without face-to-face or
direct telephone solicitation, the
creditor may delay the disclosures until
the due date of the first payment, if the
following information for representative
amounts or ranges of credit is made
available in written form to the
consumer or to the public before the
actual purchase order or request:
*
*
*
*
*
5. Section 226.24 is amended by
revising paragraph (d) to read as
follows:
§ 226.24

Advertising.

*
*
*
*
(d) Catalogs, øand¿ multiple-page fl,
and electronicfi advertisements. (1) If a
catalog or other multiple page
advertisementfl, or an advertisement
using electronic communicationfi gives
information in a table or schedule in
sufficient detail to permit determination

49733

of the disclosures required by paragraph
(c)(2) of this section, it shall be
considered a single advertisement if:
(i) The table or schedule is clearly set
forth; and
(ii) Any statement of terms of the
credit terms in paragraph (c)(1) of this
section appearing anywhere else in the
catalog or advertisement clearly refers to
øthat page on which¿ flthe page or
location wherefi the table or schedule
begins.
(2) A catalog, øor¿ multiple-page fl,
or electronicfi advertisement complies
with paragraph (c)(2) of this section if
the table or schedule of terms includes
all appropriate disclosures for a
representative scale of amounts up to
the level of the more commonly sold
higher-priced property or services
offered.
Subpart D—Miscellaneous
6. Section 226.27 is revised to read as
follows:
§ 226.27 [Spanish] Language floffi
disclosures.

All disclosures required by this
regulation flmay be made in a language
other than English, provided that the
disclosures are made available in
English upon the consumer’s
request.fiøshall be made in the English
language, except in the Commonwealth
of Puerto Rico, where creditors may, at
their option, make disclosures in the
Spanish language. If Spanish
disclosures are made, English
disclosures shall be provided on the
consumer’s request, either in
substitution for or in addition to the
Spanish disclosures.¿ This requirement
for providing English disclosures on
request shall not apply to
advertisements subject to §§ 226.16 and
226.24 of this regulation.
7. Part 226 is amended by adding a
new Subpart F to read as follows:
flSubpart F—Electronic
Communications
§ 226.34 Requirements for electronic
communications.

(a) Definition. Electronic
communication means a message
transmitted electronically between a
creditor and a consumer in a format that
allows visual text to be displayed on
equipment such as a personal computer
monitor.
(b) Electronic communication between
creditor and consumer. Except as
provided in paragraph (c) of this
section, a creditor that complied with
paragraph (d) of this section may
provide by electronic communication
any information required by this

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Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

regulation to be in writing. The creditor
shall make the disclosures required by
this part clearly and conspicuously and
in a form that the consumer may keep.
(c) In-person exception. (1) General.
When a consumer becomes obligated on
an open-end plan or consummates a
closed-end transaction in person, the
disclosures required under § 226.6 or
§ 226.18, respectively, shall be provided
in paper form; the notice of right to
cancel shall also be provided in paper
form if, in connection with the plan or
transaction, a consumer has a right to
rescind under § 226.15 or § 226.23.
(2) Credit not secured by a dwelling.
For credit not secured by a dwelling,
paragraph (c)(1) of this section does not
apply if the consumer previously
requested the credit by electronic
communication and disclosures were
provided in compliance with paragraph
(d)(2)(i) and (d)(2)(ii) of this section at
or around that time.
(d) Disclosures. (1) General. Except as
provided under paragraph (d)(4) of this
section, the disclosure notice required
by paragraph (d)(2) of this section shall
be provided in a manner substantially
similar to the applicable model form set
forth in Appendix M of this part (Model
Forms M–1 and M–2).
(2) Notice by creditor. (i) A creditor
shall:
(A) Describe the information to be
provided electronically and specify
whether the information is also
available in paper form or whether the
credit is offered only with electronic
disclosures;
(B) Identify the address or location
where the information will be provided
electronically; and if it is made available
at a location other than the consumer’s
electronic address, how long the
information will be available, and how
it can be obtained once that period ends;
(C) Specify any technical
requirements for receiving and retaining
information sent electronically, and
provide a means for the consumer to
confirm the availability of equipment
meeting those requirements; and
(D) Provide a toll-free telephone
number and, at the creditor’s option, an
address for questions about receiving
electronic disclosures, for updating
consumers’ electronic addresses, and for
seeking technical or other assistance
related to electronic communication.
(ii) Response by consumer. A creditor
shall provide a means for the consumer
to accept or reject electronic disclosures.
(3) Changes. (i) A creditor shall notify
affected consumers of any change to the
information provided in the notice
required by paragraph (d)(2)(i) of this
section. The notice shall include the
effective date of the change and must be

provided before that date. The notice
shall also include a toll-free telephone
number, and, at the creditor’s option, an
address for questions about receiving
electronic disclosures.
(ii) In addition to the notice under
(d)(3)(i) of this section, if the change
involves providing additional
disclosures by electronic
communication, a creditor shall provide
the notice in paragraph (d)(2)(i) of this
section and obtain the consumer’s
consent. A notice is not required under
paragraph (d)(2)(i) if the creditor’s
initial notice states that additional
disclosures may be provided
electronically in the future and specifies
which disclosures could be provided.
(4) Exception. A solicitation or an
application to open an account
referenced in § 226.5a shall be exempt
from paragraphs (d)(1) through (d)(3) of
this section.
(e) Address or location to receive
electronic communication. A creditor
that uses electronic communication to
provide information required by this
regulation shall:
(1) Send the information to the
consumer’s electronic address; or
(2) Post the information for at least 90
days at a location such as a website, and
send a notice to the consumer when the
information becomes available.
Thereafter the information shall be
available upon request for a period of
not less than two years from the date
disclosures are required to be made. The
notice required by this paragraph (e)(2)
shall identify the account involved,
shall be sent to an electronic address
designated by the consumer (or to a
postal address, at the creditor’s option),
and shall be substantially similar to the
model form set forth in Appendix M of
this part (Model Form M–3).
(f) Consumer use of electronic
communication. (1) Open-end credit
plans. If a creditor uses electronic
communication to provide periodic
statements, the consumer also may use
electronic communication to:
(i) Request a refund under § 226.11(b);
(ii) Notify the creditor of the theft or
loss of a credit card under
§ 226.12(b)(3);
(iii) Assert a claim or defense under
§ 226.12(c); and
(iv) Notify the creditor of a billing
error under § 226.13(b).
(2) Closed-end credit. A consumer
may request a refund of any credit
balance under § 226.21(b) by electronic
communication if the creditor has
designated an electronic address for that
purpose.
(3) Rescission. A consumer may
exercise or waive a right to rescind
under § 226.15 or § 226.23 by electronic

communication only if the creditor has
designated an electronic address for that
purpose.
(4) Creditor’s designation of address.
A creditor may designate the electronic
address or location that must be used by
a consumer for sending electronic
communication under this paragraph.
(g) Signatures and similar
authentication. Where a writing is
required to be signed or initialed, for
purposes of an electronic
communication, it may be similarly
authenticated.fi
9. Part 226 is amended by adding a
new appendix M to read as follows:
flAppendix M to Part 226—Electronic
Communication Model Forms and
Clauses
M–1 Model Disclosures for Electronic
Communication (§ 226.34(d))
(Disclosures Available in Paper or
Electronically)
M–2 Model Disclosures for Electronic
Communication (§ 226.34(d))
(Disclosures Available Only
Electronically)
M–3 Model Notice for Delivery of
Information Posted at Certain Locations
(§ 226.34(e))
M–4 Sample Form for Electronic
Communication (§ 226.34(d))
(Disclosures Available in Paper or
Electronically)
M–5 Sample Form for Electronic
Communication (§ 226.34(d))
(Disclosures Available Only
Electronically)
M–1 MODEL DISCLOSURES FOR
ELECTRONIC COMMUNICATION
(§ 226.34(d)) (Disclosures Available in Paper
or Electronically)
You can choose to receive important
information required by the Truth in Lending
Act in paper or electronically.
Read this notice carefully and keep a copy
for your records.
• You can choose to receive the following
information in paper form or electronically:
(description of specific disclosures to be
provided electronically).
• How would you like to receive this
information
b I want paper disclosures.
b I want electronic disclosures.
• øWe may provide the following
additional disclosures electronically in the
future: (description of specific disclosures).¿
• øIf you choose electronic disclosures,
this information will be available at: (specify
location) for ll days. After that, the
information will be available upon request
(state how to obtain the information). When
the information is posted, we will send you
a message at the electronic mail address you
designate here: (consumer’s electronic mail
address).¿
øIf you choose electronic disclosures this
information will be sent to the electronic
mail address that you designate here:
(consumer’s electronic mail address).¿
• To receive this information you will need:
(list hardware and software requirements).

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
Do you have access to a computer that
satisfies these requirements?
b Yes
b No
• Do you have access to a printer, or the
ability to download information, in order to
keep copies for your records?
b Yes
b No
• To update your electronic address, if you
have questions about receiving disclosures,
or need technical or other assistance
concerning these disclosures, contact us at
(telephone number).
M–2 MODEL DISCLOSURES FOR
ELECTRONIC COMMUNICATION
(§ 226.34(d)) (Disclosures Available Only
Electronically)
You will receive important information
required by the Truth in Lending Act
electronically.
Read this notice carefully and keep a copy
for your records.
• The following information will be
provided electronically: (description of

specific disclosures to be provided
electronically).
• This credit transaction is not available
unless you accept electronic disclosures.
• øWe may provide the following
additional disclosures electronically in the
future (description of specific disclosures).¿
• øIf you choose electronic disclosures,
this information will be available at: (specify
location) for ll days. After that, the
information will be available upon request
(state how to obtain the information). When
the information is posted, we will send you
a message at the electronic mail address you
designate here: (consumer’s electronic mail
address).¿
øIf you choose electronic disclosures this
information will be sent to the electronic
mail address that you designate here:
(consumer’s electronic mail address).¿
• To receive this information you will
need: (list hardware and software
requirements).
Do you have access to a computer that
satisfies these requirements?

49735

b Yes
b No
• Do you have access to a printer, or the
ability to download information, in order to
keep copies for your records?
b Yes
b No
Do you want this credit transaction with
electronic disclosures?
b Yes
b No
• To update your electronic address, if you
have questions about receiving disclosures,
or need technical or other assistance
concerning these disclosures, contact us at
(telephone number).

M–3 MODEL NOTICE FOR DELIVERY OF
INFORMATION POSTED AT CERTAIN
LOCATIONS (§ 226.34(e))
Information about your (identify account)
is now available at [website address or other
location]. The information discusses
(describe the disclosure). It will be available
for ll days.
BILLING CODE 6210–01–P

49736

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

BILLING CODE 6210–01–C

49737

49738

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

10. In Supplement I to Part 226,
Section 226.5a—Credit and Charge Card
Applications and Solicitations, under
5a(a)(2) Form of Disclosures, a new
paragraph 7. is added to read as follows:
Supplement I to Part 226—Official Staff
Interpretations
*

Subpart B—Open-End Credit

Section 226.5a—Credit and Charge Card
Applications and Solicitations

5a(a) General rules.

5a(a)(2) Form of Disclosures.

fl7. Electronic applications or
solicitations. i. Format and content of
disclosures. The format and the content of
disclosures (other than the accuracy of
variable rates) for applications or
solicitations made available by electronic
communication must comply with:

A. Section 226.5a(c), if the application
or solicitation is sent to a consumer’s
electronic mail address.
B. Section 226.5a(e), if the application
or solicitation is made available at
another location such as an Internet
website.
ii. Timing. The disclosures required by
§ 226.5a must appear on the screen before the
solicitation or application appears
electronically.fi

*
*
*
*
11. In Supplement I to Part 226,
Section 226.5b—Requirements for Home
Equity Plans, under 5b(b) Time of
Disclosures, a new paragraph 7. is added
to read as follows:
*
*
*
*
*

16(c) Catalogs, βandα multiple-page fl, and
electronicfi advertisements

fl7. Applications available by electronic
communication. If an application is available
by electronic communication such as on a
creditor’s website, the disclosures and a
brochure must appear before an application
is provided.fi

*
*
*
*
12. In Supplement I to Part 226,
Section 226.16—Advertising, the
following amendments are made:
a. The heading 16(c) Catalogs and
multiple-page advertisements. is
revised; and
b. Under Paragraph 16(c)(1).,
paragraph 1. is revised and a new
paragraph 2. is added.
The addition and revisions read as
follows:
*
*
*
*
*
Section 226.16—Advertising

*
*
*
*
13. In Supplement I to Part 226,
Section 226.19—Certain Residential
Mortgage and Variable-Rate
Transactions, under 19(b) Certain
variable-rate transactions., paragraph 2.
is revised to read as follows:
*
*
*
*
*
Subpart C—Closed-End Credit

Section 226.19—Certain Residential
Mortgage and Variable-Rate Transactions

19(b) Certain variable-rate transactions.

5b(b) Time of Disclosures

Paragraph 16(c)(1).
1. General. Section 226.16(c)(1) permits
creditors to put credit information together in
one place in a catalog, øor¿ multiple pagefl,
or electronicfi advertisement. The rule
applies only if the catalog, øor¿ multiple
pagefl, or electronicfi advertisement
contains one or more of the triggering terms
from § 226.16(b).
fl2. Electronic communication. If an
advertisement using electronic
communication uses the table or schedule
permitted under § 226.16(c)(1), any statement
of terms set forth in § 226.6 appearing
anywhere else in the advertisement must
clearly direct the consumer to the page or
location where the table or schedule begins.
For example, a term triggering additional
disclosures may be accompanied by a link
that directly connects the consumer to the
additional information.fi

fl2. Timing. A creditor must give the
disclosures required under this section at the
time an application form is provided or
before the consumer pays a nonrefundable
fee, whichever is earlier.
i. Intermediary agent or broker. In cases
where a creditor receives a written
application through an intermediary agent or
broker, however, footnote 45b provides a
substitute timing rule requiring the creditor
to deliver the disclosures or place them in
the mail not later than three business days
after the creditor receives the consumer’s
written application. (See comment 19(b)–3
for guidance in determining whether or not
the transaction involves an intermediary
agent or broker.) This three-day rule also
applies where the creditor takes an
application over the telephone.
ii. Telephone request. In cases where the
consumer merely requests an application
over the telephone, the creditor must include
the early disclosures required under this
section with the application that is sent to
the consumer.
iii. Mail solicitations. In cases where the
creditor solicits applications through the
mail, the creditor must also send the
disclosures required under this section if an
application form is included with the
solicitation.
iv. Conversion. In cases where an open-end
credit account will convert to a closed-end

transaction subject to this section under a
written agreement with the consumer,
disclosures under this section may be given
at the time of conversion. (See the
commentary to § 226.20(a) for information on
the timing requirements for § 226.19(b)(2)
disclosures when a variable-rate feature is
later added to a transaction.)
v. Electronic applications. In cases where
the creditor makes applications available by
electronic communication such as on a
creditor’s website, the disclosures required
under this section must appear on-line before
an application is provided.fi

*
*
*
*
14. In Supplement I to Part 226,
Section 226.24—Advertising, the
following amendments are made:
a. Under 24(b) Advertisement of rate
of finance charge., a new paragraph 6.
is added; and
b. Under 24(d) Catalogs and multiplepage advertisements., the heading and
paragraph 2. are revised and a new
paragraph 4. is added.
The revisions and additions would
read as follows:
*
*
*
*
*
Section 226.24—Advertising

24(b) Advertisement of rate of finance
charge.

fl6. Electronic communication. A simple
annual rate or periodic rate that is applied to
an unpaid balance may be stated only if it is
provided in conjunction with an annual
percentage rate. In an advertisement using
electronic communication, both rates must
appear in the same location so that both rates
may be viewed simultaneously. This
requirement is not satisfied if the annual
percentage rate can be viewed only by use of
a link that connects the consumer to
information appearing at another location.fi

24(d) Catalogs, øand¿ multiple-pagefl,
and electronicfi advertisements.

2. General. Section 226.24(d) permits
creditors to put credit information together in
one place in a catalog, øor¿ multiple pagefl,
or electronicª advertisement. The rule
applies only if the catalog, øor¿ multiple
page∫, or electronicfi advertisement
contains one or more of the triggering terms
from § 226.24(c)(1). A list of different annual
percentage rates applicable to different
balances, for example, does not trigger
further disclosures under § 226.24(c)(2) and
so is not covered by § 226.24(d).

fl4. Electronic advertising. If an
advertisement using electronic
communication uses the table or schedule
permitted under § 226.24(d)(1), any statement
of terms set forth in § 226.24(c)(1) appearing
anywhere else in the advertisement must
clearly direct the consumer to the page or
location where the table or schedule begins.
For example, a term triggering additional
disclosures may be accompanied by a link

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
that directly connects the consumer to the
additional information (but see comment
24(b)–6).fi

*
*
*
*
15. In Supplement I to Part 226, a new
Subpart F—Electronic communication,
is added to read as follows:
*
*
*
*
*
flSubpart F—Electronic Communication
Section 226.34—Requirements for Electronic
Communication
34(a) Definition
1. Coverage. Information transmitted by
facsimile may be received in paper form or
electronically, although the party initiating
the transmission may not know at the time
the disclosures are sent which form will be
used. A creditor that provides disclosures by
facsimile should comply with the
requirements for electronic communication
unless the creditor knows that the
disclosures will be received in paper form.
34(b) Electronic Communication between
Creditor and Consumer
1. Disclosures provided on creditor’s
equipment. Creditors that control equipment
providing electronic disclosures to
consumers (for example, computer terminals
in a creditor’s lobby or kiosks located in
public places) must ensure that the
equipment satisfies the regulation’s
requirements to provide disclosures in a clear
and conspicuous format and in a form that
the consumer may keep. A creditor that
controls the equipment may provide a printer
for consumers’ use in lieu of sending the
information to the consumer’s electronic mail
address or posting the information at another
location such as the creditor’s website.
2. Retainability. Creditors must provide
electronic disclosures in a retainable format
(for example, they can be printed or
downloaded). Consumers may communicate
electronically with creditors through a
variety of means and from various locations.
Depending on the location (at home, at work,
in a public place such as a library), a
consumer may not have the ability at a given
time to preserve TILA disclosures presented
on-screen. To ensure that consumers have an
adequate opportunity to retain the
disclosures, the creditor also must send them
to the consumer’s designated electronic mail
address or to another location, for example,
on the creditor’s website, where the
information may be retrieved at a later date.
3. Timing and delivery. When a consumer
opens a credit card account and makes a
purchase with the card (or when a consumer
consummates a loan) on the Internet, for
example, in order to meet the timing and
delivery requirements, creditors must ensure
that disclosures applicable at that time
appear on the screen and are in a retainable
format. The delivery requirements would not
be met if disclosures do not either appear on
the screen or if the consumer is allowed to
open a credit card account and make a
purchase at that time before receiving the
disclosures. For example, a creditor can
provide a link to electronic disclosures
appearing on a separate page as long as
consumers cannot bypass the link and they

are required to access the disclosures before
making a purchase (or consummating a loan).
34(c) Exceptions
1. Redisclosure required. Section 226.34(c)
requires certain disclosures in paper form
prior to consummation, even if they have
been provided electronically at an earlier
date, and redisclosure would not otherwise
be required.
2. Initial disclosures in paper form. If a
consumer opens a credit account or
consummates a credit transaction in person
the creditor generally must provide initial
disclosures in paper form. For example, if a
consumer visits a creditor’s office to close a
loan, disclosures are required before
consummation and they must be provided in
paper form; directing the consumer to
disclosures posted on the creditor’s website
would not be sufficient. If, however, a
consumer applies for credit on the Internet,
a creditor may send disclosures
electronically at or around that time even
though the creditor’s procedures require the
consumer to visit an office at a later time to
complete the transaction (for example, to
close the loan).
34(d) Disclosure Notice
1. Consumer’s affirmative responses. Even
though a consumer accepts electronic
disclosures in accordance with
§ 226.34(d)(2)(ii), a creditor may deliver
disclosures by electronic communication
only if the consumer provides an electronic
address where one is required, and responds
affirmatively to questions about technical
requirements and the ability to print or
download information (see sample forms M–
4 and M–5 in appendix M to this part).
34(d)(2)(i) Notice by Creditor
1. Toll-free telephone number. The number
must be toll-free for nonlocal calls made from
an area code other than the one used in the
creditor’s dialing area. Alternatively, a
creditor may provide any telephone number
that allows a consumer to call for information
and reverse the telephone charges.
2. Creditor’s address. Creditors have the
option of providing either an electronic or
postal address for consumers’ use in addition
to the toll-free telephone number.
3. Discontinuing electronic disclosures.
Consumers may use the toll-free number (or
optional address) if they wish to discontinue
receiving electronic disclosures. In such
cases, the creditor must inform consumers
whether the credit transaction is also
available with disclosures in paper form.
34(d)(2)(ii) Response by consumer
1. Nature of consent. Consumers must
agree to receive disclosures by electronic
communication knowingly and voluntarily.
An agreement to receive electronic
disclosures is not implied from consumers’
use of an account or acceptance of general
account terms.
34(d)(3) Changes
1. Examples. Examples of changes include
a change in technical requirements, such as
upgrades to computer software affecting the
creditor’s disclosures provided on the
Internet.
2. Timing for notices. A notice of a change
must be sent a reasonable period of time

49739

before the effective date of the change. The
length of a reasonable notice period may
vary, depending on the type of change
involved; however, fifteen days is a
reasonable time for providing notice in all
cases.
3. Delivery of notices. A creditor meets the
delivery requirements if the notice of change
is sent to the address provided by the
consumer for receiving other disclosures. For
example, if the consumer provides an
electronic address to receive notices about
periodic statements posted at the creditor’s
website, the same electronic address could be
used for the change notice. The consumer’s
postal address must be used, however, if the
consumer consented to additional
disclosures by electronic communication
when receiving the initial notice under
§ 226.34(d)(2)(i), but provided a postal
address to receive periodic statements in
paper form.
4. Toll-free number. See comment
34(d)(2)(i)–1.
5. Creditor’s address. See comment
34(d)(2)(i)–2.
6. Consumer inquiries. Consumers may use
the toll-free number (or optional address) for
questions or assistance with problems related
to a change, such as an upgrade to computer
software, that is not provided by the creditor.
Consumers may also use the toll-free number
if they wish to discontinue receiving
electronic disclosures; in such cases, the
creditor must inform consumers whether the
credit transaction is also available with
disclosures in paper form.
34(e) Address or location to receive
electronic communication.
Paragraph 34(e)(1)
1. Electronic address. A consumer’s
electronic address is an electronic mail
address that may be used by the consumer for
receiving communications transmitted by
parties other than the creditor.
Paragraph 34(e)(2)
1. Identifying account involved. A creditor
is not required to identify an account by
reference to the account number. For
example, where the consumer does not have
multiple accounts, and no confusion would
result, the creditor may refer to ‘‘your credit
card account,’’ or when the consumer has
multiple accounts the creditor may use a
truncated account number.
2. Effective delivery. Delivery by posting to
a location other than the consumer’s
electronic mail address is effective only after
the creditor posts and notifies the consumer
when the information becomes available.
3. Availability. Information that is not sent
to a consumer’s electronic mail address must
be available for at least 90 days from the date
the information becomes available or from
the date the notice required by § 226.34(e)(2)
is sent to the consumer, whichever occurs
later.
4. Certain open-end disclosures. The
disclosures required under §§ 226.5a,
226.9(a)(2), 226.9(e), and 226.10(b) and
referenced in footnote 8 shall be exempt from
§ 226.34(d)(1).

49740

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

By order of the Board of Governors of the
Federal Reserve System, August 31, 1999.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 99–23138 Filed 9–13–99; 8:45 am]
BILLING CODE 6210–01–P

FEDERAL RESERVE SYSTEM
12 CFR Part 230
[Regulation DD; Docket No. R–1044]

Truth in Savings
Board of Governors of the
Federal Reserve System.
ACTION: Proposed rule.
AGENCY:

SUMMARY: The Board is requesting
comment on proposed revisions to
Regulation DD, which implements the
Truth in Savings Act (TISA). The Board
previously published a proposed rule
that permits depository institutions to
use electronic communication (for
example, communication via personal
computer and modem) to provide
disclosures required by the act and
regulation, if the consumer agrees to
such delivery. (A similar rule was also
proposed under various other consumer
financial services and fair lending
regulations administered by the Board.)
In response to comments received on
the proposals, the Board is publishing
for comment an alternative proposal on
the electronic delivery of disclosures,
together with proposed commentary
that would provide further guidance on
electronic communication issues.
DATES: Comments must be received by
October 29, 1999.
ADDRESSES: Comments, which should
refer to Docket No. R–1044, may be
mailed to Jennifer J. Johnson, Secretary,
Board of Governors of the Federal
Reserve System, 20th Street and
Constitution Avenue, N.W.,
Washington, DC 20551. Comments
addressed to Ms. Johnson may also be
delivered to the Board’s mail room
between 8:45 a.m. and 5:15 p.m.
weekdays, and to the security control
room at all other times. The mail room
and the security control room, both in
the Board’s Eccles Building, are
accessible from the courtyard entrance
on 20th Street between Constitution
Avenue and C Street, N.W. Comments
may be inspected in room MP–500
between 9:00 a.m. and 5:00 p.m.,
pursuant to § 261.12, except as provided
in § 261.14 of the Board’s Rules
Regarding the Availability of
Information, 12 CFR 261.12 and 261.14.
FOR FURTHER INFORMATION CONTACT:
Michael L. Hentrel, Staff Attorney, or

Jane E. Ahrens, Senior Counsel,
Division of Consumer and Community
Affairs, at (202) 452–2412 or (202) 452–
3667. Users of Telecommunications
Device for the Deaf (TDD) only, contact
Diane Jenkins at (202) 452–3544.
SUPPLEMENTARY INFORMATION:
I. Background
The Truth in Savings Act (TISA), 12
U.S.C. 4301 et seq., requires depository
institutions to disclose to consumers
yields, fees, and other terms concerning
deposit accounts to consumers at
account opening, upon request, when
changes in terms occur, and in periodic
statements. It also includes rules about
advertising for deposit accounts. The
Board’s Regulation DD (12 CFR part
230) implements the act. Credit unions
are governed by a substantially similar
regulation issued by the National Credit
Union Administration.
The TISA and Regulation DD require
a number of disclosures to be provided
in writing, presuming that institutions
provide paper documents. Under many
laws that call for information to be in
writing, information in electronic form
is considered to be ‘‘written.’’
Information produced, stored, or
communicated by computer is also
generally considered to be a writing,
where visual text is involved.
In May 1996, the Board revised
Regulation E (Electronic Fund
Transfers) following a comprehensive
review. During that process, the Board
determined that electronic
communication for delivery of
information required by federal laws
governing financial services could
effectively reduce compliance costs
without adversely affecting consumer
protections. Consequently, the Board
simultaneously issued a proposed rule
to permit financial institutions to use
electronic communication to deliver
disclosures that Regulation E requires to
be given in writing. (61 FR 19696, May
2, 1996.) The 1996 proposal required
that disclosures be provided in a form
the consumer may retain, a requirement
that institutions could satisfy by
providing information in a format that
may be printed or downloaded. The
proposed rule also allowed consumers
to request a paper copy of a disclosure
for up to one year after its original
delivery.
Following a review of the comments,
on March 25, 1998, the Board issued an
interim rule under Regulation E (the
‘‘interim rule’’), 63 FR 14528. The Board
also published proposals under
Regulations DD (Truth in Savings), 63
FR 14533, M (Consumer Leasing), 63 FR
14538, Z (Truth in Lending), 63 FR
14548, and B (Equal Credit

Opportunity), 63 FR 14552 (collectively,
the ‘‘March 1998 proposed rules’’). The
rules would apply to financial
institutions, creditors, lessors, and other
entities that are required to give
disclosures to consumers and others.
(For ease of reference, this background
section uses the terms ‘‘financial
institutions,’’ ‘‘institutions,’’ and
‘‘consumers.’’) The interim rule and the
March 1998 proposed rules were similar
to the May 1996 proposed rule;
however, they did not require financial
institutions to provide paper copies of
disclosures to a consumer upon request
if the consumer previously agreed to
receive disclosures electronically. The
Board believed that most institutions
would accommodate consumer requests
for paper copies when feasible or
redeliver disclosures electronically; and
the Board encouraged financial
institutions to do so.
The March 1998 proposed rules and
the interim rule permitted financial
institutions to provide disclosures
electronically if the consumer agreed,
with few other requirements. The rule
was intended to provide flexibility and
did not specify any particular method
for obtaining a consumer’s agreement.
Whether the parties had an agreement
would be determined by state law. The
proposals and the interim rule did not
preclude a financial institution and a
consumer from entering into an
agreement electronically, nor did they
prescribe a formal mechanism for doing
so.
The Board received approximately
200 written comments on the interim
rule and the March 1998 proposed rules.
The majority of comments were
submitted by financial institutions and
their trade associations. Industry
commenters generally supported the use
of electronic communication to deliver
information required by the TISA and
Regulation DD. Nevertheless, many
sought specific revisions and additional
guidance on how to comply with the
disclosure requirements in particular
transactions and circumstances.
Industry commenters were especially
concerned about the condition that a
consumer had to ‘‘agree’’ to receive
information by electronic
communication, because the rule did
not specify a method for establishing
that an ‘‘agreement’’ was reached. These
commenters believed that relying on
state law created uncertainty about what
constitutes an agreement and, therefore,
potential liability for noncompliance.
To avoid uncertainty over which state’s
laws apply, some commenters urged the
Board to adopt a federal minimum
standard for agreements or for informed
consent to receive disclosures by

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Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

FEDERAL RESERVE SYSTEM
12 CFR Part 230
[Regulation DD; Docket No. R–1044]

Truth in Savings
Board of Governors of the
Federal Reserve System.
ACTION: Proposed rule.
AGENCY:

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
electronic communication. These
commenters believed that such a
standard would avoid the compliance
burden associated with tailoring legally
binding ‘‘agreements’’ to the contract
laws of all jurisdictions where
electronic communications may be sent.
Consumer advocates generally
opposed the March 1998 interim rule
and proposed rules. Without additional
safeguards, they believed, consumers
may not be provided with adequate
information about electronic
communications before an ‘‘agreement’’
is reached. They also believed that
promises of lower costs could induce
consumers to agree to receive
disclosures electronically without a full
understanding of the implications. To
avoid such problems, they urged the
Board, for example, either to require
institutions to disclose to consumers
that their account with the institution
will not be adversely affected if they do
not agree to receive electronic
disclosures, or to permit institutions to
offer electronic disclosures only to
consumers who initiate contact with the
institution through electronic
communication. They also noted that
some consumers will likely consent to
electronic disclosures believing that
they have the technical capability to
retrieve information electronically, but
might later discover that they are unable
to do so. They questioned consumers’
willingness and ability to access and
retain disclosures posted on Internet
websites, and expressed their
apprehension that the goals of federally
mandated disclosure laws will be lost.
Consumer advocates and others were
particularly concerned about the use of
electronic disclosures in connection
with home-secured loans and certain
other transactions that consumers
typically consummate in person (citing
as examples automobile loans and
leases, short-term ‘‘payday’’ loans, or
home improvement financing contracts
resulting from door-to-door sales). They
asserted that there is little benefit to
eliminating paper disclosures in such
transactions and that allowing
electronic disclosures in those cases
could lead to abusive practices.
Accordingly, consumer advocates and
others believed that paper disclosures
should always accompany electronic
disclosures in mortgage loans and
certain other transactions, and that
consumers should have the right to
obtain paper copies of disclosures upon
request for all types of transactions
(deposit account, credit card, loan or
lease, and other transactions).
A final issue raised by consumer
advocates was the integrity of
disclosures sent electronically. They

stated that there may be instances when
the consumer and the institution
disagree on the terms or conditions of
an agreement and consumers may need
to offer electronic disclosures as proof of
the agreed-upon terms and to enforce
rights under consumer protection laws.
Thus, to assure that electronic
documents have not been altered and
that they accurately reflect the
document originally sent, consumer
advocates recommended that the Board
require that electronic disclosures be
authenticated by an independent third
party.
The Board’s Consumer Advisory
Council considered the electronic
delivery of disclosures in 1998 and
again in 1999. Many Council members
shared views similar to those expressed
in written comment letters on the 1998
proposals. For example, some Council
members expressed concern that the
Board was moving too quickly in
allowing electronic disclosures for
certain transactions, and suggested that
the Board might go forward with
electronic disclosures for deposit
accounts while proceeding more slowly
on credit and lease transactions. Others
expressed concern about consumer
access and consumers’ ability to retain
electronic disclosures. They believed
that, without specific guidance from the
Board, institutions would provide
electronic disclosures without knowing
whether consumers could retain or
access the disclosures, and without
establishing procedures to address
technical malfunctions or nondelivery.
The Council also discussed the integrity
and security of electronic documents.
II. Overview of Proposed Revisions
Based on a review of the comments
and further analysis, the Board is
requesting comment on a modified
proposed rule that is more detailed than
the interim rule and the March 1998
proposed rules. It is intended to provide
specific guidance for institutions that
choose to use electronic communication
to comply with Regulation DD’s
requirements to provide written
disclosures, and ensure effective
delivery of disclosures to consumers
through this medium. Though detailed,
the proposal provides flexibility for
compliance with the electronic
communication rules. The modified
proposal recognizes that some
disclosures may warrant different
treatment under the rule. Some
disclosures are generally available to the
public—for example, bank account fee
schedules. Under the modified
proposal, such disclosures could be
made available electronically without
obtaining a consumer’s consent. Where

49741

written disclosures are made to
consumers who are transacting business
in person, these disclosures generally
would have to be made in paper form.
The Board is soliciting comment on a
modified approach that addresses both
industry and consumer group concerns.
Under the proposal, depository
institutions would have to provide
specific information about how the
consumer can receive and retain
electronic disclosures—through a
standardized disclosure statement—
before obtaining consumers’ acceptance
of such delivery, with some exceptions.
If they satisfy these requirements and
obtain consumers’ affirmative consent,
depository institutions would be
permitted to use electronic
communications. As a general rule an
institution would be permitted to offer
the option of receiving electronic
disclosures to all consumers, whether
they initially contact the institution by
electronic communication or otherwise.
To address concerns about potential
abuses, however, the proposal provides
that if a consumer contracts to open a
deposit account in person, initial
disclosures must be given in paper form.
Depository institutions would have
the option of delivering disclosures to
an e-mail address designated by the
consumer or making disclosures
available at another location such as the
institution’s website, for printing or
downloading. If the disclosures are
posted at a website location, depository
institutions generally must notify
consumers at an e-mail address about
the availability of the information.
(Depository institutions may offer
consumers the option of receiving alert
notices at a postal address.) The
disclosures must remain available at
that site for 90 days.
Disclosures provided electronically
would be subject to the ‘‘clear and
conspicuous’’ standard, and the existing
format, timing, and retainability rules in
Regulation DD. For example, to satisfy
the timing requirement, if disclosures
are due at the time a deposit account is
being opened electronically, the
disclosure would have to appear on the
screen before the consumer could
complete the process.
Depository institutions generally must
provide a means for consumers to
confirm the availability of equipment to
receive and retain electronic disclosure
documents. A depository institution
would not otherwise have a duty to
verify consumers’ actual ability to
receive, print or download the
disclosures. Some commenters
suggested that institutions should be
required to verify delivery by return
receipt. The Board solicits comment on

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the need for such a requirement and the
feasibility of that approach.
As previously mentioned, consumer
advocates and others have expressed
concerns that electronic documents can
be altered more easily than paper
documents. The issue of the integrity
and security of electronic documents
affects electronic commerce in general
and is not unique to the written
disclosures required under the
consumer protection laws administered
by the Board. Consumers’ ability to
enforce rights under the consumer
protection laws could be impaired in
some cases, however, if the authenticity
of disclosures that they retain cannot be
demonstrated. Signatures, notary seals,
and other established verification
procedures are used to detect alterations
for transactions memorialized in paper
form. The development of similar
devices for electronic communications
should reduce uncertainty over time
about the ability to use electronic
documents for resolving disputes.
The Board’s rules require institutions
to retain evidence of compliance with
Regulation DD. Specific comment is
solicited on the feasibility of complying
with a requirement that institutions
provide disclosures in a format that
cannot be altered without detection, or
have systems in place capable of
detecting whether or not information
has been altered, as well as the
feasibility of requiring use of
independent certification authorities to
verify disclosure documents.
Elsewhere in today’s Federal Register,
the Board is publishing similar
proposals for comment under
Regulations B, E, M, and Z. In a separate
notice the Board is publishing an
interim rule under Regulation DD, to
permit depository institutions to use
electronic communication to deliver
disclosures on periodic statements. For
ease of reference, the Board has assigned
new docket numbers to the modified
proposals published today.
III. Section-by-Section Analysis
Pursuant to its authority under
section 269 of the TISA, the Board
proposes to amend Regulation DD to
permit institutions to use electronic
communication to provide the
disclosures required by this regulation
to be in writing. Below is a section-bysection analysis of the rules for
providing disclosures by electronic
communication, including references to
proposed commentary provisions.

Section 230.2 Definitions
(q) Periodic Statement
The interim rule under Regulation DD
permits institutions to use electronic
communication to deliver disclosures
on periodic statements. Comment
230.2(q)-1(ii), which addresses
information provided by computer
through home banking services, would
be deleted as obsolete.
Section 230.3 General Disclosure
Requirements
3(g) Electronic Communication
3(g)(1) Definition
The definition of the term ‘‘electronic
communication’’ in the March 1998
proposed rule remains unchanged.
Section 230.3(g)(1) limits the term to a
message transmitted electronically that
can be displayed on equipment as visual
text, such as a message that is displayed
on a computer monitor screen. Most
commenters supported the term as
defined in the March 1998 proposed
rule. Some commenters favored a more
expansive definition that would
encompass communications such as
audio and voice response telephone
systems. Because the proposal is
intended to permit electronic
communication to satisfy the statutory
requirement for written disclosures, the
Board believes visual text is an essential
element of the definition.
Commenters asked the Board to
clarify the coverage of certain types of
communications. A few commenters
asked about communication by
facsimile. Facsimiles are initially
transmitted electronically; the
information may be received either in
paper form or electronically through
software that allows a consumer to
capture the facsimile, display it on a
monitor, and store it on a computer
diskette or drive. Thus, information sent
by facsimile may be subject to the
provisions governing electronic
communication. When disclosures are
sent by facsimile, a depository
institution should comply with the
requirements for electronic
communication unless it knows that the
disclosures will be received in paper
form. Proposed comment 3(g)(1)-1
contains this guidance.
3(g)(2) Electronic Communication
between Depository Institution and
Consumer
Section 230.3(g)(2) would permit
depository institutions to provide
disclosures using electronic
communication, if the institution
complies with provisions in new
§ 230.3(g)(3), discussed below.

1. Presenting Disclosures in a Clear
and Conspicuous Format. The Board
does not intend to discourage or
encourage specific types of
technologies. Regardless of the
technology, however, disclosures
provided electronically must be
presented in a clear and conspicuous
format as is the case for all written
disclosures under the act and
regulation. See § 230.3(a).
When consumers consent to receive
disclosures electronically and they
confirm that they have the equipment to
do so, depository institutions generally
would have no further duty to
determine that consumers are able to
receive the disclosures. Institutions do
have the responsibility of ensuring sure
the proper equipment is in place in
instances where the institution controls
the equipment. Proposed comment
3(g)(2)–1 contains this guidance.
2. Providing Disclosures in a Form the
Consumer May Keep. As with other
written disclosures, information
provided by electronic communication
must be in a form the consumer can
retain. Under the March 1998 proposals
and the interim rule, a depository
institution would satisfy this
requirement by providing information
that can be printed or downloaded. The
modified proposal adopts the same
approach but also provides that the
information must be sent to a specified
location to ensure that consumers have
an adequate opportunity to retain the
information.
Consumers communicate
electronically with depository
institutions through a variety of means
and from various locations. Depending
on the location (at home, at work, in a
public place such as a library), a
consumer may not have the ability at a
given time to preserve TISA disclosures
presented on-screen. Therefore, when a
depository institution provides
disclosures by electronic
communication, to satisfy the retention
requirements, the institution must send
the disclosures to a consumer’s e-mail
address or other location where
information may be retrieved at a later
date. Proposed comment 3(g)(2)–2
contains this guidance; see also the
discussion under § 230.3(g)(4), below. In
instances where an institution controls
an electronic terminal used to provide
electronic disclosures, an institution
may provide equipment for the
consumer to print a paper copy in lieu
of sending the information to the
consumer’s e-mail address or posting
the information at another location such
as the institution’s website. See
proposed comment 3(g)(2)–1.

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
3. Timing. Institutions must ensure
that electronic disclosures comply with
all relevant timing requirements of the
regulation. For example, accountopening disclosures must be provided
before an account is opened or a service
is provided. The rule ensures that
consumers have an opportunity to read
important information about costs and
other terms before opening an account
or agreeing to have a service provided.
To illustrate the timing requirements
for electronic communication, assume
that a consumer is interested in opening
a checking account and uses a personal
computer at home to access a bank’s
website on the Internet. The institution
provides disclosures to the consumer
about the use of electronic
communication (the § 230.3(g)(3)
disclosures discussed below) and the
consumer responds affirmatively. If the
institution’s procedures permit the
consumer to open the account at that
time, disclosures required under § 230.4
would have to be provided. Thus, the
disclosures must automatically appear
on the screen or the consumer must be
required to access the information
before the account is opened (or before
the consumer pays any fees). The timing
requirements for providing accountopening disclosures would not be met
if, in this example, the bank permitted
the consumer to open a deposit account
and sent disclosures to an e-mail
address thereafter. Proposed comment
3(g)(2)–3 contains this guidance.
On the other hand, assume that a
consumer desires to open an account
and the institution delays processing of
the consumer’s request to open the
account until the required disclosures
have been delivered by e-mail. In that
case the information would not have to
also appear on the screen; delivery to
the consumer’s e-mail address would be
sufficient. In either case, the consumer
must be given the opportunity to receive
the disclosures before opening the
account.
3(g)(2)(ii) In-Person Exception
The proposal contains an exception to
the general rule allowing information
required by Regulation DD to be
provided by electronic communication;
where the exception applies, paper
disclosures would be required. The
exception, contained in § 230.3(g)(2)(ii),
seeks to address concerns about
potential abuses where consumers are
transacting business in person but are
offered disclosures in electronic form. In
such transactions, there is a general
expectation that consumers would be
given paper copies of disclosures along
with paper copies of other documents
evidencing the transaction.

Under § 230.3(g)(2)(ii), if a consumer
opens an account in person, the
depository institution must provide
account-opening disclosures in paper
form. For example, if a consumer opens
a deposit account at a depository
institution and is provided with TISA
account disclosures at that time, the
institution would be required to provide
those disclosures in paper form;
directing the consumer to disclosures
posted on the institution’s website
would not be sufficient. An institution
also complies if a consumer opens an
account on the Internet and is sent
disclosures electronically at or around
that time, even though the institution’s
procedures require the consumer to visit
the institution at a later time to
complete the transaction (for example,
to complete a signature card). Proposed
comment 3(g)(2)(ii)–1 contains this
guidance. If a consumer makes a request
in person for account disclosures
pursuant to § 230.4(a)(2), the disclosures
also must be provided in paper form.
3(g)(3) Disclosure Notice
Section 230.3(g)(3) would identify the
specific steps required before an
institution can use electronic
communication to satisfy the
regulation’s disclosure requirements.
Proposed Model Forms B–10 and B–11
and proposed Sample Forms B–13 and
B–14, are published to aid compliance
with these requirements.
3(g)(3)(i) Notice by Depository
Institution
Section 230.3(g)(3)(i) outlines the
information that depository institutions
must provide before electronic
disclosures can be given. The depository
institution must: (1) describe the
information to be provided
electronically and specify whether the
information is also available in paper
form or whether the account is offered
only with electronic disclosures; (2)
identify the address or location where
the information will be provided
electronically; and if it will be available
at a location other than the consumer’s
e-mail address, specify for how long and
where it can be obtained once that
period ends; (3) specify any technical
requirements for receiving and retaining
information sent electronically, and
provide a means for the consumer to
confirm the availability of equipment
meeting those requirements; and (4)
provide a toll-free telephone number
and, at the institution’s option, an
electronic or a postal address for
questions about receiving electronic
disclosures, or for updating consumers’
electronic addresses, and for seeking
assistance with technical or other

49743

difficulties (see proposed comments to
3(g)(3)(i)). The Board requests comment
on whether other information should be
disclosed regarding the use of electronic
communication and on any format
changes that might improve the
usefulness of the notice for consumers.
The Board also solicits comment on
the benefits of requiring an annual
notice in paper form to consumers who
receive disclosures by electronic
communication. The notice would
contain general information about
receiving electronic disclosures
including, for example, a reminder of
the toll-free telephone number where
consumers may contact the institution if
they have questions regarding their
electronic disclosures. The Board
solicits comment on whether an annual
notice is feasible for all types of
accounts covered by Regulation DD.
Under the proposal, the § 230.3(g)(i)
disclosures must be provided, as
applicable, before the depository
institution uses electronic
communication to deliver any
information required by the regulation.
The approach of requiring a
standardized disclosure statement
addresses, in several ways, the concern
that consumers may be steered into
using electronic communication
without fully understanding the
implications. Under this approach, the
specific disclosures that would be
delivered electronically must be
identified, and consumers must be
informed whether there is also an
option to receive the information in
paper form. Consumers must provide an
e-mail address where one is required.
Technical requirements must also be
stated, and consumers must affirm that
their equipment meets the requirements,
and that they have the capability of
retaining electronic disclosures by
downloading or printing them (see
proposed comment 3(g)(3)–1). Thus, the
§ 230.3(g)(3)(i) disclosures should allow
consumers to make informed judgments
about receiving electronic disclosures.
Some commenters requested
clarification of whether a depository
institution may use electronic
communication to provide some
required disclosures while using paper
for others. The proposed rule would
permit institutions to do so; the
disclosure given under § 230.3(g)(3)(i)
must specify which TISA disclosures
will be provided electronically.
Commenters requested further
guidance on a depository institution’s
obligation under the regulation if the
consumer chooses not to receive
information by electronic
communication. A depository
institution could offer a consumer the

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Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

option of receiving disclosures in paper
form, but it would not be required to do
so. A depository institution could
establish accounts or services for which
disclosures are given only by electronic
communication. Section
230.3(g)(3)(i)(A) would require
institutions to tell consumers whether
or not they have the option to receive
disclosures in paper form. Section
230.3(g)(i)(D) would require depository
institutions to provide a toll-free
number that consumers could use to
inform institutions if they wish to
discontinue receiving electronic
disclosures. In such cases, the
institution must inform the consumer
whether the deposit account is also
available with disclosures in paper
form. Proposed sample disclosure
statements in which the consumer has
an option to receive electronic or paper
disclosures (Form B–13) or electronic
disclosures only (Form B–14) are
contained in appendix B.
3(g)(3)(ii) Response by Consumer
Proposed § 230.3(g)(3)(ii) would
require a means for the consumer to
affirmatively indicate that disclosures
may be provided electronically.
Examples include a signature (for
requests made in paper form) or a
‘‘check box’’ on a computer screen or a
signature line (for requests made in
paper form). The requirement is
intended to ensure that consumers’
consent is established knowingly and
voluntarily, and that consent to receive
electronic disclosures is not inferred
from consumers’ use of the account or
acceptance of general account terms.
See proposed comment 3(g)(3)(ii)–1.
3(g)(3)(iii) Changes
Depository institutions would be
required to notify consumers about
changes to the information provided in
the notice required by § 230.3(g)(3)(i)—
for example, if technical upgrades to
software are required. Proposed
comment 3(g)(3)(iii)–1 contains this
guidance.
The notice must include the effective
date of the change and be provided
before that date. Proposed comment
3(g)(3)(iii)–2 would provide that the
notice must be sent a reasonable period
of time before the effective date of the
change. Although the number of days
that constitutes reasonable notice may
vary, depending on the type of change
involved, the comment would provide
institutions with a safe harbor: fifteen
days’ advance notice would be
considered a reasonable time in all
cases. The same time period is stated in
similar proposals under Regulations B,
Z, and E published in today’s Federal

Register. Comment is requested on
whether a safe harbor of 15 days is an
appropriate time period, and whether a
uniform period for changes involving
electronic communication is desirable.
An alternative approach would adopt
notice requirements that are consistent
with change-in-terms requirements
under the respective regulations. Under
this approach, for example, the safe
harbor would be 21 days under § 205.8
for Regulation E, 15 days under § 226.9
for Regulation Z, and 30 days under
§ 230.5 for Regulation DD. Proposed
comment 3(g)(3)(iii)–3 contains
guidance on delivery requirements for
the notice of change.
The notice of a change must also
include a toll-free telephone number or,
at the institution’s option, an address for
questions about receiving electronic
disclosures. For example, a consumer
may call regarding problems related to
a change, such as an upgrade to
computer software that is not provided
to the institution. Consumers may also
use the toll-free number if they wish to
discontinue receiving electronic
disclosures. In such cases, the
institution must inform consumers
whether the account is also available
with disclosures in paper form. (See
proposed comments 3(g)(3)(iii)–4
through –6.)
If the change involves providing
additional disclosures by electronic
communication, institutions generally
would be required to provide the notice
in § 230.3(g)(3)(i) and obtain the
consumer’s consent. That notice would
not be required if the institution
previously obtained the consumer’s
consent to the additional disclosures in
its initial notice by disclosing the
possibility and specifying which
disclosures might be provided
electronically in the future. Comment is
specifically requested on this approach.
A list of additional disclosures may be
necessary to ensure that consumers’
consent is informed and knowing
(provided it does not cause confusion).
3(g)(4) Address or Location To Receive
Electronic Communication
Proposed § 230.3(g)(4) identifies
addresses and locations where
institutions using electronic
communication may send information
to the consumer. Institutions may send
information to a consumer’s electronic
address, which is defined in proposed
comment 3(g)(4)(i)–1 as an e-mail
address that the consumer also may use
for receiving communications from
parties other than the depository
institution. For periodic statements, for
example, a depository institution’s
responsibility to provide disclosures by

electronic communication will be
satisfied when the information is sent to
the consumer’s e-mail address in
accordance with the applicable
proposed rules concerning delivery of
disclosures by electronic
communication.
Guidance accompanying the March
1998 proposed rule provided that an
institution would not meet delivery
requirements by simply posting
information to an Internet site such as
the institution’s ‘‘home page’’ without
appropriate notice on how consumers
can access the information. Industry
commenters wanted to retain the
flexibility of posting disclosures on an
Internet website. They did not object to
providing a separate notice alerting
consumers about the disclosures’
availability but requested more
guidance on the issue. Consumer
advocates and others expressed concern
that the mere posting of information
inappropriately places the responsibility
to obtain disclosures on consumers, and
undermines the purpose of the delivery
requirements of the regulation.
The Board recognizes that currently,
because of security and privacy
concerns associated with data
transmissions, a number of institutions
may choose to provide disclosures at
their websites, where the consumer may
retrieve them under secure conditions.
Under § 230.3(g)(4), a depository
institution may make disclosures
available to a consumer at a location
other than the consumer’s electronic
address. The institution must notify the
consumer when the information
becomes available and identify the
account involved. The notice must be
sent to the electronic mail address
designated by the consumer; the
depository institution may, at its option,
permit the consumer to designate a
postal address. A proposed model form
(Model Form B–12) is published below;
see also proposed comment 3(g)(4)(ii)–1.
The Board believes it would be
inconsistent with the TISA to require a
consumer to initiate a search—for
example, to search the website of each
institution with which an account is
held—to determine whether a
disclosure has been provided. The
proposed approach ensures that a
consumer would not be required to
check an institution’s website
repeatedly, for example, to learn
whether the institution posted a change
in a term that affects a deposit account
held by the consumer.
The requirements of the regulation
would be met only if the required
disclosure is posted on the website and
the consumer is notified of its
availability in a timely fashion. For

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
example, depository institutions must
provide a change-in-terms notice to
consumers at least 30 days in advance
of the change. (12 CFR 230.5(a).) For a
change-in-terms notice posted on the
Internet, an institution must both post
the notice and notify consumers of its
availability at least 30 days in advance
of the change.
Commenters sought guidance on how
long disclosures posted at a particular
location must be available to consumers.
There is a variety of circumstances
when a consumer may not be able
immediately to access the information
due to illness, travel, or computer
malfunction, for example. Under
§ 230.3(g)(4), institutions must post
information that is sent to a location
other than the consumer’s e-mail
address for 90 days. Proposed comment
3(g)(4)(ii)–2 contains this guidance.
Under the modified proposal,
institutions that post information at a
location other than the consumer’s email address are required—after the 90
day period—to make disclosures
available to consumers upon request for
a period of not less than two years from
the date disclosures are required to be
made, consistent with the record
retention requirements under § 230.9(c).
The Board requests comment on this
approach, including suggestions for
alternative means for providing
consumers continuing access to
disclosures.
Section 230.4 Account Disclosures
4(a) Delivery of Account Disclosures—
(1) Account Opening.
Account-opening disclosures required
under § 230.4(a) set forth the terms and
conditions of the account. These
disclosures inform the consumers of the
types and amount of any fees that may
be imposed and the interest rate and
annual percentage yield that will be
paid on the account. Section 230.4(a)(1)
requires that account disclosures be
provided before an account is opened or
a service is provided, whichever is
earlier; § 230.4(a)(2) requires that
account disclosures be provided upon
request.
Section 266(b) of TISA and
§ 230.4(a)(1) of the regulation provide
that if the consumer is not physically
present at the institution when an initial
deposit is accepted (and the disclosures
have not been furnished previously) the
institution shall mail or deliver the
disclosures no later than ten days after
the account is opened or the service is
provided. The rationale underlying the
ten-day delay is that the institution
cannot provide written disclosures
before an account is opened in some

instances (such as when an account is
opened by telephone). Similarly,
§ 230.4(a)(2) provides that if the
consumer is not present at the
institution when the request for account
disclosures is made, the institution must
mail or deliver the disclosures within a
reasonable time after the institution
receives the request; comment 4(a)(2)(i)–
3 clarifies that ten days is a reasonable
time.
The Board indicated in the March
1998 proposed rule that the ten-day
delay did not apply to accounts opened
by electronic communication, such as
on the Internet. The difficulties
associated with an account opening by
telephone, for example, do not exist for
accounts opened electronically; thus,
depository institutions would be
required to provide account-opening
disclosures before the account is opened
or a service is provided, when an
account is opened using electronic
communication.
Views were mixed on the Board’s
interpretation that the ten-day delay in
providing disclosures would not apply
to accounts opened electronically. Many
commenters were opposed to the
Board’s position. These commenters
believed that it would be difficult to
furnish transaction-specific disclosures
before the account is opened. For
example, interest rates may change after
the consumer submits account
information but before the account is
opened in accord with the institution’s
procedures. Other commenters
supported the Board’s position. They
believed that all of the information that
would be available to a consumer
present in a depository institution is
available to a consumer via a website
controlled by the depository institution.
A few commenters stated that it would
not be overly burdensome to provide
required disclosures on a website.
Based on the comments received and
further analysis, the modified proposals
address an institution’s duties when a
consumer is not physically present at
the institution and uses electronic
communication to open an account or
request a service, or to request account
disclosures. Section 230.4(a)(1)(ii) is
proposed under the Board’s exception
authority in section 269(a)(3) of the act
and would require institutions to
provide account disclosures before an
account is opened or a service is
provided; the ten-day delay would not
apply. Proposed § 230.4(a)(2)(i) would
provide that institutions must respond
to requests within a reasonable period
after receiving the request and may
provide account disclosures
electronically to a consumer’s electronic
mail address or in paper form. The

49745

requirements of § 230.3(g)(3) would not
apply to such requests. Comment is also
requested on whether, in the context of
electronic communication, the ten-day
time period provided in comment
4(a)(2)(i)–3 for responding to requests
for account disclosures is reasonable.
Section 230.8 Advertising
8(a) Misleading or Inaccurate
Advertisements
Section 230.8 provides that
advertising certain terms triggers the
disclosure of other account terms.
Although Regulation DD does not
address multi-page advertisements,
Regulations Z (Truth in Lending) and M
(Consumer Leasing) permit creditors to
provide required advertising disclosures
on more than one page, if certain
conditions are met. Elsewhere in today’s
Federal Register, the Board is proposing
guidance to creditors and lessors on
how to comply with rules on multi-page
advertising in the context of electronic
advertisements. Consistent with the
approach taken for Regulations Z and
M, the Board believes that a depository
institution that advertises electronically
can comply with the regulation’s
advertising requirements if the required
terms are disclosed at more than one
location, under certain conditions. If a
triggering term (such as a bonus or an
annual percentage yield) appears at a
location that does not contain other
required disclosures, the location with
the triggering term must clearly refer the
consumer to the page or location that
sets forth clearly and conspicuously all
additional required disclosures.
Proposed comment 8(a)–9 contains this
guidance.
8(b) Permissible Rates
Section 230.8(b) provides that an
advertisement may state an interest rate,
as long as the interest rate is stated in
conjunction with, but not more
conspicuously than, the annual
percentage yield to which it relates.
Proposed comment 8(b)–4 contains
guidance on how this rule applies to
rates stated in an electronic
advertisement.
8(e) Exemption for Certain
Advertisements
Section 230.8(e) exempts
advertisements made through broadcast
or electronic media, such as television
and radio, from several of the
advertising disclosures. The Board
provided guidance on the scope of the
exemption in the supplementary
information to the March 1998 proposed
rule. The Board stated that the
‘‘electronic media’’ exemption would

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not apply to advertisements made
electronically, such as those posted on
the Internet.
The rationale for the broadcast and
electronic media exemption is that these
media have time or space constraints
that make it extremely burdensome to
provide the required disclosures. The
Board believes that advertisements
posted on the Internet generally do not
have these constraints. A few
commenters disagreed. They stated that
there are space constraints on ‘‘nonproprietary’’ websites and urged the
Board to apply the exemption to thirdparty websites. The Board believes,
however, that space constraints on a
non-proprietary website are not
significantly different than those for a
print advertisement. Thus,
advertisements made electronically
such as advertisements posted on the
Internet are subject to Regulation DD’s
general advertising rules. Proposed
comment 8(e)(1)(i)–1 contains this
guidance.
Appendix B to Part 230—Model Clauses
and Sample Forms
The Board solicits comment on three
proposed model forms and two sample
forms for use by depository institutions
to aid compliance with the disclosure
requirements of §§ 230.3(g)(3) and (g)(4).
Model Forms B–10 and B–11 would
implement § 230.3(g)(3), regarding the
notice that depository institutions must
give prior to using electronic
communication to provide required
disclosures. Model Form B–12 would
implement § 230.3(g)(4), regarding
notices to consumers about the
availability of electronic disclosures at
locations such as the depository
institution’s website. Use of any
modified version of these forms would
be in compliance as long as the
institution does not delete information
required by the regulation or rearrange
the format so as to affect the substance,
clarity, or meaningful sequence of the
disclosure. For example, institutions
that combine Regulation E and
Regulation DD disclosures on a deposit
account can modify the model form to
provide a single disclosure statement
about electronic delivery of those
disclosures.
Sample Form B–13 illustrates the
disclosures under § 230.3(g)(3) for a
deposit account. The sample assumes
that the institution also offers paper
disclosures for consumers who choose
not to receive electronic disclosures.
Sample Form B–14 assumes that
consumers must accept electronic
disclosures if they want to open the
deposit account.

Additional Issues Raised by Electronic
Communication
Preemption
A few commenters suggested that any
final rule issued by the Board permitting
electronic disclosures should explicitly
preempt any state law requiring paper
disclosures. Under Appendix C of the
regulation, state laws are preempted if
they are inconsistent with the act and
regulation and only to the extent of the
inconsistency. The proposed rule would
provide depository institutions with the
option of giving required disclosures by
electronic communication as an
alternative to paper. There is no
apparent inconsistency with the act and
regulation if state laws require paper
disclosures. The Board, however, will
review preemption issues that are
brought to the Board’s attention.
Appendix C outlines the Board’s
procedures for determining whether a
specific law is preempted, which will
guide the Board in any determination
requested by a state, depository
institution, or other interested party
following publication of a final rule
regarding electronic communication.
IV. Form of Comment Letters
Comment letters should refer to
Docket No. R–1044, and, when possible,
should use a standard typeface with a
type size of 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 of
comments for review. Also, if
accompanied by an original document
in paper form, comments may be
submitted on 31⁄2 inch computer
diskettes in any IBM-compatible DOS or
Windows-based format.
V. Initial Regulatory Flexibility
Analysis
In accordance with section 3(a) of the
Regulatory Flexibility Act, the Board
has reviewed the proposed amendments
to Regulation DD. Although the
proposal would add disclosure
requirements with respect to electronic
communication, overall, the proposed
amendments are not expected to have
any significant impact on small entities.
A depository institution’s use of
electronic communication to provide
disclosures required by the regulation is
optional. The proposed rule would give
depository institutions flexibility in
providing disclosures. A final regulatory
flexibility analysis will be conducted
after consideration of comments
received during the public comment
period.

VI. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3506;
5 CFR 1320 Appendix A.1), the Board
reviewed the proposed rule under the
authority delegated to the Board by the
Office of Management and Budget
(OMB). The Federal Reserve may not
conduct or sponsor, and an organization
is not required to respond to, this
information collection unless it displays
a currently valid OMB number. The
OMB control number is 7100–0271.
The collection of information
requirements relevant to this proposed
rulemaking are in 12 CFR Part 230. This
information is mandatory (12 U.S.C.
4301 et seq.) to evidence compliance
with the requirements of the Regulation
DD and the Truth in Savings Act (TISA).
The revised requirements would be
used to ensure adequate disclosure of
basic terms, costs, and rights relating to
services affecting consumers holding
deposit accounts and receiving certain
disclosures by electronic
communication. The respondents/
recordkeepers are for-profit depository
institutions, including small businesses.
Institutions are also required to retain
records for 24 months. This regulation
applies to all types of depository
institutions, not just state member
banks; however, under Paperwork
Reduction Act regulations, the Federal
Reserve accounts for the burden of the
paperwork associated with the
regulation only for state member banks.
Other agencies account for the
paperwork burden on their respective
constituencies under this regulation.
The proposed revisions would allow
institutions the option of using
electronic communication (for example,
via personal computer and modem) to
provide disclosures required by the
regulation. Although the proposal
would add disclosure requirements with
respect to electronic communication,
the optional use of electronic
communication would likely reduce the
paperwork burden of depository
institutions. With respect to state
member banks, it is estimated that there
are 988 respondents/recordkeepers and
an average frequency of 87,071
responses per respondent each year.
Therefore, the current amount of annual
burden is estimated to be 1,464,216
hours. There is estimated to be no
additional annual cost burden and no
capital or start-up cost.
Because the records would be
maintained at state member banks and
the notices are not provided to the
Federal Reserve, no issue of
confidentiality under the Freedom of
Information Act arises; however, any

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
information obtained by the Federal
Reserve may be protected from
disclosure under exemptions (b)(4), (6),
and (8) of the Freedom of Information
Act (5 U.S.C. 522(b)(4), (6) and (8)). The
disclosures and information about error
allegations are confidential between
institutions and the customer.
The Federal Reserve requests
comments from institutions, especially
state member banks, that will help to
estimate the number and burden of the
various disclosures that would be made
in the first year this proposed regulation
would be effective. Comments are
invited on: (a) the cost of compliance;
(b) ways to enhance the quality, utility,
and clarity of the information to be
disclosed; and (c) ways to minimize the
burden of disclosure on respondents,
including through the use of automated
disclosure techniques or other forms of
information technology. Comments on
the collection of information should be
sent to the Office of Management and
Budget, Paperwork Reduction Project
(7100–0271), Washington, DC 20503,
with copies of such comments sent to
Mary M. West, Federal Reserve Board
Clearance Officer, Division of Research
and Statistics, Mail Stop 97, Board of
Governors of the Federal Reserve
System, Washington, DC 20551.
List of Subjects in 12 CFR Part 230
Advertising, Banks, banking,
Consumer protection, Federal Reserve
System, Reporting and recordkeeping
requirements, Truth in savings.
Text of Proposed Revisions
Certain conventions have been used
to highlight proposed changes to
Regulation DD. New language is shown
inside bold-faced arrows and deletions
are shown in bold-faced brackets.
For the reasons set forth in the
preamble, the Board proposes to amend
Regulation DD, 12 CFR part 230, as set
forth below:
PART 230—TRUTH IN SAVINGS
(REGULATION DD)
1. The authority citation for part 230
continues to read as follows:
Authority: 12 U.S.C. 4301 et seq.

2. Section 230.3 is amended by
adding a new paragraph (g) to read as
follows:
§ 230.3

General disclosure requirements.

*
*
*
*
fl(g) Electronic communication. (1)
Definition. Electronic communication
means a message transmitted
electronically between a consumer and
a depository institution in a format that
allows visual text to be displayed on

equipment such as a personal computer
monitor.
(2) Electronic communication between
depository institution and consumer. (i)
General. Except as provided in
paragraph (g)(2)(ii) of this section, a
depository institution that has complied
with paragraph (g)(3) of this section may
provide by electronic communication
any information required by this
regulation to be in writing.
(ii) In-person exception. When a
consumer opens a deposit account or
requests a service in person, disclosures
required under § 230.4(a)(1) shall be
provided in paper form, unless the
consumer previously initiated the
process of opening the account by
electronic communication and
disclosures were provided in
compliance with paragraphs (g)(3)(i)
and (g)(3)(ii) of this section at or around
that time. A depository institution shall
also provide account disclosures in
paper form to a consumer who makes a
request in person pursuant to
§ 230.4(a)(2).
(3) Disclosure notice. The disclosure
notice required by this paragraph shall
be provided in a manner substantially
similar to the applicable model form set
forth in Appendix B of this part (Model
Forms B–10 and B–11).
(i) Notice by depository institution. A
depository institution shall:
(A) Describe the information to be
provided electronically and specify
whether the information is also
available in paper form or whether the
account is offered only with electronic
disclosures;
(B) Identify the address or location
where the information will be provided
electronically; and if it is made available
at a location other than the consumer’s
electronic address, how long the
information will be available, and how
it can be obtained once that period ends;
(C) Specify any technical
requirements for receiving and retaining
information sent electronically, and
provide a means for the consumer to
confirm the availability of equipment
meeting those requirements; and
(D) Provide a toll-free telephone
number and, at the institution’s option,
an address for questions about receiving
electronic disclosures, for updating
consumers’ electronic addresses, and for
seeking technical or other assistance
related to electronic communication.
(ii) Response by consumer. A
depository institution shall provide a
means for the consumer to accept or
reject electronic disclosures.
(iii) Changes. (A) A depository
institution shall notify affected
consumers of any change to the
information provided in the notice

49747

required by paragraph (g)(3)(i) of this
section. The notice shall include the
effective date of the change and must be
provided before that date. The notice
shall also include a toll-free telephone
number, and, at the institution’s option,
an address for questions about receiving
electronic disclosures.
(B) In addition to the notice under
paragraph (g)(3)(iii)(A) of this section, if
the change involves providing
additional disclosures by electronic
communication, a depository institution
shall provide the notice in paragraph
(g)(3)(i) of this section and obtain the
consumer’s consent. A notice is not
required under paragraph (g)(3)(i) of this
section if the institution’s initial notice
states that additional disclosures may be
provided electronically in the future
and specifies which disclosures could
be provided.
(4) Address or location to receive
electronic communication. A depository
institution that uses electronic
communication to provide information
required by this regulation shall:
(i) Send the information to the
consumer’s electronic address; or
(ii) Post the information for at least 90
days at a location such as a website, and
send a notice to the consumer when the
information becomes available.
Thereafter the information shall be
available upon request for a period of
not less than two years from the date
disclosures are required to be made. The
notice required by paragraph (g)(4)(ii)
shall identify the account involved,
shall be sent to an electronic address
designated by the consumer (or to a
postal address, at the institution’s
option), and shall be substantially
similar to the model form set forth in
Appendix B of this part (Model Form B–
12).fi
3. Section 230.4 is amended by
revising paragraph (a)(1) and paragraph
(a)(2)(i) to read as follows:
§ 230.4

Account disclosures

(a) Delivery of account disclosures. (1)
Account opening. (i) flGeneral.fi A
depository institution shall provide
account disclosures to a consumer
before an account is opened or a service
is provided, whichever is earlier. An
institution is deemed to have provided
a service when a fee required to be
disclosed is assessed. flExcept as
provided in paragraph (a)(1)(ii) of this
section, iffi [If] the consumer is not
present at the institution when the
account is opened or the service is
provided and has not already received
the disclosures, the institution shall
mail or deliver the disclosures no later
than 10 business days after the account

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is opened or the service is provided,
whichever is earlier.
fl(ii) Electronic communication. If a
consumer is not present at the
institution and uses electronic
communication to open an account or
request a service, the disclosures
required under paragraph 4(a)(1) of this
section must be provided before an
account is opened or a service is
provided.fi
(2) Requests. (i) A depository
institution shall provide account
disclosures to a consumer upon request.
If the consumer is not present at the
institution when a request is made, the
institution shall mail or deliver the
disclosures within a reasonable time
after it receives the request fland may
provide the disclosures in paper form or
electronically at the consumer’s
electronic address. The requirements of
§ 230.3(g)(3) shall not apply.fi
*
*
*
*
*
4. Appendix B to Part 230 is amended
by:
a. Adding entries for appendices B–10
through B–14 to the table of contents at
the beginning of the appendix; and
b. Adding new Appendices B–10, B–
11, B–12, B–13, and B–14.
The additions read as follows:
Appendix B to Part 230—Model
Disclosure Clauses and Sample Forms
*

flB–10—Model Disclosures for Electronic
Communication (§ 230.3(g)(3))
(Disclosures Available in Paper Form or
Electronically)
B–11—Model Disclosures for Electronic
Communication (§ 230.3(g)(3))
(Disclosures Available Only
Electronically)
B–12—Model Notice for Delivery of
Information Posted at Certain Locations
(§ 230.3(g)(4))
B–13—Sample Form for Electronic
Communication (§ 230.3(g)(3))
(Disclosures Available in Paper Form or
Electronically)
B–14—Sample Form for Electronic
Communication (§ 230.3(g)(3))
(Disclosures Available Only
Electronically)ª

flB–10 MODEL DISCLOSURES FOR
ELECTRONIC COMMUNICATION
(§ 230.3(g)(3)) (Disclosures Available in
Paper or Electronically)
You can choose to receive important
information required by the Truth in Savings
Act in paper or electronically.
Read this notice carefully and keep a copy
for your records.
• You can choose to receive the following
information in paper form or electronically:
(description of specific disclosures to be
provided electronically).
How would you like to receive this
information
b I want paper disclosures.
b I want electronic disclosures.
• øWe may provide the following
additional disclosures electronically in the
future: (description of specific disclosures).¿
• øIf you choose electronic disclosures,
this information will be available at: (specify
location) for ll days. After that, the
information will be available upon request
(State how the consumer can obtain the
information). When the information is
posted, we will send you a message at the
electronic mail address you designate here:
(consumer’s electronic mail address).¿
øIf you choose electronic disclosures this
information will be sent to the electronic
mail address that you designate here:
(consumer’s electronic mail address).¿
• To receive this information you will
need: (list hardware and software
requirements).
Do you have access to a computer that
satisfies these requirements?
b Yes
b No
• Do you have access to a printer, or the
ability to download information, in order to
keep copies for your records?
b Yes
b No
• To update your electronic address, if you
have questions about receiving disclosures,
or need technical or other assistance
concerning these disclosures, contact us at
(telephone number).
B–11 MODEL DISCLOSURES FOR
ELECTRONIC COMMUNICATION
(§ 230.3(g)(3)) (Disclosures Available Only
Electronically)
You will receive important information
required by the Truth in Savings Act
electronically.
Read this notice carefully and keep a copy
for your records.

• The following information will be
provided electronically: (description of
specific disclosures to be provided
electronically).
• This deposit account is not available
unless you accept electronic disclosures.
• øWe may provide the following
additional disclosures electronically in the
future: (description of specific disclosures).¿
• øIf you choose electronic disclosures,
this information will be available at: (specify
location) for ll days. After that, the
information will be available upon request
(state how the consumer can obtain the
information). When the information is
posted, we will send you a message at the
electronic mail address you designate here:
(consumer’s electronic mail address).¿
øIf you choose electronic disclosures this
information will be sent to the electronic
mail address that you designate here:
(consumer’s electronic mail address).¿
• To receive this information you will
need: (list hardware and software
requirements).
Do you have access to a computer that
satisfies these requirements?
b Yes
b No

• Do you have access to a printer, or
the ability to download information, in
order to keep copies for your records?
b Yes
b No
Do you want this deposit account with
electronic disclosures?
b Yes
b No
• To update your electronic address, if you
have questions about receiving disclosures,
or need technical or other assistance
concerning these disclosures, contact us at
(telephone number).

B–12 MODEL NOTICE FOR DELIVERY OF
INFORMATION POSTED AT CERTAIN
LOCATIONS (§ 230.3(g)(4))
Information about your (identify account)
is now available at øwebsite address or other
location¿. The information discusses
(describe the disclosure). It will be available
for ll days.
BILLING CODE 6210–01–P

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BILLING CODE 6210–01–C–

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules
5. In Supplement I to Part 230 in
Section 230.2—Definitions, under (q)
Periodic Statement, paragraph 1.ii. is
removed and paragraph 1.iii. is
redesignated as paragraph 1.ii.
6. In Supplement I to Part 230, under
Section 230.3— General disclosure
requirements, a new paragraph (g)
Electronic communication, is added to
read as follows:
Supplement I to Part 230—Official Staff
Interpretations
*

Section 230.3 General disclosure
requirements

(g) Electronic communication
(g)(1) Definition
1. Coverage. Information transmitted by
facsimile may be received in paper form or
electronically, although the party initiating
the transmission may not know at the time
the disclosures are sent which form will be
used. A depository institution that provides
disclosures by facsimile should comply with
the requirements for electronic
communication unless the depository
institution knows that the disclosures will be
received in paper form.
(g)(2) Electronic communication between
depository institution and consumer
1. Disclosures provided on institution’s
equipment. Institutions that control
equipment providing electronic disclosures
to consumers (for example, computer
terminals in an institution’s lobby or kiosks
located in public places) must ensure that the
equipment satisfies the regulation’s
requirements to provide disclosures in a clear
and conspicuous format and in a form the
consumer may retain. A depository
institution that controls the equipment may
provide a printer for the consumers’ use in
lieu of sending the information to the
consumer’s electronic mail address or
posting the information at another location
such as the institution’s website.

2. Retainability. Institutions must
provide electronic disclosures in a
retainable format (for example, they can
be printed or downloaded). Consumers
may communicate electronically with
depository institutions through a variety
of means and from various locations.
Depending on the location (at home, at
work, in a public place such as a
library), a consumer may not have the
ability at a given time to preserve TISA
disclosures presented on-screen. To
ensure that consumers have an adequate
opportunity to retain the disclosures,
the institution also must send them to
the consumer’s designated electronic
mail address or to another location, for
example, on the institution’s website,
where the information may be retrieved
at a later date.
3. Timing and delivery. When a
consumer opens an account on the

Internet or by other electronic means, in
order to meet the timing and delivery
requirements, institutions must ensure
that disclosures applicable at that time
appear on the screen and are in a
retainable format. The delivery
requirements would not be met if
disclosures do not either appear on the
screen or if the consumer is allowed to
open an account before receiving the
disclosures. For example, an institution
can provide a link to electronic
disclosures appearing on a separate page
as long as consumers cannot bypass the
link and they are required to access the
disclosures before completing the
opening of the account.
(g)(2)(ii) In-person exception
1. Account-opening disclosures in paper
form. If a consumers opens a deposit account
in person, the depository institution
generally must provide account-opening
disclosures in paper form. For example, if a
consumer visits a depository institution’s
branch office to open a deposit account,
account-opening disclosures are required
before the consumer opens an account or a
service is provided and they must be
provided in paper form; directing the
consumer to disclosures posted on the
institution’s website would not be sufficient.
If, however, a consumer makes a request on
the Internet to open an account, a depository
institution may send disclosures
electronically at or around that time even
though the depository institution’s
procedures require the consumer to visit a
branch office at a later time to complete the
agreement (for example, to execute a
signature card).
(g)(3) Disclosure notice
1. Consumer’s affirmative responses. Even
though a consumer accepts electronic
disclosures in accordance with
§ 230.3(g)(3)(ii), a depository institution may
deliver disclosures by electronic
communication only if the consumer
provides an electronic address where one is
required, and responds affirmatively to
questions about technical requirements,
access to a printer or the ability to download
information; (see sample forms B–13 and B–
14 in appendix B to this part).
(g)(3)(i) Notice by depository institution
1. TOLL-FREE TELEPHONE NUMBER. The
number must be toll-free for nonlocal calls
made from an area code other than the one
used in the institution’s dialing area.
Alternatively, a depository institution may
provide any telephone number that allows a
consumer to call for information and reverse
the telephone charges.
2. Institution’s address. Depository
institutions have the option of providing
either an electronic or postal address for
consumers’ use in addition to the toll-free
telephone number.
3. Discontinuing electronic disclosures.
Consumers may use the toll-free number (or
optional address) if they wish to discontinue
receiving electronic disclosures. In such
cases, the institution must inform consumers

49751

whether the account is also available with
disclosures in paper form.
(g)(3)(ii) Response by consumer
1. Nature of consent. Consumers must
agree to receive disclosures by electronic
communication knowingly and voluntarily.
An agreement to receive electronic
disclosures is not implied from consumers’
use of an account or acceptance of general
account terms.
(g)(3)(iii) Changes
1. Examples. Examples of changes include
a change in technical requirements, such as
upgrades to software packages affecting the
institution’s disclosures provided on the
Internet.
2. Timing for notices. A notice of a change
must be sent a reasonable period of time
before the effective date of the change. The
length of a reasonable notice period may
vary, depending on the type of change
involved; however fifteen days is a
reasonable time for providing notice in all
cases.
3. Delivery of notices. An institution meets
the delivery requirements if the notice of a
change is sent to the address provided by the
consumer for receiving other disclosures. For
example, if the consumer provides an
electronic address to receive notices about
periodic statements posted at the institution’s
website, the same electronic address may be
used for the change notice. The consumer’s
postal address must be used, however, if the
consumer consented to additional
disclosures by electronic communication
when receiving the notice under
§ 230.3(g)(3)(i) but provided a postal address
to receive periodic statements in paper form.
4. Toll-free number. See comment
3(g)(3)(i)–1.
5. Institution’s address. See comment
3(g)(3)(i)–2
6. Consumer inquiries. Consumers may use
the toll-free telephone number (or optional
address) for questions or assistance with
problems related to a change, such as an
upgrade to computer software that is not
provided by the institution. Consumers may
also use the toll-free number if they wish to
discontinue receiving electronic disclosures;
in such cases, the institution must inform
consumers whether the account is also
available with disclosures in paper form.
(g)(4) Address or location to receive
electronic communication
(g)(4)(i)
1. Electronic address. A consumer’s
electronic address is an electronic mail
address that may be used by the consumer for
receiving communications transmitted by
parties other than the depository institution.
(g)(4)(ii)
1. Identifying account involved. A
depository institution is not required to
identify an account by reference to the
account number. For example, where the
consumer does not have multiple accounts,
and no confusion would result, the
institution may refer to ‘‘your checking
account,’’ or when the consumer has
multiple accounts the institution may use a
truncated account number.

49752

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / Proposed Rules

2. Availability. Information that is not sent
to a consumer’s electronic mail address must
be available for at least 90 days from the date
the information becomes available or from
the date the notice required by
§ 230.3(g)(4)(ii) is sent to the consumer,
whichever occurs later.fi
7. In Supplement I to Part 230, under
§ 230.8—Advertising, the following
amendments are made:
a. Under (a) Misleading or inaccurate
advertisements, a new paragraph 9. is added;
b. Under (b) Permissible rates, a new
paragraph 4. is added; and
c. Under (e)(1) Certain Media, a new
heading (e)(1)(i), and a new paragraph 1. are
added.
The additions read as follows:

Section 230.8 Advertising
(a) Misleading or inaccurate advertisements

fl9. Electronic advertising. A depository
institution that provides a multi-page
advertisement electronically may display a
triggering term (such as a bonus or an annual
percentage yield) at one location, as long as
the consumer is clearly referred—for
example, by clicking an icon that directly
connects the consumer—to the location that
sets forth clearly and conspicuously the
additional disclosures required by the
regulation. For example, the icon could
instruct the consumer to ‘‘click here for
additional cost information.’’fi

(b) Permissible rates

fl4. Electronic communication. An
interest rate may be stated in conjunction
with, but not more conspicuously than, the
annual percentage yield to which it relates.
In an advertisement using electronic
communication, both rates must appear in
the same location so that both rates may be
viewed simultaneously. This requirement is
not satisfied if the annual percentage yield
can be viewed only by use of a link that
connects the consumer to information
appearing at another location.fi

(e)(1) Certain media.
fl(e)(1)(i)
1. Internet advertisements. The exemption
for advertisements made through broadcast
or electronic media does not extend to
advertisements made by electronic
communication, such as advertisements
posted on the Internet.fi

By order of the Board of Governors of the
Federal Reserve System, August 31, 1999.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 99–23140 Filed 9–13–99; 8:45 am]
BILLING CODE 6210–01–P

DEPARTMENT OF TRANSPORTATION

Comments Invited

Federal Aviation Administration

Interested persons are invited to
participate in the making of the
proposed rule by submitting such
written data, views, or arguments as
they may desire. Communications shall
identify the Rules Docket number and
be submitted in triplicate to the address
specified above. All communications
received on or before the closing date
for comments, specified above, will be
considered before taking action on the
proposed rule. The proposals contained
in this notice may be changed in light
of the comments received.
Comments are specifically invited on
the overall regulatory, economic,
environmental, and energy aspects of
the proposed rule. All comments
submitted will be available, both before
and after the closing date for comments,
in the Rules Docket for examination by
interested persons. A report
summarizing each FAA-public contact
concerned with the substance of this
proposal will be filed in the Rules
Docket.
Commenters wishing the FAA to
acknowledge receipt of their comments
submitted in response to this notice
must submit a self-addressed, stamped
postcard on which the following
statement is made: ‘‘Comments to
Docket Number 99–NM–207–AD.’’ The
postcard will be date stamped and
returned to the commenter.

14 CFR Part 39
[Docket No. 99–NM–207–AD]
RIN 2120–AA64

Airworthiness Directives; Dornier
Model 328–100 Series Airplanes
Federal Aviation
Administration, DOT.
ACTION: Notice of proposed rulemaking
(NPRM).
AGENCY:

This document proposes the
adoption of a new airworthiness
directive (AD) that is applicable to
certain Dornier Model 328–100 series
airplanes. This proposal would require
replacement of a flight attendant panel
and modification of its associated
wiring. This proposal is prompted by
issuance of mandatory continuing
airworthiness information by a foreign
civil airworthiness authority. The
actions specified by the proposed AD
are intended to prevent the disabling of
the ‘‘Fasten Seat Belt’’ and ‘‘No
Smoking’’ signs when they are required
to be illuminated. Such disabling could
result in the inability to instruct the
passengers to extinguish their cigarettes
and fasten their seat belts when
required, which may contribute to
passenger injury should a hard landing
or in-flight turbulence be experienced.
DATES: Comments must be received by
October 14, 1999.
ADDRESSES: Submit comments in
triplicate to the Federal Aviation
Administration (FAA), Transport
Airplane Directorate, ANM–114,
Attention: Rules Docket No. 99–NM–
207–AD, 1601 Lind Avenue, SW.,
Renton, Washington 98055–4056.
Comments may be inspected at this
location between 9:00 a.m. and 3:00
p.m., Monday through Friday, except
Federal holidays.
The service information referenced in
the proposed rule may be obtained from
Dornier Luftfahrt GmbH, P.O. Box 1103,
D–82230 Wessling, Germany. This
information may be examined at the
FAA, Transport Airplane Directorate,
1601 Lind Avenue, SW., Renton,
Washington.
FOR FURTHER INFORMATION CONTACT:
Norman B. Martenson, Manager,
International Branch, ANM–116,
Transport Airplane Directorate, 1601
Lind Avenue, SW., Renton, Washington
98055–4056; telephone (425) 227–2110;
fax (425) 227–1149.
SUPPLEMENTARY INFORMATION:
SUMMARY:

Availability of NPRMs
Any person may obtain a copy of this
NPRM by submitting a request to the
FAA, Transport Airplane Directorate,
ANM–114, Attention: Rules Docket No.
99–NM–207–AD, 1601 Lind Avenue,
SW., Renton, Washington 98055–4056.
Discussion
The Luftfahrt-Bundesamt (LBA),
which is the airworthiness authority for
Germany, notified the FAA that an
unsafe condition may exist on certain
Dornier Model 328–100 series airplanes.
The LBA advises that, when the reading
light switches that are located on the
flight attendant panel are in the OFF
position, the seat belt warning light
switch and the no smoking warning
light switch that are located on the flight
deck overhead panel are inhibited from
operating the passenger cabin ‘‘Fasten
Seat Belt’’ and ‘‘No Smoking’’ warning
lights. This condition, if not corrected,
could result in the inability to instruct
the passengers to extinguish their
cigarettes and fasten their seat belts
when required, which may contribute to
passenger injury should a hard landing
or in-flight turbulence be experienced.

Full text of District Notices (Federal Reserve Bank of Dallas) : Request for Public Comment on Revised Proposal to Permit Electronic Delivery of Federally Mandated Disclosures, Notice 1999-79

FRASER