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FEDERAL RESERVE BANK OF NEW YORK P Circular No. 7 9 7 6 1 October 22, 1776 J L AMENDMENT TO REGULATION Z Implementing the Consumer Leasing Act of 1976 T o A l l M e m b e r B a n k s , a n d O th e r s C o n c ern ed , in th e S e c o n d F e d e ra l R e s e r v e D is tr ic t: hollowing is the text of a statement issued October 13, by the Board of Governors of the Fed eral Reserve System: The Board of Governors of the Federal Reserve System today announced adoption of regulatory amend ments to carr}- out provisions of the Consumer Leasing Act of 1976 requiring disclosure of terms under which personal property is leased. The amendment to Regulation Z (Truth in Lending) will become effective March 23, 1977, when the Consumer Leasing Act becomes effective. The Act requires accurate, meaningful disclosure of the terms of leases of personal property, basically automobiles and furniture, leased primarily for personal, family or house hold use, for more than four months and for which the total contractual obligation is less than $25,000. Enforcemeat will be the responsibility of the same agencies that enforce Truth in Lending. 1 n ^*le disclosures required by the Act have been added as a new section (Section 226.15) of Regulation Z Other amendments have been made elsewhere in the Regulation to comply with the Act, including the provi sions^ of sections dealing with general disclosures, definitions, advertising and exemptions of States with sub stantially similar laws. To assist in compliance with the new law the Board will propose sample disclosure forms for use with leases of personal property subject to the Act. Proper use of these forms will ensure compliance with the Board s regulation. The consumer leasing amendments to Regulation Z reflect consideration of written suggestions and com ment received by the Board following publication of proposed consumer leasing disclosure rules on July 1 , 1976 and consideration of testimony received in a hearing held by the Board on August 3, 1976. The main disclosures required are: 1. A brief description of the leased property adequate to identify it to both parties to the lease. 2 The total amount of any payment or payments the lessee is to pay at the consummation of the lease, such as a refundable security deposit, advance payment or the like. 3. The number, amount and due dates of periodic payments and their total. 4. The total amount of taxes, fees and other charges involved. а. Identification of those responsible for maintaining or servicing the leased property. б . How any penalty or delinquency charge will be determined, and the amount. 7. A statement whether the lessee has an option to purchase the property at the end of the lease term or earlier, and at what price. ’ 8 . A statement of the conditions under which either party to the lease may terminate it, and how any penalty or other charge will be determined. 9. A statement that the lessee shall be responsible for the difference between the estimated value of the property leased and its realized value at the end of the lease or upon earlier termination, if such lia bility exists. 10 . A statement that in an open-end lease the lessee may obtain a professional appraisal of the property by an independent third party at the end of the lease or upon earlier termination, and that this appraisal will be binding. 1 E n fo rc e m e n t a g e n c ie s a r e : C o m p tro lle r o f th e C u rre n c y , B o a rd o f D ir e c to r s of th e F e d e ra l D e p o sit In s u ra n c e C o rp o ra tio n , r e d e r a l H o m e L o a n B a n k B o a rd ( a c tin g d ire c tly o r th r o u g h th e F e d e ra l S a v in g s a n d L o a n C o r p o r a ti o n ) f A d m in is tr a to r 9* ^ , N a tio n a l C r e d it U n io n A d m in is tra tio n , C ivil A e r o n a u tic s B o a rd , S e c r e ta r y of A g r ic u ltu r e , F a r m C re d it A d m in is tra tio n , B o a rd of G o v e rn o rs o f th e F e d e r a l R e s e rv e S y ste m , a n d th e F e d e ra l T r a d e C o m m issio n . 1 1 . Where the lessee’s liability at the end of the lease term is based upon the estimated value of the property: —A statement of the value of the property at the consummation of the lease, the itemized total lease ob ligation at the end of the lease, and the difference between them. —Where the estimated value of the leased property exceeds three times the average monthly lease pay ment for the property concerned, a statement that there is a rebuttable presumption that the estimated value is unreasonable and can only be collected by legal action of the lessor, taken at his expense, with certain exceptions. 1 he final regulation permits lessors to understate the estimated value of the property in leases with a pur chase option as a safety factor in open-end automobile leasing. At the same time, the Board exempted from the amendments many applications of the Act to leases of personal property that are incidental to the lease of real property, such as furniture in a rented, furnished apart ment. In letters to the Senate and House Banking Committees, the Board said neither the Act nor its legisla tive history mention combined leases of real and personal property. After considering all comments received on this question, the Board concluded that an exemption provides the most equitable solution pending specific legislative action, and imposes the smaller burden on consumers and lessors. A new paragraph has been added to the advertising requirements of the regulation to permit the use of mer chandise tags without full advertising disclosures where a number of items is being leased, so long as the tags clearly and conspicuously refer to a posted schedule of required disclosures. The requirement in the July 1 proposal that all disclosures be made on a single page has been dropped. The consumer leasing requirements do not apply to : —Transactions over $25,000. —Agricultural credit transactions. —Leases of personal property that are incident to the lease of real property and which provide that the lessee ( 1 ) has no liability for the value of the property at the end of the lease other than for abnormal wear and tear and ( 2 ) has no option to purchase the property leased. In submitting the amendment for publication in the F ederal R e g is te r , the Board of Governors made the following additional statement, which has been reprinted from the F ederal R e g is te r of October 15, 1976: believes, by education efforts, which may Include the issuance of approved lease disclosure forms. S u b c h a p te r A— B o a rd o f G o v e rn o rs o f A detailed discussion of the revisions th e F e d e ra l R e s e rv e S y s te m to the amendments follows: [Reg. Z; Docket No. R - 0048 J 1. Technical changes have been made In § 226.1(c) by (1) limiting the protec P A R T 2 2 6 — T R U T H IN L E N D IN G tion from civil and criminal liability A m e n d m e n ts to R e g u la tio n Z T o Im p le m e n t granted to creditors who act in con th e C o n s u m e r L e a s in g A ct formity with duly authorized staff opin On July 9, 1976, the Board published ion letters to Sections 112 and 130 of for comment proposed amendments to the Act, and (2) adding a statement con Regulation Z implementing the Consu cerning the provisions of 8 185(b) which mer Leasing Act of 1976 (41 FR 98313). Imposes civil liability for lessor viola The Board also conducted an Informal tions of the advertising provisions of public hearing on the proposed amend Section 184 when such violations result ments on August 3, 1976, at which five In actual damages. 2. The definition “aggregate cost of persons testified. Forty-seven written comments on the the lease” has been redesignated “total proposal were received. The written lease obligation” in order to reflect more comments and hearing testimony have accurately the concept embodied in the been analyzed and careful consideration definition. has been given to them. On the basis of The Board wishes to clarify that for the comments and testimony and its purposes of this definition and the cal own analysis, the Board has adopted culations of which it Is an element, the final amendments to implement the Act. term “scheduled periodic payments Several commenters requested that under the lease" Includes that portion the Board issue a separate leasing regu of the payments attributable to depre lation rather than incorporate the leas ciation, cost of money, lessor’s profit and ing amendments into Regulation Z. The taxes, but excludes, In leases where such Board still believes that the incorpora charges are included in the periodic pay tion of the leasing regulation into Regu ments, charges for maintenance and in lation Z permits utilization of terms surance. and concepts previously defined under The words “fair market” have been Regulation Z and substantially limits deleted from the third element of the duplication of provisions. Confusion definition, “the estimated value of the among lessors unfamiliar with Regula leased property at the end of the lease tion Z can be greatly reduced, the Board term," to permit the use of underesti T itle 1 2 — B a n k s a n d B a n k in g C H APTE R II— FEDERAL RESERVE SYSTEM 2 mation in determination of the figure. 3. The words “fair market” have been deleted from the definition “value at consummation” because the amount used in the definition may not approximate a “fair market value” as it permits In clusion of a lessor markup. The Board believes that the legislative history of the Consumer Leasing Act is clear that such a markup Is permissible Usee 122 Cong, Rec., S. 1025, February 2. 1976). 4. The definition "realized value” has been amended to exclude any deduction for actual disposition costs. It Is the Board’s position that such costs should be disclosed at consummation of the lease and should not be used to circumvent the limitations Imposed by section 183(a) of the Act on the lessee’s end-term liability. The Board also wishes to clarify that the methods of disposition presented in the definition of “realized value" are al ternatives and may be chosen at the lessor's option, The use of the right of appraisal < 226.15(b) <14 >) by the lessee § and lessor constitutes a binding deter mination of realized value. 5. A new paragraph has been added to g 226.3 which deals with exempted transactions. This paragraph exempts from the requirements of the Act lease transactions of personal property in cident to leases of real property which provide that (1) the lessee has no liabil ity for the value of the property at the end of the term other than for abnormal wear and tear, and (2) there is no option to purchase the leased property. It is the Board’s position that the definition of “consumer lease” excludes such leases as it is limited to "a contract for the use of personal property" (em phasis added) and a lease for a fur nished apartm ent is a real property lease to which the personal property is in cidental. Neither the Act nor the legislative his tory mentions leases of personal property incident to leases of real property. The Board believes th at such an exemption is Justified by the increased costs and the decreased availability of advertising in formation and services associated with furnished apartments, which may be generated by requiring compliance with the Act by such lessors. 6. Section 226.0(f) has been amended to permit lessors to understate in pur chase option leases the estimated value of the property at the end of the lease term. This will allow lessors to use a “safety factor” when estimating this value. 7. A new paragraph, 8 226.10(h), has been added to the advertising provisions to permit use of triggering terms in mer chandise tags for items normally used in multiple-item leases without full ad vertising disclosures, provided that such tags clearly and conspicuously refer to a prominently posted sign or display which contains a table or schedule of items to be disclosed under § 226.10(g). The table or schedule of lease terms may be similar to th at used in credit transactions as set forth in Interpreta tion 8 226.1002, which will be amended to include lease advertisements. 8. The Board makes the following essity of reproducing them in the disclo comments concerning § 226.15: sure statement. (a) The requirement of § 226.15(a) (f) The lessor is under no obligation to that disclosures be made on one side of set standards for wear and use. However, a single page of a separate disclosure such standards, if they are set, must be statement has been deleted. A number of reasonable and must be disclosed in ac commenters questioned their ability to cordance with 8 226.15(b) (8). provide the required disclosures, a num (g) Section 226.15(b) (14), dealing with ber of which are textural rather than the right of numerical, on a single page. Thus, lessors as provided appraisal, has been limited, in 8 183(c) of the Act, would be permitted to make disclosures to leases where the lessee’s liability at on both sides of a separate disclosure the end of the term is based upon the statement. the leased property. (b) Certain arithmetical disclosures estimated value of solicited comments on <h) The Board have been rearranged to provide a more a proposed exemption from the renego meaningful sequence of disclosures. tiation and extension requirements (c) Security deposits, as used in (| 226.15(c) ) for multiple item leases. As 88 226.15(b) (2) and (9), have been a result of the comments received, the limited to refundable cash deposits to Board now changes the exemption by in distinguish them from other types of se creasing the threshold change in the curity interests. Further, a security de monthly payment above which new dis posit disclosed under § 226.15(b) (2) need closures must be made from 10 to 25 per not be further disclosed under 8 226.15 cent. (b )(9). The Board also exempts from the new disclosure requirement lease extensions (d) Section 226.15(b) (5) has been for a total of six months or less, either changed to incorporate in the total of on a month-to-month basis or otherwise. “all other charges” the amount of any If a lease is extended for more than six liabilities imposed upon the lessee a t the months new disclosures must be made. end of the term (formerly 8 226.15(b) The Board believes that the addition or (13)), excluding the difference between subtraction of items from a multiple item the estimated and realized values. lease, resulting in relatively small (e) The wai’ranty disclosure (8 226.15 changes in the monthly payments, as well (b)(7)) has been amended to require as short term extensions, are primarily only that the lessor provide a statement accommodations to consumers and that identifying any express warranties or requiring new disclosures in these limited guarantees made by the lessor or manu situations would inconvenience lessees facturer and available to the lessee. This and lessors without a corresponding in paragraph permits the lessor to refer to crease in consumer protection. any express warranties without the nec Enclosed is a copy of the amendment to Regulation Z, effective March 23, 1977, which has been reprinted from the F e d e r a l R e g i s t e r . Inquiries thereon may be directed to our Bank Regula tions Department. Additional copies of the amendment will be furnished upon request. P a u l A. V o l c k e r , P re sid e n t. 3 Board of Governors of the Federal Reserve System TRUTH IN LENDING A M E N D M E N T TO Effective March 23, 1977, Regulation Z is amended as follows: A. Section 226.1 is amended as follows: § 226.1 [A m ended] 1. By revising the last sentence of paragraph (a) (1) to read as follows: (a) Authority, scope, purpose, etc., (1) * * * Except as otherwise provided herein, this Part, within the context of its related provisions, applies to all per sons who are creditors, as defined in paragraph(s) of § 226.2, and in the case of consumer leases, as defined in para graph (mm) of § 226.2, to all persons who are lessors, as defined in paragraph (oo) of § 226.2. 2. In paragraph (a) (2) by inserting the words “and consumer lease” between the words “Advertising of consumer credit” and “terms must comply” and by adding the following sentence before the last sentence of the paragraph: (2) * * * This Part is also designed to assure that lessees of personal property are given meaningful disclosures of lease terms, to delimit the ultimate liability of lessees in leasing personal property and to require meaningful and accurate dis closures of lease terms in advertisements. * * * 3. In paragraph (b)(1) by inserting a comma after the word “creditors,” de leting the word “and” between the words “creditors” and “credit” and inserting the words “and lessors” between the words “issuers” and “is.” 4. By amending paragraph c> to read as follows: * * * * * (c) Penalties and liabilities. Section 112 of the Act provides criminal liability for willful and knowing failure to com ply with any requirement imposed under the Act and this Part. Section 134 pro vides for criminal liability for certain fraudulent activities related to credit cards. Section 130 provides for civil li R E G U L A T IO N Z ability in individual or class actions for any creditor or lessor who fails to comply with any requirement imposed under Chapter 2, Chapter 4 or Chapter 5 of the Act and the corresponding provisions of this Part. Section 130 also provides credi tors or lessors a defense against civil and criminal liability under sections 130 and 112 for any act done or omitted in good faith in conformity with the provisions of this Part or any interpretation there of by the Board, or with any interpreta tions or approvals issued by a duly au thorized official or employee of the Fed eral Reserve System, notwithstanding that after such act or omission has oc curred, such rule, regulation, interpreta tion or approval is amended, rescinded or otherwise determined to be invalid for any reason. Section 130 further provides that a multiple failure to disclose in con nection with a single account or single consumer lease shall permit but a single recovery. Section 115 provides for civil liability for an assignee of an original creditor where the original creditor has violated the disclosure requirements and such violation is apparent on the face of the instrument assigned, unless the as signment is involuntary. Section 185(b) provides for civil liability under section 130 for any lessor who fails to comply with any requirement imposed under sec tion 184 to any person who suffers actual damage from the violation. Pursuant to section 108 of the Act, violations of the Act or this Part constitute violations of other Federal laws which may provide further penalties. B. Section 226.2 is amended as follows: § 226.2 [A m ended] 1. In paragraph (d) by inserting the words " or lessee or prospective lessee” “ between the words “prospective cus tomer” and “in.” 2. By amending paragraph (h) to read as follows: F o r th is R e g u la tio n to be co m p lete, r e ta in : 1) R e g u la tio n Z p a m p h le t, e ffe c tiv e O c to b e r 28, 1975. 2) A m e n d m e n ts e ffe c tiv e J u ly 30 a n d A u g u s t 6, 1976. 3 ) A m e n d m e n t d a te d A u g u s t 27. 1976. 4 ) T h is slip sheet. PRIN TED IN [Enc. Cir. No. 7976] NEW YORK (rr) “ Total lease obligation” equals the total of (1) the scheduled periodic pay ments under the lease, (2) any nonrefundable cash payment required of the lessee or agreed upon by the lessor and lessee or any trade-in allowance made at consummation, and (3) the estimated value of the leased property at the end of the lease term. (ss) “Value at consummation” equals the cost to the lessor of the leased prop erty including, if applicable, any increase or markup by the lessor prior to consum mation. C. Section 226.3 is amended by adding a new § 226.3(f) to read as follows: (h) “Arrange for the extension of credit or for lease of personal property" means to provide or offer to provide con sumer credit or a lease which is or will be extended by another person under a business or other relationship pursuant to which the person arranging such credit or lease (1) Receives or will receive a fee, com pensation, or other consideration for such service, or (2) Has knowledge of the credit or lease terms and participates in the prep aration of the contract documents re quired in connection with the extension of credit or the lease. It does not include honoring a credit card or similar device where no finance charge is imposed at the time of that transaction. 3. In paragraph (jj) by deleting the word “and” after the words “consumer loan” and adding the words “and ‘lease’ to mean ‘consumer lease’ ” after the words “consumer credit transaction.” 4. In paragraph (kk) by inserting the words “or a lessor and lessee” between the words “customer” and “irrespective.” 5. By adding the following after para graph (11) : * * * * * (mm) “Consumer lease” means a con tract in the form of a bailment or lease for the use of personal property by a natural person primarily for personal, family or household purposes, for a pe riod of time exceeding four months, for a total contractual obligation not exceed ing $25,000, whether or not the lessee has the option to purchase or otherwise be come the owner of the property at the expiration of the lease. It does not in clude a lease which meets the definition of a credit sale in § 226.2 (t), nor does it include a lease for agricultural, business or commercial purposes or one made to an organization. (nn) “Lessee” means a natural person who leases under, or who is offered, a consumer lease. (oo) “Lessor” means a person who in the ordinary course of business regularly leases, offers to lease or arranges for the leasing of personal property under a con sumer lease. (pp) “Personal property” means any property which is not real property under the law of the State where it is located at the time it is offered or made available for lease. (qq) “Realized value” means (1) the price received by the lessor for the leased property at disposition, (2) the highest offer for disposition, or (3) the fair mar ket value at the end of the lease term. § 2 2 6 .3 Exempted transactions. * * * * * (f) Certain lease transactions. Lease transactions of personal property which are incident to the lease of real property and which provide that (1) the lessee has no liability for the value of the prop erty at the end of the lease term except for abnormal wear and tear, and (2) the lessee has no option to purchase the leased property. D. Section 226.6 is amended as follows: 1. By adding a new § 226.6(b) (3) to read as follows: § 2 2 6 .6 [Amended] (b) (3) (i) A State law which is similar In nature, purpose, scope, Intent, effect or requisites to a section of Chapter 5 of the Act is not inconsistent with the Act or this Part within the meaning of § 186(a) of the Act if the lessor can com ply with the S tar e law without violating < this Part. If a le* sor cannot comply with a State law without violating a provision of this Part which implements a section of Chapter 5 of the Act, such State law is inconsistent with the requirements of the Act and this Part within the' meaning of § 186(a) of the Act and is preempted. (ii) A State, through its Governor, At torney General, oi other appropriate of ficial having primary enforcement or in terpretative responsibilities for its con sumer leasing law, may apply to the Board for a determination that the State law offers greater protection and benefit to lessees than a comparable provision(s) of Chapter 5 of the Act and its imple menting provision(s) in this Part, or is otherwise not inconsistent with Chapter 5 of the Act and this Part, or for a deter mination with respect to any issues not clearly covered by § 226.6(b) (3) <i) as to the consistency or inconsistency of a State law with Chapter 5 of the Act or its implementing provisions in this Part. 2. In paragraph (c) by inserting the words “or lessor’s” betw een th e words 2 “creditor’s” and “option” and by insert ing the words “or lessee” between the words “customer” and “or” in the first sentence, and by inserting the words “or lessor” between the words “creditor” and “who elects” in the second sentence. 3. By revising paragraphs (d), (e) and (f) to read as follows: * * * * * (d) Multiple creditors or lessors; joint disclosure. If there is more than one creditor or lessor in a transaction, each creditor or lessor shall be clearly identi fied and shall be responsible for making only those disclosures required by this Part which are within his knowledge and the purview of his relationship with the customer or lessee. If two or more credi tors or lessors make a joint disclosure, each creditor or lessor shall be clearly identified. The disclosures required under paragraphs (b) and (c) of § 226.8 shall be made by the seller if he extends or arranges for the extension of credit. Otherwise disclosures shall be made as required under paragraphs (b) and (d) of § 226.8 and paragraph (b) of § 226.15. fl S u ch acts, occurrences, or agreem en ts in clu d e th e failu re o f th e cu stom er or lessee to perform h is ob lig a tio n s un d er th e c o n tra ct and su ch a ctio n s by th e creditor or lessor as m ay be proper to p ro tect h is in te r ests in su ch circu m stan ces. S u ch failu re m ay resu lt in th e lia b ility of th e cu stom er or lessee to pay d elin q u en cy charges, co llectio n costs, or exp en ses o f th e creditor or lessor for p erfectio n or a c q u isitio n o f any secu rity in terest or a m o u n ts advanced by th e creditor or lessor on b eh a lf of th e cu stom er or lessee in co n n e c tio n w ith in su ran ce, repairs to or preservation o f collateral. (e) Multiple customers or lessees; dis closure to one. In any transaction other than a credit transaction which may be rescinded under the provisions of § 226.9, if there is more than one customer or lessee, the creditor or lessor need fur nish a statement of disclosures required by this Part to only one of them other than an endorser, comaker, guarantor, or a similar party. (f) Unknown information estimate. If at the time disclosures must be made, an amount or other item of information required to be disclosed, or needed to de termine a required disclosure, is un known or not available to the creditor or lessor and the creditor or lessor has made a reasonable effort to ascertain it, the creditor or lessor may use an esti mated amount or an approximation of the information, provided the estimate or approximation is clearly identified as such, is reasonable, is based on the best information available to the creditor or lessor and is not used for the purpose of circumventing or evading the dis closure requirements of this Part. Notwithstanding the requirement of this paragraph that the estimate be based on the best information available, a lessor is not precluded in a purchase option lease from understating the estimated value of the leased property at the end of the term in computing the total lease obligation as required in § 226.15(b) (15) (i). 4. By revising the footnote to para graph (g) to read as follows: (a) General rule. * * * (2) No advertisement to aid, promote or assist directly or indirectly any con sumer lease may state that a specific lease of any property at specific amounts or terms is available unless the lessor usually and customarily leases or will lease such property at those amounts or terms. (b) Catalogs and multi-page adver tisements. If a catalog or other multiplepage advertisement sets forth or gives in formation in sufficient detail to permit determination of the disclosures required by this section in a table or schedule of credit or lease terms, such catalog or multiple-page advertisement shall be considered a single advertisement pro vided : ( 1 ) The table or schedule and the dis closures made therein are set forth clear ly and conspicuously; and (2) Any statement of credit or lease terms appearing in any place other than in that table or schedule of credit or lease terms clearly and conspicuously refers to the page or pages on which that table or schedule appears, unless that state ment discloses all of the credit or lease terms required to be stated under this section. For the purpose of this subpara graph, cash price is not a credit term. * * • * • (g) Advertising of consumer leases. No advertisement to aid, promote or assist directly or indirectly any consumer lease shall state the amount of any payment, the number of required payments, or that any or no downpayment or other pay- 5. In paragraph (i) by inserting the words, “or lessor” between the words “creditor” and “for” in the first sentence and between the w rords “creditor” and “shall” in the last sentence. E. Section 226.10 is amended by re designating the introductory text of § 226.10(a) as § 226.10(a) (1), § 226.10(a) (1) as § 226.10(a) (1) (i) and § 226.10(a) (2) as § 226.10(a) (1) (ii), and by adding new paragraphs (a)(2), (g) and (h) as follows: § 226.10 Advertising credit and lease term s. 3 afforded greater protection than is a f forded under Chapter 4 of the Act, or in th e case of Chapter 5, the lessee is afforded greater protection and benefit than is afforded under Chapter 5 of the Act, and (2) There is adequate provision for enforcem ent. (b) Procedures and criteria. The pro cedures and criteria under w hich any S tate m ay apply for the determ ination provided for in paragraph (a) of this section are set forth in Supplement II to Regulation Z with respect to disclo sure and rescission requirements (sec tions 121-131 of Chapter 2 ), Supplement IV w ith respect to the prohibition of the issuance of unsolicited credit cards and th e liability of the cardholder for unau thorized use of a credit card (sections 132-133 of Chapter 2 ), in Supplem ent V w ith respect to fair credit billing re quirements (sections 161-171 of Chapter 4) and in Supplement VI with respect to consumer leasing (sections 181-186 of Chapter 5). * * * * * G. A new section 226.15 is added to read as follows: m ent is required at consummation of the lease unless the advertisement also states clearly and conspicuously each of the fo l lowing items of information as applica ble: (1) T hat the transaction advertised is a lease. (2) The total amount of any paym ent such as a security deposit or capitalized cost reduction required at the consum m ation of the lease, or th at no such pay ments are required. (3) The number, amounts, due dates or periods of scheduled payments, and the total of such payments under the lease. (4) A statem ent of whether or not the lessee has the option to purchase the lease property and at w hat price and time. The method of determining the price m ay be substituted for disclosure of the price. (5) A statem ent of the amount or m ethod of determining the am ount of any liabilities the lease imposes upon the lessee at the end of the term and a state m ent that the lessee shall be liable for the difference, if any, between the esti m ated value of the lease property and its realized value at the end of the lease term, if the lessee has such liability. (h) M ultiple-item leases; merchandise tags. If a merchandise tag for an item normally included in a m ultiple-item lease sets forth inform ation which would require additional disclosures under par agraph (g) of this section, such m er chandise tag need not contain such ad ditional disclosures, provided it clearly and conspicuously refers to a sign or dis play which is prominently posted in the lessor’s showroom. Such sign or display shall contain a table or schedule of those items of inform ation to be disclosed un der paragraph (g) of this section. F. Section 226.12 is amended as fo l lows: § 226.15 § 226.12 Exemption of certain State reg ulated transactions. (a) Exemption for State regulated transactions. In accordance with the pro visions of Supplements II, IV, V, and VI to Regulation Z, any State may make ap plication to the Board for exemption of any class of transactions within the S tate from the requirements of Chapters 2, 4 or 5 of the Act and the correspond ing provisions of this Part, Provided that: (1) The Board determines that under the law of that State, th at class of trans actions is subject to requirements sub stantially sim ilar to those imposed un der Chapter 2 or Chapter 4 of the Act, or both, or under Chapter 5, and the cor responding provisions of this Part; or in the case of Chapter 4, the consumer is Consumer leasing. (a) General requirements. Any lessor shall, in accordance w ith § 226.6 and to th e extent applicable, m ake the disclo sures required by paragraph (b) of this section w ith respect to any consumer lease. Such disclosures shall be made prior to th e consum m ation of the lease on a dated w ritten statem ent which identifies th e lessor and th e lessee, and a copy of such statem ent shall be given to the lessee at th at tim e. All of the dis closures shall be m ade together on either (1) The contract or other instrum ent evidencing the lease on the sam e page and above th e place for the lessee’s sig nature; or (2) A separate statem ent which iden tifies the lease transaction. In any lease of m ultiple items, the de scription required by § 226.15(b) (1) m ay be provided on a separate statem ent or statem ents which are incorporated by reference in the disclosure statem ent required by § 226.15(a). (b) Specific disclosure requirements . In any lease subject to this section the following items, as applicable, shall be disclosed: (1) A brief description of the leased property, sufficient to identify the prop erty to th e lessee and lessor. (2) The total am ount of any payment, such as a refundable security deposit paid by cash, check or sim ilar means, advance paym ent, capitalized cost reduc tion or any trade-in allowance, appro priately identified, to be paid by the les4 see a t consummation of the lease. (3) The number, am ount and due dates or periods of paym ents scheduled under the lease and the total amount of such periodic payments. (4) The total am ount paid or payable by the lessee during th e lease term for official fees, registration, certificate of title, license fees or taxes. (5) The total am ount of all other charges, individually itemized, payable by the lessee to th e lessor, which are not included in the periodic payments. This total includes the amount of any liabilities the lease imposes upon the les see a t the end of the term, but excludes the potential difference between the esti m ated and realized values, required to be disclosed under § 226.15(b) (15) (i). (6) A brief identification of insurance in connection with the lease including (i) if provided or paid for by the lessor, the types and amounts of coverages and cost to the lessee, or (ii) if not provided or paid for by the lessor, the types and amounts of coverages required of the lessee. (7) A statem ent identifying any ex press warranties or guarantees available to the lessee made by the lessor or m anu facturer with respect to the leased prop erty. (8) An identification of the party re sponsible for m aintaining or servicing the leased property together with a brief description of the responsibility, and a statem ent of reasonable standards for wear and use, if the lessor sets such standards. (9) A description of any security in terest, other than a security deposit dis closed under paragraph (b )(2) of this section, held or to be retained by the lessor in connection with the lease and a clear identification of the property to which the security interest relates. (10) The am ount or m ethod of deter m ining the am ount of any penalty or other charge for delinquency, default or late payments. (11) A statement of whether or not the lessee has the option to purchase the leased property and, if at the end of the lease term, at what price, and, if prior to the end of the lease term at what time and the price or method of determining the price. (12) A statem ent of the conditions under which the lessee or lessor may term inate the lease prior to the end of the lease term and the amount or method of determ ining th e am ount of any penalty or other charge for early term i nation. (13) A statem ent th at the lessee shall be liable for the difference between the estim ated value of the property and its realized value at early term ination or the end of the lease term, if such liability exists. (14) Where the lessee’s liability at early term ination or at the end of the lease term is based on the estim ated value of the leased property, a statem ent th at the lessee m ay obtain at th e end of the lease term or at early term ination, at the lessee’s expense, a professional ap praisal of the value which could be real ized at sale of the leased property by an independent third party agreed to by the lessee and the lessor, which appraisal shall be final and binding on the parties. (15) Where the lessee’s liability at the end of the lease term is based upon the estim ated value of the leased property: (i) The value of the property at con sum mation of the lease, the itemized total lease obligation at the end of th e lease term, and the difference between them. (ii) T hat there is a rebuttable pre sumption th at the estim ated value of the leased property at the end of the lease term is unreasonable and not in good faith to the extent th at it exceeds the realized value by more than three times the average paym ent allocable to a m onthly period, and th at the lessor can not collect th e am ount of such excess li ability unless the lessor brings a success ful action in court in which the lessor pays the lessee’s attorney’s fees, and that this provision regarding the presump tion and attorney’s fees does not apply to the extent the excess of estimated value over realized value is due to unrea sonable wear or use, or excessive use. (iii) A statement that the require ments of paragraph (b) (15) (ii) of this section do not preclude the right of a willing lessee to make any mutually agreeable final adjustment regarding such excess liability. (c) Renegotiations or extensions. If any existing lease is renegotiated or e x tended, such renegotiation or extension shall be considered a new lease subject to the disclosure requirements of this Part, except th at the requirements of this paragraph shall not apply to (1) a lease of m ultiple item s where a new item (s) is provided or a previously leased item (s) is returned, and the average pay m ent allocable to a m onthly period is not changed by more than 25 per cent, or (2) a lease which is extended for not more than six m onths on a m onth-toinonth basis or otherwise. By order of the Board of Governors. October 8, 1976. T heodore E. A llison , Secretary of the Board. |FR D o c.7 6 -3 0 3 3 6 Filed FEDERAL REGISTER, V O L. 4 1 , N O . 2 0 1 — FRIDAY. OCTOBER 1 5 , 1 0 -1 4 -7 6 ; 8: 45 1976 am)
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