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- ? 3 Z e> July 8, 1982 To All Depository Institutions in the Second Federal Reserve District: Enclosed is a copy of the "Official Staff Commentary on Regulation M — Consumer Leasing," referred to in Circular No. 9298 9 dated May 25, 1982. Circulars Division FEDERAL RESERVE BANK OF NEW YORK Board of Governors of the Federal Reserve System Official Staff Commentary on Regulation M Consumer Leasing A n y in q u iry rela tin g to R e g u la tio n M sh o u ld b e a d d ressed to th e F ed era l R eserv e B an k o f th e F ed era l R e se r v e D istr ic t in w h ic h th e in q u iry arises. J u n e 1982 Contents Page Page I n t r o d u c t io n .............................................................. 1 S e c tio n 2 1 3 .1 — G e n era l P r o v i s i o n s ............. 1 S ectio n 2 1 3 .2 — D e fin itio n s an d R u le s o f C o n s t r u c t io n ......................................................... 2 5 S e c tio n 2 1 3 .4 — D i s c l o s u r e s ............................... 5 S e c tio n 2 1 3 .5 — A d v e r t is in g .................................. 13 13 A p p e n d ix B — P r o c e d u r e s an d C riteria for B oard D e te r m in a tio n R eg a rd in g A p p e n d ix C — M o d e l F o r m s ................................15 A p p e n d ix D — F ed era l E n fo r c e m e n t S ectio n 2 1 3 .7 — In c o n s iste n t S tate S ta te E x e m p t io n .....................................................14 P r e e m p t io n ...............................................................14 S ectio n 2 1 3 .6 — P reser v a tio n an d R e q u ir e m e n t s ...................................................... S ta te -R e g u la te d T r a n s a c t io n s ........................ 14 A p p e n d ix A — P r o c e d u r e s an d C riteria for S ectio n 2 1 3 .3 — E x e m p te d T r a n s a c t io n s . . . In sp e c tio n o f E v id e n c e o f C o m p lia n c e . . S ectio n 2 1 3 .8 — E x e m p tio n o f C ertain 14 A g e n c i e s .................................................................... 15 Official Staff Commentary on Regulation M INTRODUCTION 1. le ss th e c o n te x t in d ic a te s th a t a referen ce to p rev io u s R e g u la tio n Z Official status. T h is c o m m e n ta r y is th e v e ( 1 2 C F R 2 2 6 ) is a lso in te n d ed . h ic le b y w h ic h th e sta ff o f th e D iv is io n o f (c ) T hroughout C o n su m e r a n d C o m m u n ity A ffa irs o f th e F e d th e c o m m e n ta r y , refer e n c e to “ th is s e c tio n ” o r “ th is p a ra g ra p h ” eral R e se r v e B o a rd issu es official sta ff in te r m ea n s th e se c tio n or p aragrap h in th e reg u p reta tio n s o f R e g u la tio n M , effe ctiv e A p r il 1, la tio n th a t is th e su b ject o f th e c o m m e n t. 1981. G o o d fa ith c o m p lia n c e w ith th is c o m Comment designations. E a c h c o m m e n t in m en ta ry afford s p r o te c tio n from lia b ility u n 5. d er se c tio n 1 3 0 ( f ) o f th e T r u th in L e n d in g th e c o m m e n ta r y is id en tified b y a n u m b er an d A c t (1 5 U S C 1 6 4 0 ). S e c tio n 1 3 0 ( f ) p ro tects th e reg u la to ry se c tio n or p aragrap h th a t it in lesso rs fro m civ il lia b ility for a n y act d o n e or terp rets. T h e c o m m e n ts are d e sig n a te d w ith as o m itte d in g o o d fa ith in c o n fo r m ity w ith a n y m u c h sp ec ificity as p o ssib le a c c o r d in g to th e in te rp reta tio n issu ed b y a d u ly a u th o r iz e d offi p a rticu la r reg u la to ry p r o v isio n a d d ressed . F o r cia l ex a m p le, so m e o f th e c o m m e n ts to se c tio n or e m p lo y e e o f th e F ed era l R eserv e S y stem . 2. 2 1 3 .4 ( a ) are fu r th er d iv id e d b y su b p aragrap h , Procedures for requesting interpretations. U n d e r se c tio n 2 1 3 .1 ( d ) o f th e reg u la tio n , a n y o n e m a y req u est an official sta ff in te rp reta tio n . In terp reta tio n s th a t are a d o p ted w ill be in co rp o ra ted in th is c o m m e n ta r y fo llo w in g p u b lic a tio n in th e Federal Register. N o official sta ff in te rp reta tio n s are ex p e c te d to b e issu ed o th e r th a n by m ea n s o f th is co m m e n ta r y . 3. Status o f previous interpretations. A ll sta te m e n ts a n d o p in io n s issu ed b y th e F ed era l R e serv e B o a rd a n d its sta ff in te rp retin g p rev io u s R e g u la tio n Z rem a in effe ctiv e u n til O c to b er 1, 1 982, o n ly in so fa r a s th e y in terp ret th at r eg u la tio n . W h en c o m p lia n c e w ith R e g u la tio n M b e c o m e s m a n d a to r y o n O c to b e r 1, 1982, th e B o a rd a n d sta ff in te rp reta tio n s o f th e p rev io u s R e g u la tio n Z lea sin g p r o v isio n s w ill b e en tir e ly su p ersed ed b y R e g u la tio n M an d th is c o m m en ta ry , ex c e p t w ith regard to lia b ility u n d er th e p rev io u s reg u la tio n . 4. su ch as c o m m e n t 4 ( a ) ( 1 ) - 1 4 (a ) (l)-2 . an d c o m m e n t In o th e r ca ses, c o m m e n ts h a v e m o r e gen era l a p p lic a tio n an d are d esig n a ted , for ex a m p le , as c o m m e n t 4 ( a ) - l . T h is in tr o d u c tio n m ay be c ite d as c o m m e n ts 1-1 th r o u g h 1-6. T h e a p p e n d ix e s m a y b e c ite d as c o m m e n ts ap p . C - l a n d app. C -2. 6. Cross-references. T h e fo llo w in g c r o ss-refer e n c e s to rela ted m a ter ia l ap p ear at th e en d o f e a ch s e c tio n o f th e co m m e n ta ry : ( a ) “ S ta t u te ” — th o s e s e c tio n s o f th e T r u th in L e n d in g A ct on b ased ; w h ic h (b ) th e “ O th e r reg u la to ry p ro v isio n s e c tio n s ” — o th e r is p r o v i sio n s in th e reg u la tio n n ecessa ry to u n d e r sta n d th a t se ctio n ; la tio n ” — p a ra llel R e g u la tio n Z; an d b r ie f d e sc r ip tio n (c) “ P r e v io u s p r o v isio n s (d ) of th e in r eg u p rev io u s “ 1981 c h a n g e s” — a m ajor reg u la to ry c h a n g e s m a d e w h en th e lea sin g ru les w ere m o v e d from p rev io u s R e g u la tio n Z to R e g u la tio n M . Rules o f construction, ( a ) L ists th a t ap p ear in th e c o m m e n ta r y m a y b e e x h a u stiv e or illu stra tiv e; th e a p p ro p ria te c o n str u c tio n SECTION 213.1—General Provisions Foreign applicability. R e g u la tio n M ap p lies sh o u ld b e cle a r from th e c o n te x t. In m o st 1. ca ses, illu str a tiv e lists are in tr o d u c e d by to all p erso n s ( in c lu d in g b ra n ch es o f foreign p h ra ses su ch as “ in c lu d in g , b u t n o t lim ited b a n k s or lea sin g c o m p a n ie s lo c a te d in th e t o ,” “ a m o n g o th e r th in g s ,” “ for e x a m p le ,” U n ite d S ta te s ) th a t offer c o n su m e r lea ses to o r “ su ch a s .” resid en ts ( in c lu d in g resid en t a lie n s ) o f a n y ( b ) T h r o u g h o u t th e c o m m e n ta r y an d reg sta te as d efin ed in se c tio n 2 1 3 . 2 ( a ) ( 1 6 ) . T h e u la tio n , referen ce to th e r eg u la tio n sh o u ld reg u la tio n d o e s n o t a p p ly to a fo reig n b ran ch b e c o n str u e d to refer to R e g u la tio n M , u n o f a U .S . b an k or lea sin g c o m p a n y lea sin g to a 1 §213.1 R egulation M Official Staff C om m entary U .S . c itiz e n resid in g o r v isitin g ab road or to a 2. Persons covered. S ee th e c o m m e n ta r y to fo reig n n a tio n a l ab road . se c tio n 2 1 3 .5 ( a ) . 2. Issuance o f sta ff interpretations. T h is c o m m en ta ry is th e m e th o d b y w h ic h th e sta ff p ro v id e s in te rp reta tio n s th a t afford fo rm a l p ro 2(a)(4) “Arrange fo r Lease o f Personal Property ” te c tio n u n d er se c tio n 1 3 0 ( f ) o f th e act. T h is 1. General. T h e d efin itio n o f lesso r in se c tio n c o m m e n ta r y m a y b e a m e n d e d p e rio d ica lly . 2 1 3 . 2 ( a ) ( 8 ) in c lu d e s o n e w h o , in th e o r d i n ary co u r se o f b u sin e ss, reg u la rly arran ges for th e lea sin g o f p erso n a l p rop erty. F o r exam p le: References • Statute: §§ 1 0 2 ( b ) , 105, an d 1 3 0 ( 0 Previous regulation: § 2 26.1 1981 changes: N o n e A n a u to m o b ile d ea ler w h o , p u rsu a n t to a b u sin e ss r ela tio n sh ip , c o m p le te s th e n e c e s sary lea se a g r eem en t b efo re fo rw a rd in g it to th e le a sin g c o m p a n y ( t o w h o m th e o b li g a tio n is p a y a b le o n its fa c e ) for e x e c u tio n is “ a r ra n g in g ” for th e lease. SECTION 213.2—Definitions and Rules of Construction • A n a u to m o b ile d ea ler w h o , r ece iv in g n o fee for th e se rv ice, refers a c u sto m e r to a le a sin g c o m p a n y th a t w ill p rep are all rele v a n t c o n tr a c t d o c u m e n ts is n o t “ a rran g 2(a) Definitions in g ” for th e lease. 2. M ultiple lessors. S ee th e c o m m e n ta r y to 2(a)(2) “A dvertisem ent ” s e c tio n 2 1 3 .4 ( c ) . 1. Coverage. O n ly c o m m e r c ia l m e ssa g e s th a t p r o m o te c o n su m e r lea se tr a n sa c tio n s req u ir in g d isc lo s u r e s are a d v ertisem en ts. M essa g e s in v itin g , offerin g , o r o th e r w ise a n n o u n c in g g en era lly to p r o sp e c tiv e c u sto m e r s th e a v a il a b ility o f c o n su m e r lea ses, w h e th e r in v isu a l, o ra l, o r p rin t m ed ia , are c o v ere d b y th e d efin i tio n . T h e list o f e x a m p le s in th e d efin itio n is n o t ex h a u stiv e; te le p h o n e so lic ita tio n s an d le t 3. Consideration. T h e term “ o th e r c o n sid e r a tio n ” refers to an a c tu a l p a y m e n t c o r r e sp o n d in g to a fee or sim ila r c o m p e n sa tio n . It d o es n o t refer to in ta n g ib le b en efits, su c h as th e a d v a n ta g e o f in crea sed b u sin ess, th a t m a y flow fro m th e r e la tio n sh ip b e tw e e n th e p arties. 2(a)(6) “C on su m erL ease” ters se n t to c u sto m e r s a s p art o f an o r g a n iz e d 1. Prim ary purposes. A le sso r m u st d eterm in e s o lic ita tio n o f b u sin ess, for ex a m p le, are a lso in e a ch c a se i f th e lea sed p ro p erty w ill b e u sed a d v ertisem en ts. T h e term d o e s not in c lu d e th e p rim a rily for p erso n a l, fa m ily , or h o u se h o ld fo llo w in g : p u rp o ses. I f s o m e q u e stio n e x is ts a s to th e p ri • D ir e c t p erso n a l c o n ta c ts , su c h as f o llo w u p letters, c o s t e stim a te s for in d iv id u a l le s se es, o r ora l o r w ritte n c o m m u n ic a tio n s re la tin g to th e n e g o tia tio n of a sp ecific tra n sa ctio n • In fo r m a tio n a l m a ter ia l d istrib u ted o n ly to b u sin e sse s • N o t ic e s req u ired by fed eral or sta te la w , if th e la w m a n d a tes th a t sp ec ific in fo r m a tio n m a ry p u rp o se for a lease, th e lesso r is, o f c o u rse, free to m a k e th e d isc lo s u r e s, an d th e fa ct th a t d isc lo s u r e s are m a d e in su c h c ir c u m sta n c e s is n o t c o n tr o llin g o n th e q u e stio n o f w h e th e r th e tr a n sa ctio n w a s e x e m p t. T h e p ri m ary p u rp o se o f a lea se is g e n era lly d eter m in e d b efo re or at c o n su m m a tio n , an d a su b se q u en t c h a n g e in p rim ary u sa g e is g o v ern ed b y s e c tio n 2 1 3 .4 ( e ) . b e d isp la y e d a n d o n ly th e in fo r m a tio n so • 2. Period o f time. T o b e a c o n su m e r lease, th e m a n d a ted is in clu d ed in th e n o tic e in itia l term o f th e lea se m u st b e m o re th an fo u r m o n th s. T h u s, a lea se o f p erso n a l p ro p er ty for fo u r m o n th s, th ree m o n th s or o n a M a rk et resea rch o r e d u c a tio n a l m a ter ia ls m o n th -to -m o n th or w e e k -to -w e e k b a sis (e v e n th a t d o n o t so lic it b u sin ess • N e w s a rticles, th e u se o f w h ic h is c o n tro lled by th e n e w s m e d iu m th o u g h th e lea se a c tu a lly e x te n d s b e y o n d fou r 2 R egulation M Official Staff C om m entary m o n th s ) is n o t a c o n su m e r lea se an d is n o t § 2 1 3 .2 • B u rglar alarm sy s te m s req u irin g th e in sta l su b ject to th e d isc lo su r e req u irem en ts o f th e la tio n o f lea sed e q u ip m e n t th a t trig g ers a reg u la tio n . A lea se w ith a p e n a lty for c a n c e l te le p h o n e ca ll w h e n a h o m e is b u rg la rized lin g d u rin g th e first fo u r m o n th s is c o n sid er ed to h a v e a term o f m o re th a n fou r m o n th s. A m o n th -to -m o n th o r w e e k -to -w e e k e x te n sio n o f a lea se th a t w a s o r ig in a lly for fo u r m o n th s or less is n o t a c o n su m e r lease, ev en i f th e e x te n sio n a c tu a lly la sts for m o re th a n fo u r m o n th s. F o r ex a m p le , a th r e e -m o n th lea se ex te n d e d on 2(a)(7) “Lessee ” 1. Guarantors. G u a r a n to r s are n o t le sse e s for p u rp o ses o f th e reg u la tio n . 2(a)(8) “Lessor ” a m o n th -to -m o n th b a sis an d term in a ted after 1. Assignees. A n a ssig n e e m a y b e a lesso r for o n e y ea r d o e s n o t req u ire c o n su m e r lea se p u r p o se s o f th e reg u la tio n in c ir c u m sta n c e s d isclo su res. su c h as th o s e d esc rib ed in Ford M otor Credit 3. Organization. A c o n su m e r lea se d o e s n o t in c lu d e a lea se m a d e to an o r g a n iz a tio n , as d efin ed in se c tio n 2 1 3 . 2 ( a ) ( 9 ) . A lea se to an o r g a n iz a tio n is o u ts id e th e req u irem en ts o f th e Co. v. Cenance, 4 5 2 U .S . 155, 101 S .C t. 2 2 3 9 ( 1 9 8 1 ) . In th a t ca se, th e S u p rem e C o u rt h eld th a t an a ssig n e e w a s a c r ed ito r for p u rp o ses o f p r e v io u s R e g u la tio n Z b e c a u se o f its su b s ta n tial in v o lv e m e n t in th e cr e d it tra n sa ctio n . reg u la tio n ev en i f th e p ro p erty is u sed ( b y an e m p lo y e e , for e x a m p le ) p rim a rily for p e r so n al, fa m ily , o r h o u se h o ld p u rp o ses. L ik ew ise, a 2(a)(9) “ Organization ” Coverage. T h e term in c lu d e s jo in t v en tu r es lea se m a d e to an o r g a n iz a tio n is n o t a c o n 1. su m er lea se ev en if it is g u a ra n te ed b y o r su b an d p erso n s o p e r a tin g u n d er a b u sin ess n am e. se q u e n tly a ssig n ed to a n a tu ra l p erson . 2 (a )(12) “Personal Property” 4. Credit sale. A lea se th a t m eets th e d efin i tio n o f a cred it sa le in R e g u la tio n Z , 12 C F R 1. Coverage. W h e th e r p ro p erty is c o n sid e r e d 2 2 6 . 2 ( a ) ( 1 6 ) , is n o t a c o n su m e r lease. R e g u p erso n a l p ro p erty d e p e n d s o n sta te o r o th e r la tio n Z d efin es a cred it sa le , in part, as— a p p lic a b le la w . F o r ex a m p le , a m o b ile h o m e or a bailment or lease (unless terminable without pen alty at any time by the consumer) under which the consumer— (i) Agrees to pay as compensation for use a sum substantially equivalent to, or in excess of, the total value of the property and services involved; and (ii) Will become (or has the option to become), for no additional consideration or for nominal consideration, the owner of the property upon compliance with the agreement. h o u se b o a t m ay be c o n sid e r e d p erson al p ro p erty in o n e sta te b u t real p ro p erty in a n o th er. 2(a)(14) “R ealized Value ” 1. General. R e a liz e d v a lu e is n o t a req u ired d isc lo su r e . It refers to th e v a lu e o f th e p ro p er ty at ea rly term in a tio n o r at th e en d o f th e lea se term . It m a y b e eith e r th e retail or w h o le sa le v a lu e. R e a liz e d v a lu e is relev a n t 5. Safe deposit boxes. A lea se o f a sa fe d ep o sit o n ly to lea ses in w h ic h th e le s se e ’s lia b ility at b o x is n o t a c o n su m e r lea se for p u rp o ses o f ea rly te r m in a tio n or at th e en d o f th e lea se th is reg u la tio n . term is th e d ifferen ce b e tw e e n th e estim a te d v a lu e o f th e p ro p erty a n d its rea lized valu e. 6. Leases o f personal property incidental to a service. T h e fo llo w in g lea ses o f p erso n a l p ro p erty th a t are in c id e n ta l to se rv ices are n ot c o n su m er lea ses su b ject to th e req u irem en ts o f th e 2. Options. S u b ject to th e c o n tr a c t an d to sta te or o th e r a p p lic a b le la w , th e le sso r m a y c h o o s e a n y o f th e th r ee m e th o d s for c a lc u la t in g th e rea lized v a lu e in d e te r m in in g th e le s reg u la tio n : se e ’s lia b ility at th e en d o f th e lea se term or at • H o m e e n terta in m en t sy s te m s req u irin g th e early term in a tio n . I f th e lesso r se lls th e p r o p c o n su m e r to lea se e q u ip m en t th a t en a b les erty p rior to m a k in g th a t d e te r m in a tio n , th e a te le v isio n to rece iv e p ro g ra m m in g th e tra n sm itted p rice rece iv e d for th e p ro p erty is th e realized v a lu e. I f th e le sso r d o e s n o t se ll th e p ro p erty 3 §213.2 R egulation M Official S taff C om m entary p rio r to m a k in g th a t d e te r m in a tio n , th e lesso r n o t a se c u r ity in te rest for p u rp o ses o f th is m a y c h o o s e eith er th e h ig h e st offer or th e fair reg u la tio n . m a rk et v a lu e as th e rea lized valu e. 3. Exclusions. T h e rea lized v a lu e m a y e x c lu d e a n y a m o u n t a ttrib u ta b le to taxes. 4. Disposition charges. D is p o s itio n ch a rg es m a y n o t b e su b tra cted in d e te r m in in g th e rea l ized v a lu e. I f th e le sso r c h a rg es th e le sse e a fee to c o v e r th e d isp o s itio n e x p en se s, th e fee m u st b e d isc lo s e d at c o n su m m a tio n u n d er se c tio n 2 1 3 . 4 ( g ) ( 5 ) . D is p o s itio n c h a rg es m a y b e e s ti m a ted in a c c o r d a n c e w ith se c tio n 2 1 3 .4 ( d ) , 2(a)(17) “Total Lease O bligation” 1. Disclosure. T h e to ta l lea se o b lig a tio n is d is c lo s e d u n d er se c tio n 2 1 3 .4 ( g ) ( 1 5 ) ( i ) . It is relev a n t o n ly to so -c a lle d o p en -e n d lea ses in w h ic h th e le s s e e ’s lia b ility at th e en d o f th e lea se term is b a sed o n th e d ifferen ce b etw een th e estim a te d v a lu e o f th e lea sed p ro p erty an d its rea lized valu e. a n d th is d o e s n o t p rev en t th e lesso r fro m c o l 2. Periodic payments: disclosure distinguished. le c tin g th e a ctu a l d isp o s itio n c o s ts in cu rred . C erta in ite m s th a t m a y b e p aid p e r io d ic a lly 5. Offers. In d e te r m in in g th e h ig h e st offer for d isp o s itio n , th e lesso r n eed n o t c o n sid e r offers th a t th e offero r h a s w ith d ra w n o r is u n a b le or u n w illin g to p erform . 6. Appraisals. T h e le sso r m a y o b ta in an a p p ra isa l o f th e lea sed p ro p erty to d e te r m in e its rea lized v a lu e. S u ch an a p p raisal, h o w ev er, is n o t th e o n e a d d ressed in se c tio n 1 8 3 ( c ) o f th e a ct a n d se c tio n 2 1 3 .4 ( g ) ( 1 4 ) ; th o s e p r o v i sio n s refer to th e le s se e ’s righ t to an in d e p e n d en t p r o fe ssio n a l a p p ra isal. are n o t p art o f th e le s s e e ’s to ta l lea se o b lig a tio n . T h er efo re , th e a m o u n t o f th e sc h e d u le d p e r io d ic p a y m e n ts for p u rp o ses o f c a lc u la tin g th e to ta l lea se o b lig a tio n m a y b e less th a n th e a m o u n t o f th e p e r io d ic p a y m e n ts d isc lo se d u n d er s e c tio n 2 1 3 . 4 ( g ) ( 3 ) . 3. Periodic paym ents: inclusions and exclu sions. T h e to ta l o f sc h e d u le d p e rio d ic p a y m e n ts u n d er th e lea se for p u rp o ses o f c a lc u la t in g th e to ta l le a se o b lig a tio n is c o m p o se d o f th e fo llo w in g item s: • trib u ta b le to d ep r e c ia tio n , c o s t o f m o n e y , 2(a)(15) “Security Interest” 1. Coverage. T h e list o f se cu rity in te rests in an d profit • T a x e s in so m e c a s e s (S e e th e c o m m e n ta r y • T h e c a p ita liz e d c o s t o f m e c h a n ic a l b reak th e d efin itio n is n o t e x h a u stiv e. O th e r th an th o s e listed , o n ly in te rests th a t are se cu rity in to se c tio n 2 1 3 . 4 ( g ) ( 1 5 ) . ) terests u n d er sta te o r o th e r a p p lica b le la w are e n c o m p a ss e d by th e d efin itio n . F o r ex a m p le, a n y in terest th e lesso r m a y h a v e in th e lea sed p ro p erty fa lls w ith in th is d efin itio n o n ly if it is co n sid e r e d a se c u r ity in terest u n d er sta te or o th e r a p p lica b le law . 2. Disclosable interests. F o r p u rp o ses o f th e reg u la tio n , a se cu rity in te rest is an in terest d o w n p r o te c tio n c o n tr a c ts T h e to ta l o f sc h e d u le d p e r io d ic p a y m e n ts u n d er th e lea se for p u rp o ses o f c a lc u la tin g th e to ta l lea se o b lig a tio n th a t is n o t a lesso r m a k e s a loan to a lea sin g c o m p a n y a n d ta k e s a ssig n m e n ts o f c o n su m e r d o e s not in c lu d e th e fo llo w in g : • A n y a m o u n t n o t p aid p e r io d ic a lly • A n y p o rtio n o f p e r io d ic p a y m e n ts a ttrib u t ab le to official fees, reg istra tio n , certifica te ta k en b y th e lesso r to se cu re p erfo rm a n c e o f th e le s se e ’s o b lig a tio n . F o r ex a m p le , if a b an k A n y p o rtio n o f th e p e r io d ic p a y m e n ts a t o f title, or lic e n se fees • T a x e s in so m e c a s e s (S e e th e c o m m e n ta r y to se c tio n 2 1 3 . 4 ( g ) ( 1 5 ) . ) lea ses g en era ted by th at c o m p a n y to secu re A t th e le s so r ’s o p tio n , th e c a p ita liz e d c o s t o f th e lo a n , th e b a n k ’s se cu rity in terest in th e se rv ice le s so r ’s rece iv a b les is n o t a se cu rity in terest m a y b e eith er in c lu d e d or e x c lu d e d from th is for p u rp o ses o f th is reg u la tio n . c a lc u a tio n . 3. Insurance. T h e le s so r ’s righ t to in su ra n ce 4. Initial payments. T h e fo llo w in g a m o u n ts p r o ceed s o r u n ea rn ed in su ra n ce p rem iu m s is are not in c lu d e d a m o n g th e p a y m e n ts at c o n 4 c o n tr a c ts an d in su r a n c e p rem iu m s R egulation M Official Staff C om m entary § 213.4 su m m a tio n w h en c a lc u la tin g th e to ta l lea se d o e s n o t o c c u r m erely b e c a u se th e le sse e h as o b lig a tio n : m a d e so m e fin a n cia l in v e stm e n t in th e tra n s a c tio n (fo r ex a m p le , b y p a y in g a n o n refu n d a - • R e fu n d a b le se cu rity d e p o sits • O fficial fees a n d c h a rg es d isc lo s a b le u n d er se c tio n 2 1 3 . 4 ( g ) ( 4 ) • “ O th e r c h a r g e s” d isc lo s a b le u n d er se c tio n 2 1 3 .4 ( g )( 5 ) • The cost of p r o te c tio n a m e c h a n ic a l c o n tr a c t b rea k d o w n p u rch a sed at c o n su m m a tio n 5. E stim ated value. S ee th e c o m m e n ta r y to se c tio n 2 1 3 .4 ( d ) b le fe e ) u n less, o f c o u rse, a p p lica b le la w h o ld s o th e rw ise. References Statute: §§ 1 0 3 ( g ) an d 181 Previous regulation: § 2 2 6 .2 1981 changes: “ A g r ic u ltu r a l p u r p o se ” h as b een s lig h tly rev ised to c o n fo r m to th e a m e n d ed act. reg a rd in g th e u se o f e s ti m a tes a n d se c tio n 1 8 3 ( a ) o f th e a ct regard in g th e criteria fo r e stim a tin g th e v a lu e o f th e lea sed p ro p erty a t th e en d o f th e lea se term . SECTION 213.3—Exempted Transactions 2(a)(18) “ Value at Consummation ” References 1. Disclosure. T h e v a lu e at c o n su m m a tio n is Statute: § 1 0 5 ( a ) Previous regulation: § 2 2 6 .3 ( f ) 1981 changes: N o n e relev a n t o n ly to so -c a lle d o p e n -e n d lea ses an d is d isc lo s e d lea se a n d su b tra cted o b lig a tio n u n d er from se c tio n th e to ta l 2 1 3 .4 ( g ) - 0 5 )(i). 2. Taxes. The v a lu e at c o n su m m a tio n in SECTION 213.4— Disclosures c lu d e s ta x e s p a id by th e lesso r in c o n n e c tio n w ith th e a c q u isitio n o f lea sed p ro p erty an d 4(a) General Requirements a m o r tiz e d o v er th e lea se term . (S e e th e c o m 1. Basis o f disclosures. m en ta ry to se c tio n 2 1 3 . 4 ( g ) ( 1 5 ) . ) su m e s th a t p arties w ill p erform fu lly a c c o r d 3. Other amounts. T h e d efin itio n o f th e v a lu e in g to th e lea se term s. F o r exam p le: at c o n su m m a tio n e x p lic itly p erm its th e lesso r • to in c lu d e a p rofit o r m a rk u p (w ith o u t se p a rate it e m iz a t io n ). The lesso r m a y The reg u la tio n a s In a th r ee-y ea r lea se w ith a o n e -y e a r m in i m u m term after w h ic h th e re is n o p en a lty in c lu d e for te r m in a tio n , d isc lo s u r e s sh o u ld be c o s ts o f d o in g b u sin ess, su c h as in su ra n ce th at b a sed o n th e fu ll th r ee-y ea r term o f th e th e lesso r p u rch a ses o n its o w n b eh a lf. (S e e lease. T h e o n e -y e a r m in im u m term is o n ly th e c o m m e n ta r y to se c tio n 2 1 3 . 4 ( g ) ( 6 ) . ) T h e relev a n t to th e ea rly te r m in a tio n p r o v i lesso r m a y n o t in c lu d e in th is a m o u n t o th e r sio n s o f se c tio n 2 1 3 .4 ( g ) ( 1 2 ) , ( 1 3 ) , an d ite m s ( s u c h a s m a in te n a n c e o r ex te n d e d w a r (1 4 ). ra n ty in su r a n c e ) th a t are p u rch a sed b y th e lessee. 2. M inor variations. T h e le sso r m a y d isregard th e effects o f th e fo llo w in g in m a k in g c a lc u la tio n s an d d isclo su res: 2(b) Rules of Construction • 1. Footnotes. M a teria l th a t a p p ea rs in a f o o t n o te h a s th e sa m e leg a l w e ig h t as m a teria l in ce n ts • th e b o d y o f th e reg u la tio n . 2. Consummation. W h en a c o n tr a c tu a l rela tio n s h ip is crea ted b etw een th e le sso r an d th e le sse e is a m a tter to b e d eterm in ed u n d er sta te T h a t p a y m e n ts m u st b e c o lle c te d in w h o le T h a t d a te s o f sc h e d u le d p a y m e n ts m a y b e c h a n g e d b e c a u se th e sc h e d u le d d a te is n o t a b u sin e ss d ay • T h a t m o n th s h a v e d ifferen t n u m b ers o f d ays o r o th e r a p p lica b le law ; th e r eg u la tio n d o es 3. Form o f disclosures. In m a k in g d isc lo su r e s n o t m a k e th a t d e te r m in a tio n . C o n su m m a tio n le sso r s m a y c r o ss-referen ce rath er th a n rep eat 5 § 213.4 R egulation M Official Staff C om m entary Type size. T h e term “ p o in t” in th e p h rase item s th a t are d isc lo s e d else w h e r e in th e lease 2. d isc lo s u r e sta tem e n t. In a d d itio n , w h en a re “ 1 0-p oin t ty p e ” is a p rin tin g term th a t refers q u ired d isc lo s u r e c o n sis ts o f a sin g le ch a rg e, to lesso rs d o n o t h a v e to rep eat th e c h a rg e as an d istin g u is h e d from th e siz e o f th e ty p e fa ce , ite m iz a tio n a n d a to ta l a m o u n t. (S e e th e c o m w h ic h m en ta ry to s e c tio n 2 1 3 . 4 ( g ) ( 5 ) an d ( 1 5 ) . ) m a n u fa ctu rers. th e siz e o f th e m ay body v ary am ong o f th e ty p e , d ifferen t as p rin t 4. N um ber o f transactions. L e sso r s h a v e flex i b ility in h a n d lin g lea se tr a n sa ctio n s th a t m ay be v ie w e d as m u ltip le tra n sa ctio n s. For ex a m p le: • 1. Consummation. W h en a le sso r lea ses tw o ite m s to th e sa m e le sse e o n th e sa m e d a y , th e lesso r m a y d is c lo s e th e lea ses as eith er o n e or tw o lea se tra n sa ctio n s. • Paragraph 4(a)(2) W h en a lesso r se lls in su ra n ce o r o th e r in c i d en ta l se r v ic e s in c o n n e c tio n w ith a lease, th e le sso r m a y d isc lo s e in o n e o f tw o w ays: S ee th e c o m m e n ta r y 2. Identification o f parties. W h ile d isc lo s u r e s m u st a lw a y s b e m a d e cle a r ly an d c o n s p ic u o u sly , it is n o t n e c e ssa r y to u se th e w o rd s “ le s so r ” or “ le s s e e ” w hen id e n tify in g th o se p arties. a sin g le lea se tra n sa ctio n or a lea se an d a 3. M ultiple lessors and multiple lessees. cred it sa le tra n sa ctio n . tr a n sa c tio n s 5. Rebates. In a lea se tr a n sa ctio n , a se lle r ’s or m a n u fa ctu rer’s reb ate m ay b e offered to p ro sp e c tiv e lessees. A t th e le s so r ’s o p tio n , th e se reb a tes m a y b e eith e r reflected in or d isre g a rd to s e c tio n 2 1 3 .2 ( b ) . in v o lv in g m u ltip le In lesso rs an d lessees, th e d isc lo s u r e sta te m e n t m u st id en tify all th e le sso r s a n d lessees; h o w e v e r , se ctio n 2 1 3 .4 ( c ) p erm its a sin g le le sso r to m a k e all th e d isc lo s u r e s to a sin g le lessee. ed in th e lea se d isc lo s u r e s req u ired u n d er th e 4. Integrated lease/disclosure forms. C o n tra ct reg u la tio n . I f th e lesso r c h o o se s to reflect th e term s or d isc lo s u r e s th a t are n o t req u ired by reb a te in th e le a sin g d isc lo s u r e s, it m a y b e ta k th e r e g u la tio n m a y b e a d d ed to th e d isc lo su r e en in to a c c o u n t in a n y m a n n er as part o f th o se sta te m e n t so lo n g as th e req u ired d isc lo s u r e s d isc lo su r e s. are m a d e to g e th e r o n a sin g le p a g e (w h ic h m a y in c lu d e b o th s id e s ) an d a b o v e th e p la ce for th e le s se e ’s sig n a tu re. Paragraph 4(a)(1) G e n e r a lly , o th e r term s an d d isc lo s u r e s m a y p reced e, fo llo w , or Clearly, conspicuously, and in meaningful sequence. T h is sta n d a rd req u ires th a t d is c lo 1. su re s b e in a rea so n a b ly u n d ersta n d a b le form . F o r ex a m p le , w h ile th e reg u la tio n req u ires n o p a rticu la r m a th e m a tic a l p ro g ressio n or fo r m a t, th e d isc lo s u r e s m u st b e p resen ted in a b e in te r m in g le d w ith th e r e g u la tio n ’s d is c lo su re s w ith in th e lim its o f se c tio n 2 1 3 .4 ( b ) g o v e r n in g th e u se o f a d d itio n a l in fo r m a tio n an d th e clea r, c o n sp ic u o u s , an d m ea n in g fu l se q u e n c e d isc lo s u r e sta n d a rd in se ctio n 2 1 3 .4 ( a )( 1 ). w a y th a t d o e s n o t o b scu re th e rela tio n sh ip o f 5. Lessee's signature. T h e reg u la tio n d o e s n o t th e term s to ea ch o th er. A p p e n d ix C c o n ta in s req u ire th e le s se e to sig n th e d isc lo s u r e s b u t, i f m odel a l d isc lo s u r e s are c o m b in e d w ith c o n tr a c t term s, th o u g h lesso rs are n o t req u ired to u se th e se fo rm s th e le sso r m a y req u ire th e le s se e ’s sig n a tu re fo rm s. T h e req u irem en t th a t d isc lo s u r e s be for c o n tr a c t or e v id en tia r y p u rp o ses. In su ch a m ade n ot ca se, th e d isc lo s u r e s m u st b e m a d e a b o v e th e m ea n th a t th e y m u st b e m o re c o n sp ic u o u s p la ce for th e le s se e ’s sig n a tu re. W h en d is c lo th a n o th e r term s in a c o m b in e d c o n tr a c t-d is su res an d c o n tr a c t term s ap p ear o n b o th sid es c lo su r e sta te m e n t, n o r d o e s it p reclu d e th e u se o f a p age, th e c o n su m e r ’s sig n a tu re u su a lly o f a m u ltip u r p o se d isc lo s u r e form th a t en a b les ap p ears o n th e b o tto m o f th e se c o n d sid e. F o r th e lesso r to d e sig n a te th e sp ecific d isc lo su r e s p u rp o ses o f th e reg u la tio n , th e c o n su m e r ’s sig a p p lica b le to a g iv en tra n sa ctio n . n a tu re m a y ap p ear o n th e b o tto m o f th e first c le a r ly th a t and m eet th is sta n d a rd , c o n sp ic u o u s ly c o m m e n ta r y to a p p en d ix C .) 6 does (S e e th e sid e if all th e d isc lo s u r e s ap p ear o n th a t sid e. R egulation M Official Staff C om m entary § 2 1 3 .4 2. Basis o f estimates. E stim a te s m u st b e m a d e Paragraph 4(a)(4) 1. Permissible uses. I f th e le sso r c h o o s e s to p ro v id e fo r e ig n -la n g u a g e tr a n sla tio n s o f th e d isc lo s u r e s o r is req u ired to d o so b y state, fed era l, o r lo c a l la w , th e tr a n sla tio n s are n o t in c o n sis te n t p er se w ith d isc lo s u r e s u n d er th e reg u la tio n a n d m a y b e p ro v id ed as a d d itio n a l in fo r m a tio n u n d er se c tio n 2 1 3 .4 ( b ) . o n th e b asis o f th e b est in fo r m a tio n r e a so n ab ly a v a ila b le at th e tim e d isc lo s u r e s are m ad e. T h e “ rea so n a b ly a v a ila b le ” stan d ard req u ires th a t th e lesso r, a ctin g in g o o d faith , e x e r c ise d u e d ilig e n c e in o b ta in in g in fo r m a tio n . T h e lesso r n o r m a lly m a y rely o n th e rep r e se n ta tio n s o f o th e r p arties in o b ta in in g in fo rm a tio n . F o r ex a m p le , th e lesso r m ig h t lo o k 2. Advertisements in Puerto Rico. T h e req u ire to th e c o n su m e r to d e te r m in e th e p u rp o se for m en t for p r o v id in g E n g lish d isc lo su r e s u p on w h ic h lea sed p ro p erty w ill b e u sed , to in su r req u est d o e s n o t a p p ly to a d v e r tise m e n ts su b a n c e c o m p a n ie s for th e c o s t o f in su ra n ce, or to je c t to se c tio n 2 1 3 .5 o f th e reg u la tio n . an a u to m o b ile m a n u fa ctu rer or d ea ler for th e d a te o f d eliv ery . 4(b) Additional Information 1. State law disclosures. I f sta te law d is c lo 3. E stim ated value o f leased property at term i nation. W h en th e le s s e e ’s lia b ility at th e en d su res are n o t in c o n sis te n t w ith th e a ct an d o f th e lea se term is b a sed o n th e estim a te d r e g u la tio n u n d er s e c tio n 2 1 3 .7 , th e le sso r m ay v a lu e m a k e th o s e d isc lo su r e s in a c c o r d a n c e w ith th e 2 1 3 . 4 ( g ) ( 1 5 ) ) , th e e s tim a te m u st b e r e a so n first se n te n c e o f th is p aragrap h . I f sta te law ab le an d b a sed o n th e b est in fo r m a tio n r ea so n d isc lo su r e s se c tio n ab ly a v a ila b le to th e lesso r. T h a t sta n d a rd p er 2 1 3 .7 a n d th e lesso r e le c ts to m a k e th e m , it m its a le sso r to u se a g e n era lly a cc e p te d trad e m u st d o so in a c c o r d a n c e w ith th e se c o n d s e n p u b lic a tio n listin g estim a te d cu rren t or fu tu re te n c e o f th is p aragrap h . m a rk et p rices for th e lea sed p ro p erty , rath er are in c o n sis te n t u n d er o f th e lea sed p ro p erty (see se c tio n th a n in v e stin g in th e m o st so p h is tic a te d c o m 4(c) Multiple Lessors; Multiple Lessees p u ter e q u ip m e n t to d eriv e th e e s tim a te d v a lu e 1. M ultiple lessors. I f a lea se tra n sa ctio n in at th e en d o f th e lea se term . T h e lesso r sh o u ld v o lv e s m o re th a n o n e lesso r, th e lesso rs m ay rely o n o th e r in fo r m a tio n , its e x p erien ce, or c h o o s e w h ic h o f th e m w ill m a k e th e d is c lo rea so n a b le b elief, if th o s e so u r c e s p r o v id e th e su res. A ll d isc lo s u r e s fo r th e tr a n sa ctio n m u st b est in fo r m a tio n . F o r ex a m p le: b e g iv en , e v en if th e d isc lo s in g le sso r w o u ld • n o t o th e r w ise h a v e b een o b lig a te d to m a k e a A n a u to m o b ile lesso r o fferin g a th r ee-y ea r o p e n -e n d lea se in te n d s to a ssig n a w h o le p a rticu la r d isclo su re. sa le v a lu e to th e v e h ic le at th e en d o f th e lea se term . T h e lesso r m a y d isc lo s e as an 4(d) Unknown-Information Estimate e stim a te d v a lu e a w h o le sa le v a lu e d erived Time o f estim ated disclosure. T h e lesso r from a c r ed ib le trad e p u b lic a tio n listin g m a y u se e s tim a te s to m a k e d isc lo su r e s i f n e c cu rren t w h o le sa le va lu es, if th e trad e p u b 1. lic a tio n is th e b est in fo r m a tio n availab le. essa ry in fo r m a tio n is u n k n o w n or u n a v a ila b le at th e tim e th e d isc lo s u r e s are m ad e. F o r • S a m e fa cts as a b o v e, e x c e p t th a t th e lesso r d isc lo s e s an estim a te d v a lu e d eriv ed b y a d ex a m p le: ju s tin g th e v a lu e q u o te d in th e trad e p u b li • S e c tio n 2 1 3 . 4 ( g ) ( 4 ) req u ires th e lesso r to d isc lo s e th e to ta l a m o u n t p a y a b le b y th e le sse e d u rin g th e lea se term for official fees, reg istra tio n , certific a te o f title, lic e n se fees, o r ta x es. I f th e se a m o u n ts are su b ject to in d ete rm in a b le in crea ses or d ecrea ses o v er th e c o u r s e o f th e lease, th e lesso r m ay e s tim a te its d isc lo s u r e s b a sed o n th e rates or c h a rg es in effect d isclo su re. at th e tim e ca tio n b eca u se , in its e x p erien ce, th e trad e p u b lic a tio n v a lu es eith er u n d ersta te or o v e r sta te th e p rices a c tu a lly rece iv e d in lo ca l u se d -v e h ic le m a rk ets. T h e lesso r m ay ad ju st estim a te d v a lu e s q u o ted in trad e p u b lic a tio n s b a sed o n th e le s so r ’s e x p e r i e n c e or rea so n a b le b e lie f th a t su ch v a lu es w ill b e u n d ersta ted or o v ersta ted . of 4. R etail or wholesale value. T h e lesso r m ay 7 § 2 13.4 R egulation M Official Staff C om m entary c h o o s e eith e r a reta il o r a w h o le sa le v a lu e in u n d er se c tio n 2 1 3 . 4 ( g ) ( 9 ) . (S e e th e c o m m e n e s tim a tin g th e v a lu e o f th e lea sed p ro p erty at tary to a p p en d ix C .) te r m in a tio n , p ro v id ed th at c h o ic e is c o n sis te n t w ith th e le s so r ’s g en era l p ra ctice or in te n tio n w h en d e te r m in in g th e v a lu e o f th e p ro p erty at th e en d o f th e lea se term . 5. Labelling estimates. G e n e r a lly , o n ly 2. Other required disclosures. T h e d isc lo su r e sta te m e n t m u st in c lu d e th e d a te an d id en tify th e lesso r an d th e lessee. (S e e th e c o m m e n ta r y to se c tio n 2 1 3 . 4 ( a ) ( 2 ) . ) T h e lesso r n eed o n ly th e b e id en tified b y n am e; n o ad d ress is req u ired . p a rticu la r d isc lo su r e fo r w h ic h th e ex a ct in fo r m a tio n is u n k n o w n is lab elled as an e s ti Paragraph 4(g)(1) m a te. H o w e v e r , w h en sev era l d isc lo su r e s are 1. a ffected b e c a u se o f th e u n k n o w n in fo r m a tio n , lease, th e p ro p erty m a y b e d esc rib ed in se p a M ultiple-item th e lesso r h a s th e o p tio n o f la b ellin g as an e s ti rate m a te eith er ev ery a ffected d isc lo su r e or o n ly lease. In a m u ltip le -ite m 2 1 3 .4 ( a )( 3 ). sta te m e n ts as p ro v id ed in se ctio n th e d isc lo s u r e p rim a rily affected . 6. Understating the estim ated value. In n o n Paragraph 4(g)(2) p u r c h a se -o p tio n lea ses, th e lesso r m a y n ot u se 1. Itemization not required. T h e le sso r m u st a v a lu e lo w e r th a n th a t in d ica ted by th e b est d isc lo s e o n e to ta l in itia l p a y m e n t a m o u n t an d in fo r m a tio n a v a ila b le w h en d isc lo s in g th e e s ti id en tify th e c o m p o n e n ts o f th is o n e a m o u n t m a ted v a lu e o f lea sed p ro p erty at th e en d o f (fo r e x a m p le , c a p ita liz e d c o s t red u ctio n , m e th e lea se term u n d er se c tio n 2 1 3 . 4 ( g ) ( 1 5 ) . c h a n ic a l b rea k d o w n p r o te c tio n , reg istra tio n f e e s ) . T h e lesso r m a y , b u t n eed n o t, d isc lo s e 4(e)Effect of Subsequent Occurrence th e d o lla r a o u n t o f e a ch c o m p o n e n t. 1. Subsequent occurrences. E x a m p le s o f su b 2. Consummation. se q u en t o c c u r r e n c e s in clu d e: se c tio n 2 1 3 .2 ( b ) . S ee th e c o m m e n ta r y to 3. Fees payable upon delivery. T h is p ro v isio n d o e s n o t a p p ly to fees p a id at d eliv ery , w h en T h e a d d itio n o f in su ra n ce or a se c u r ity in d eliv ery terest b y th e lesso r b eca u se th e lessee h as exam p le: n o t p erfo rm ed o b lig a tio n s c o n tr a c te d for • A c h a n g e fro m a m o n th ly to a w e e k ly p a y m en t sc h e d u le • • in th e lea se • occu rs after c o n su m m a tio n . For T h e lessee a g rees to p ay reg istra tio n fees, sa les ta x es, a n d a d e liv ery c h a rg e in o n e lu m p su m o n th e d a te th e a u to m o b ile is th e c o m m e n ta r y to se c tio n 2 1 3 .4 ( d ) .) • A n in crea se in official fees or ta x e s (S e e d eliv ered , so m e tim e after c o n su m m a tio n . A n in crea se in in su ra n ce p rem iu m or c o v N o n e o f th e se c h a rg es is an in itia l p a y m e n t era g e c a u se d by a c h a n g e in law u n d er se c tio n 2 1 3 . 4 ( g ) ( 2 ) L a te d e liv ery o f an a u to m o b ile c a u se d by a are p aid after c o n su m m a tio n o f th e lease. strik e • T h e reg istra tio n fees an d sa le s ta x e s are b e c a u se th e y 2. Redisclosure. W h en a d isc lo su r e b e c o m e s d isc lo se d u n d er se c tio n 2 1 3 . 4 ( g ) ( 4 ) , and in a ccu ra te b eca u se o f a su b seq u en t o c c u r th e d eliv ery c h a rg e is d isc lo s e d as an “ o t h ren ce, th e lesso r n eed n ot m a k e n ew d is c lo er c h a r g e ” u n d er se c tio n 2 1 3 . 4 ( g ) ( 5 ) . su res u n less n ew d isc lo su r e s are req u ired u n d er se c tio n 2 1 3 .4 ( h ) . Paragraph 4(g)(3) 4(g)Specific Disclosure Requirements 2 1 3 .4 ( g )( 3 ) 1. Inapplicable disclosures. T h e d isc lo su r e s re ite m iz e th e c o m p o n e n ts o f th e p erio d ic p a y 1. Itemization q u ired by th is se c tio n n eed b e m a d e o n ly as a p p lica b le. A n y d isc lo su r e n ot relevan t to a p a rticu la r tra n sa ctio n m ay b e e lim in a ted e n tirely . F o r ex a m p le , if th e lesso r d o e s n ot tak e a se c u r ity in terest, n o d isc lo su r e is req u ired not required. S ectio n d o e s n o t req u ire th e lesso r to m en ts. S o m e o f th e c o m p o n e n ts m u st b e d is c lo s e d se p a r a tely i f th eir d isc lo su r e is req u ired by o th e r p ro v isio n s o f th e reg u la tio n , su ch as official fees an d le s se e ’s in su ra n ce. 2. Periodic payments. T h e p h ra se “ n u m b er, R egulation M Official Staff C om m entary a m o u n t, a n d d u e d a te s or p erio d s o f p a y § 2 1 3 .4 ch a rg es th a t are n o t req u ired to b e d isc lo s e d m e n ts ” req u ires th e d isc lo su r e o f all p a y m e n ts u n d er a n o th e r p r o v isio n o f se c tio n 2 1 3 .4 ( g ) . m a d e p erio d ica lly . T h e d isc lo s e d F o r exam p le: p a y m e n ts m u st in c lu d e all a m o u n ts, su c h as m a in te n a n c e a n d in su ra n ce ch a rg es, th a t are p aid p e • su m m a tio n r io d ica lly . In a d d itio n , th e le sso r m u st d is as an “ o th e r part o f th e to ta l in itia l ch a r g e s u n d er se c d isc lo s e as th e to ta l o f p e r io d ic p a y m e n ts th e tio n su m o f th e sc h e d u le d p e rio d ic p a y m e n ts re (S e e th e d isc lo s e d c o n su m m a tio n , h o w ev er, is d isc lo s e d as an o p e n -e n d lea se, h o w ev er, th e lesso r m a y c o m m e n ta r y to se c tio n 2 1 3 . 2 ( a ) ( 1 7 ) . ) is c h a r g e .” A d eliv ery ch a rg e th a t is p a id at c lo s e th e to ta l o f su c h p e rio d ic p a y m e n ts. In ferred to in se c tio n 2 1 3 . 2 ( a ) ( 1 7 ) . A d eliv ery c h a rg e th a t is p aid after c o n 2 1 3 .4 ( g )( 2 ), not as an “ o th e r c h a r g e .” • O c c a s io n a lly , th e p rice o f a m e c h a n ic a l b rea k d o w n p r o te c tio n ( M B P ) co n tr a c t is d isc lo s e d as an “ o th e r c h a r g e .” M o r e o f Paragraph 4(g)(4) ten , th e p rice o f M B P is reflected in th e p e r io d ic p a y m e n t d isc lo s u r e u n d er se c tio n 1. Taxes. T a x e s th a t are in c lu d e d in th e v a lu e 2 1 3 . 4 ( g ) ( 3 ) , in w h ic h ca se it is n o t d is at c o n su m m a tio n are n o t d isc lo s e d p u rsu a n t c lo s e d to th is p a ra g ra p h . (S e e th e c o m m e n ta r y s e c as an “ o th e r c h a r g e .” In sta tes w h ere M B P is regard ed as in su ra n ce, h o w tio n 2 1 3 .2 ( a ) ( 1 8 ) . ) ever, th e c o s t sh o u ld b e d isc lo s e d in a c c o r d a n c e w ith se c tio n 2 1 3 . 4 ( g ) ( 6 ) , n o t as Paragraph 4(g)(5) an “ o th e r c h a r g e .” (S e e th e c o m m e n ta r y to se c tio n 2 1 3 . 4 ( g ) ( 6 ) . ) 1. Coverage. S e c tio n 2 1 3 . 4 ( g ) ( 5 ) req u ires th e th e p a rties a s in cid en t to th e n o rm a l o p era tio n Lessee liabilities a t the end o f the lease term. L ia b ilitie s th a t th e lea se im p o s e s u p o n o f th e lea se a g reem en t. It d o e s n o t req u ire d is th e le sse e at th e en d o f th e sc h e d u le d lea se d isc lo su r e o f ch a rg es th a t are a n tic ip a ted by 4. c lo su r e o f c h a rg es th a t are im p o se d w h e n th e term an d th a t m u st b e d isc lo s e d in clu d e, but le sse e term in a tes ea rly o r fa ils to ab id e b y th e are n o t lim ite d to, d isp o s itio n an d “ p ic k -u p ” lea se a g reem en t, su ch as c h a rg es for: ch a rg es. • L a te p a y m e n t • D e fa u lt • E a rly term in a tio n • D eferra l o f p a y m e n ts • E x te n sio n o f th e lea se 2. Form o f disclosure. A lth o u g h th e d is c lo su re o f an “ o th e r c h a r g e ” or th e to ta l o f all o th e r c h a rg es m u st b e clea r an d c o n sp ic u o u s , th e lesso r n eed n o t u se th e sp ec ific te r m in o lo g y “ o th e r c h a r g e .” M o reo v e r, th e reg u la tio n d o e s n o t im p o se a lo c a tio n req u irem en t for th e d isc lo s u r e o f o th e r ch a rg es. F o r exam p le: • A le sso r h a s a sin g le o th e r ch a rg e, w h ic h is a d isp o s itio n fee o f $ 1 0 0 . T h e lesso r m a y d isc lo s e th e d isp o s itio n fee w ith related d isc lo s u r e s a b o u t ea rly o r sc h e d u le d te r m i n a tio n . It m a y b u t n eed n o t rep eat th e c h a rg e as a to ta l w ith th e lab el o f “ o th e r c h a r g e ” o r sh o w a to ta l o f o th e r ch a rg es. Paragraph 4(g)(6) 1. Lessor's insurance. In su ra n ce th a t is p u r c h a se d b y th e lesso r p rim a rily for its o w n b e n efit, a n d th a t is a b sorb ed as a b u sin e ss e x p e n se an d n o t se p a r a tely ch a rg ed to th e lessee, n eed n o t b e d isc lo s e d u n d er se c tio n 2 1 3 . 4 ( g ) ( 6 ) ev en if it p r o v id e s an in c id e n ta l b en efit to th e lessee. 2. M echanical breakdown protection. W h eth e r m e c h a n ic a l b rea k d o w n p r o te c tio n (M B P ) p u rch a sed in c o n ju n c tio n w ith a lea se sh o u ld b e trea ted as in su r a n c e is d eterm in ed b y sta te or o th e r a p p lica b le law . In sta te s th a t d o n o t treat M B P as in su ra n ce, th e lesso r n eed n ot m a k e se c tio n le sso r m ay, 2 1 3 .4 ( g )( 6 ) h o w ev er, d isc lo su r e s. T h e d isc lo s e th e se c tio n 2 1 3 . 4 ( g ) ( 6 ) in fo r m a tio n in su ch ca se s in a c 3. Relationship to other provisions. T h e o th e r c o r d a n c e w ith th e a d d itio n a l in fo r m a tio n p ro ch a rg es m e n tio n e d in se c tio n 2 1 3 . 4 ( g ) ( 5 ) are v isio n in se c tio n 2 1 3 .4 ( b ) . 9 §213.4 R egulation M Official S taff C om m entary Paragraph 4(g)(7) a c c o u n tin g lease, th e a d d itio n a l lea se ch a rg e 1. B rief identification. T h e sta te m e n t id e n tify in g w a rra n ties m a y b e brief. F o r ex a m p le, m a n u fa c tu r e r ’s w a rra n ties m a y b e id en tified sim p ly b y a referen ce to th e sta n d a rd m a n u fa ctu re r’s w a rra n ty . 2. Warranty th a t a c c r u e s o n th e lea se b a la n ce w h e n a p eri o d ic p a y m e n t is m a d e after th e d u e d a te d o es n o t c o n stitu te a p e n a lty or o th e r c h a rg e for late p a y m e n t. S im ila rly , c o n tin u e d accru a l o f th e lea se c h a rg e after te r m in a tio n o f th e lea se b e c a u se th e le sse e fails to retu rn th e lea sed disclaimers. d is p ro p erty d o e s n o t c o n stitu te a d efa u lt ch a rg e. cla im e r o f w a rra n ties is n o t req u ired b y th e In eith e r ca se, if th e a d d itio n a l c h a rg e a ccru es r e g u la tio n , th e lesso r m a y g iv e a d isc la im e r as at a rate h ig h er th a n th e n o rm a l lea se ch arge, a d d itio n a l th e le sso r m u st d isc lo s e th e a m o u n t o f or th e in fo r m a tio n A lth o u g h in a accordance w ith m e th o d o f d e te r m in in g th e a d d itio n a l ch a rg e s e c tio n 2 1 3 .4 ( b ) . 3. State law. W h e th e r an ex p ress w arra n ty or u n d er se c tio n 2 1 3 .4 ( g ) ( 1 0 ) . g u a ra n ty e x is ts is d e term in ed b y sta te or o th e r 4. Extension charges. E x te n sio n ch a r g e s th at a p p lica b le law . e x c e e d th e lea se c h a rg e in a sim p le-in terest a c c o u n tin g lea se or th a t are a d d ed se p a r a tely are Paragraph 4(g)(8) d isc lo s e d u n d er s e c tio n 2 1 3 .4 ( g ) ( 1 0 ) . 1. Standards fo r wear and use. T h e lesso r is 5. Reasonableness o f charges. p erm itted , b u t n o t req u ired , to set sta n d a rd s o th e r c h a rg es for d e lin q u e n c y , d efa u lt, or ear P e n a ltie s or for w ea r a n d u se ( s u c h as e x c e s s m ile a g e ). ly te r m in a tio n m a y b e sp ec ified in th e lease, T h e d isc lo s u r e m a y b e o m itte d b y lesso rs th at b u t o n ly in an a m o u n t th a t is reason ab le. S ec d o n o t set su ch sta n d a rd s. (S e e th e c o m m e n tio n 1 8 3 ( b ) o f th e a ct se ts fo rth th e sta n d a rd s ta ry to se c tio n 2 1 3 . 4 ( g ) ( 1 5 ) . for d e te r m in in g a rea so n a b le p e n a lty or ch a rg e. Paragraph 4(g)(9) 1. Disclosable security interests. S ee se c tio n Paragraph 4(g) (11) to d e te r m in e w h a t se cu rity in te rests m u st be 1. M andatory disclosure o f no purchase op tion. A lth o u g h g e n era lly th e lesso r n eed o n ly d isclo sed . m a k e th e sp ec ific req u ired d isc lo s u r e s th a t a p 2 1 3 .2 ( a ) ( 1 5 ) a n d a c c o m p a n y in g c o m m e n ta r y p ly to a tra n sa ctio n , it m u st d is c lo s e affirm a Paragraph 4(g) (10) tiv ely th a t th e le sse e h a s n o o p tio n to p u r 1. Collection costs. T h e a u to m a tic im p o s itio n o f c o lle c tio n c o s ts o r a tto rn ey fees u p o n d e c h a se th e lea sed p ro p erty w h en th e p u rch a se o p tio n is in a p p lica b le. se ctio n 2. Existence o f purchase option. W h e th e r a c o s ts or a tto rn ey p u rch a se o p tio n e x is ts is d eterm in ed by sta te fees th a t are n o t im p o se d a u to m a tic a lly , b ut or o th e r a p p lica b le law . T h e le s se e ’s righ t to are c o n tin g e n t u p o n e x p en d itu re o f a m o u n ts su b m it a b id to p u rch a se p ro p erty at te r m in a in c o n ju n c tio n w ith a c o lle c tio n p r o ceed in g or tio n o f th e lea se is n o t an o p tio n to p u rch a se u p o n th e e m p lo y m e n t o f an a tto rn ey to effect u n d er se c tio n 2 1 3 .4 ( g ) ( 1 1 ) i f th e lesso r is n ot c o lle c tio n , n eed n o t b e d isc lo se d . req u ired to a c c e p t th e le s se e ’s b id an d th e le s fa u lt m u st be 2 1 3 .4 ( g ) (1 0 ). d isc lo se d C o lle c tio n u n d er 2. Charges fo r early termination. W h en d e see d o e s n o t rece iv e p referen tia l trea tm en t. fa u lt is a c o n d itio n for early term in a tio n o f a 3. Purchase option fees. A p u rch a se o p tio n fee lea se, d efa u lt ch a rg es m u st a lso b e d isc lo s e d m u st b e d isc lo s e d u n d er th is p aragrap h u n less u n d er th e se c tio n 2 1 3 .4 ( g ) (1 2 ). 2 1 3 .4 ( g ) ( 1 0 ) a n d The se ctio n ( 1 2 ) d isc lo s u r e s m ay be lesso r d isc lo s e s th e fee u n d er se ctio n 2 1 3 . 4 ( g ) ( 5 ) as an o th e r ch arge. c o m b in e d . E x a m p le s o f c o m b in e d d isc lo su r e s are p ro v id ed in th e m o d e l lea se d isc lo su r e fo rm s in a p p en d ix C. 3. Sim ple-interest leases. In a sim p le-in terest 10 Paragraph 4(g) (12) 1. Default. W h en d efa u lt is a lso a c o n d itio n for early term in a tio n of a lease, d efa u lt R egulation M Official Staff C om m entary § 2 1 3 .4 c h a rg es m u st b e d isc lo s e d u n d er th is p a ra tim e after te r m in a tio n o f th e lease. T h e r eg u grap h . la tio n d o e s n o t d efin e w h a t is a “ rea so n a b le ( S e e 't h e c o m m e n ta r y to se c tio n 2 1 3 .4 ( g )( 1 0 ). tim e .” 2. Lessee's liability a t early termination. W h en th e le sse e is lia b le for th e d ifferen ce b etw een th e u n a m o r tiz e d c a p ita liz e d c o s t an d th e rea l ized v a lu e at ea rly te r m in a tio n , th e a m o u n t or th e m e th o d o f d e te r m in in g th e a m o u n t o f th e d ifferen ce m u st be d isc lo s e d u n d er th is p aragrap h . 1. Coverage. The d isc lo su r e u n d er se c tio n 2 1 3 .4 ( g ) ( 1 5 ) lim itin g th e le s s e e ’s lia b ility for th e v a lu e o f th e lea sed p ro p erty d o e s n o t a p p ly at ea rly term in a tio n . 3. Reasonableness o f charges. P e n a ltie s or o th e r c h a rg es for d e lin q u e n c y , d efa u lt, or ear ly te r m in a tio n m a y b e sp ecified in th e lease, b u t o n ly in an a m o u n t th a t is rea so n a b le. S e c tio n 1 8 3 ( b ) o f th e a ct se ts fo rth th e sta n d a rd s fo r Paragraph 4(g)(15) d e te r m in in g a rea so n a b le p e n a lty or ch a rg e. 2. Total lease obligation. The req u irem en t th a t th e to ta l lea se o b lig a tio n b e ite m iz e d is satisfied b y d isc lo s in g th e th r ee c o m p o n e n ts in th e d efin itio n o f to ta l lea se o b lig a tio n in s e c tio n 2 1 3 . 2 ( a ) ( 1 7 ) w ith th eir co r r e sp o n d in g a m o u n ts. T h e le sso r m a y c r o ss-referen ce th e in d iv id u a l c o m p o n e n ts d isc lo s e d e lse w h e r e in th e le a se d isc lo s u r e sta te m e n t, as d o n e in a p p e n d ix C - l . Paragraph 4(g) (14) 3. Taxes. T a x e s in c lu d e d in th e v a lu e at c o n 1. Disclosure inapplicable. W h en th e le sse e is lia b le a t th e en d o f th e lea se term or at early te r m in a tio n fo r u n rea so n a b le w ea r or u se b ut not fo r th e estim a te d v a lu e o f th e lea sed p ro p erty , th e lesso r n eed n o t d isc lo s e th e le s se e ’s rig h t to an in d e p e n d e n t ap p raisal. For ex a m p le: • T h e a u to m o b ile lesso r m a y rea so n a b ly e x p ect a lessee to retu rn an u n d e n te d car w ith fo u r g o o d tires a t th e en d o f th e lea se term . E v e n th o u g h it h o ld s th e le sse e lia b le for th e d ifferen ce b e tw e e n a d e n te d car su m m a tio n are in c lu d e d in th e to ta l lea se o b li g a tio n . T a x e s n o t in c lu d e d in th e v a lu e at c o n su m m a tio n m a y , b u t n eed n o t, b e in c lu d e d in th e to ta l le a se o b lig a tio n at th e le s so r ’s o p tio n . (S e e th e c o m m e n ta r y to se c tio n 2 1 3 .2 ( a ) - ( 1 8 ).) 4. Leases with a m inim um term. I f a lea se h as an a lte r n a tiv e m in im u m term , th e se c tio n 2 1 3 .4 ( g ) ( 1 5 ) d isc lo s u r e s g o v e r n in g th e lia b il ity lim ita tio n are n o t a p p lic a b le for th e m in i m u m term . (S e e th e c o m m e n ta r y to se c tio n 2 1 3 .4 ( a ) .) rea so n a b ly g o o d rep air, th e lesso r is n o t 5. Average paym en t allocable to a m onthly p e riod. T h e p h ra se “ a v era g e p a y m e n t a llo c a b le req u ired to d isc lo s e th e le s se e ’s ap p raisal to a m o n th ly p e r io d ” is b a sed o n th e p erio d ic w ith b a ld tires a n d th e v a lu e o f a car in righ t. 2. Lessor's appraisal. T h e lesso r m a y o b ta in an a p p ra isa l o f th e lea sed p ro p erty to d e te r m in e its rea lized v a lu e. S u ch an ap p raisal, h o w ev er, is n o t th e o n e a d d ressed in se c tio n p a y m e n t u sed to c o m p u te th e to ta l le a se o b li g a tio n . (S e e th e c o m m e n ta r y to se c tio n 2 1 3 .2 ( a )( 1 7 ).) 6. Charges not subject to rebuttable presum p tion. T h e lim ita tio n o n lia b ility a p p lies o n ly to 1 8 3 ( c ) o f th e a ct, a n d th e lesso r still m u st lia b ility th a t is b a sed o n th e e s tim a te d v a lu e o f d isc lo s e th e le s se e ’s in d ep en d e n t righ t to an th e p ro p erty at th e en d o f th e lea se term . T h e a p p ra isa l u n d er se c tio n 2 1 3 .4 ( g ) ( 1 4 ) . 3. Time restriction on appraisal. N e ith e r th e a ct n o r th e reg u la tio n sp ec ifies a n y tim e p eri lesso r a lso m a y r eco v e r a d d itio n a l ch a rg es from th e le sse e at th e en d o f th e lea se term . E x a m p le s o f su c h a d d itio n a l c h a rg es in clu d e: o d in w h ic h th e lessee m u st ex e r c ise th e a p • D is p o s itio n ch a rg es p ra isa l righ t. T h e lesso r m a y req u ire a lessee • E x c e ss -m ile a g e ch a rg es to o b ta in th e ap p ra isa l w ith in a rea so n a b le • L a te p a y m e n t an d d efa u lt ch a rg es 11 § 213.4 • R egulation M Official S taff C om m entary A m o u n ts b y w h ic h th e u n a m o r tiz e d c a p i an d e x c e e d s six m o n th s, n e w d isc lo s u r e s are ta liz e d c o s t e x c e e d s th e estim a te d resid u al req u ired at th e c o m m e n c e m e n t o f th e se v en th v a lu e th a t h a v e a ccru ed in sim p le in te rest m o n th . I f a c o n su m e r lea se is e x te n d e d for a c c o u n tin g le a se s b e c a u se th e le sse e h a s sev era l term s, o n e o f w h ic h w ill e x c e e d six m o n th s b ey o n d th e o r ig in a lly sc h e d u le d ter m a d e la te p a y m e n ts m in a tio n d a te o f th e lease, n e w d isc lo s u r e s are 4(h ) Renegotiations or Extensions req u ired at th e c o m m e n c e m e n t o f th e term 1. General coverage. S e c tio n 2 1 3 .4 ( h ) a p p lies o n ly to e x is tin g lea ses th a t w ere c o v ere d by th e r eq u irem en ts o f th e reg u la tio n or p rev io u s R e g u la tio n Z. It th e refo re d o e s n o t ap p ly to th e re n e g o tia tio n o r e x te n sio n o f lea ses w ith an in itia l term o f fo u r m o n th s or less, b eca u se th a t w ill e x c e e d six m o n th s b e y o n d th e o r ig i n a lly sc h e d u le d te r m in a tio n d ate. 6. Inapplicable disclosures. D is c lo s u r e s th a t are in a p p lic a b le to th e term s o f a re n e g o tia tio n o r e x te n sio n n eed n o t b e g iv en . For ex a m p le: su c h lea ses are n o t c o v ere d by th e d efin itio n o f c o n su m e r lea se in se c tio n 2 1 3 . 2 ( a ) ( 6 ) . • I f th e term for w h ic h e x te n sio n d isc lo su r e s 2. Renegotiation defined. A r e n e g o tia tio n o c are g iv en is o n e m o n th a n d th e le sse e w ill cu rs w h en an e x is tin g c o n su m e r lea se is sa tis p ay n o official fees an d ta x e s d u rin g th at fied a n d rep la ced b y a n ew lea se u n d erta k en m o n th , n o d isc lo s u r e o f th o s e a m o u n ts is n ecessa ry . b y th e sa m e lessee. A ren e g o tia tio n is a n ew lea se req u irin g n ew d isclo su res. W h e th e r an d • If a r e n e g o tia tio n in v o lv e s no in itial w h en a lea se is sa tisfied an d rep la ced b y a n ew ch a rg es, n o d isc lo s u r e o f in itia l ch a rg es is lea se is d e term in ed b y sta te or o th e r a p p lic a n ecessa ry . b le law . 7. Court proceedings. N o d isc lo s u r e s are re 3. Renegotiation exceptions. The fo llo w in g q u ired i f a re n e g o tia tio n or e x te n sio n resu lts e v e n ts are n o t r e n e g o tia tio n s ev en if th e y are from a c c o m p lish e d b y sa tisfy in g an d rep la cin g an p ro ceed in g . an a g reem en t in v o lv in g a cou rt e x is tin g lease: • A su b stitu tio n o f lea sed p rop erty in a m u l tip le -ite m lea se, p ro v id ed th e a v era g e p a y 8. Deferrals. N o d isc lo s u r e s are req u ired if o n e or m o r e p a y m e n ts are d eferred , w h eth er or n o t a fee is ch a rg ed . m en t is n o t c h a n g e d by m o re th a n 25 p ercen t 9. Assumptions. N o d isc lo s u r e s are req u ired • A red u ctio n in th e lea se ch a rg e w h en a c o n su m e r lea se is a ssu m e d b y a n o th er • A su b stitu tio n o f lea sed p rop erty w ith p ro p erty th a t h a s a su b sta n tia lly e q u iv a p erso n , w h e th e r or n o t an a ssu m p tio n fee is ch arged . len t o r g rea ter e c o n o m ic v a lu e, p rovid ed n o o th e r lea se term s are ch a n g ed 4. Extension defined. An e x te n sio n is an y c o n tin u a tio n o f an e x is tin g c o n su m e r lea se b e yond th e o rig in a lly sc h e d u le d term in a tio n d a te, b u t o n ly if th e c o n tin u a tio n is n o t th e resu lt o f a ren eg o tia tio n . T h e co n tin u a tio n m u st b e ag reed to by b o th th e lesso r an d th e lessee. A n e x te n sio n th a t e x c e e d s six m o n th s is a n ew lea se req u irin g n ew d isc lo su r e s. References Statute: §§ 1 0 2 ( b ) , 121, 122, 124, 182, an d 183 Other sections: §§ 2 1 3 .2 , 2 1 3 .5 , an d 2 1 3 .7 and a p p en d ix C Previous regulation: §§ 2 2 6 .6 an d 2 2 6 .1 5 1981 changes: A lth o u g h reo rg a n ized , th e d is 5. Time o f extension disclosures. I f a c o n s u m c lo su r e er lea se is e x ten d ed for a sp ecified term greater sa m e a s th e p rev io u s req u irem en ts. T h e so le th a n six m o n th s, n ew d isc lo su r e s are req u ired a m e n d m e n t im p le m e n ts se c tio n at th e tim e th e e x te n sio n is agreed to. I f th e T ru th in L e n d in g A c t p erta in in g to m u ltip le lea se is e x ten d ed o n a m o n th -to -m o n th b asis lesso rs an d lessees. 1 2 req u irem en ts are su b sta n tia lly 121 th e o f th e R egulation M Official Staff C om m entary § 2 13.6 SECTION 213.5—Advertising 5(c) Terms That Require Additional Information 5(a) General Rule 1. Clear and conspicuous standard. S e c tio n 2 1 3 .5 ( c ) p rescrib es n o sp ec ific ru les for th e 1. Persons covered. A ll “ p e r s o n s” m u st c o m fo rm a t o f th e n ecessa ry d isc lo su r e s. T h e term s p ly w ith th e a d v ertisin g p r o v isio n s in th is s e c n eed n o t b e p rin te d in a certa in ty p e siz e an d tio n , n o t ju s t th o s e th a t m e e t th e d efin itio n o f n eed n o t ap p ear in a n y p a rticu la r p la c e in th e “ le s so r ” in s e c tio n 2 1 3 . 2 ( a ) ( 8 ) . T h u s, a u to a d v ertisem en t. m o b ile d ea lers, m erch a n ts, an d o th e r s w h o are n o t th e m s e lv e s lesso rs m u st c o m p ly w ith th e 2. Triggering terms. W h en ev er certa in tr ig a d v ertisin g p r o v isio n s o f th e reg u la tio n i f th e y g erin g term s a p p ea r in lea se a d v ertisem en ts, a d v ertise c o n su m e r lea se tr a n sa ctio n s. The th e a d d itio n a l term s en u m e ra te d in se c tio n o w n e r a n d p e r so n n e l o f th e m e d iu m in w h ic h 2 1 3 . 5 ( c ) ( 1 ) th r o u g h ( 5 ) m u st a lso ap p ear. an a d v e r tise m e n t a p p ea rs or th r o u g h w h ic h it A n e x a m p le o f o n e o r m o re ty p ic a l lea ses w ith is d isse m in a te d , h o w e v e r , are n o t su b ject to a sta te m e n t o f all th e term s a p p lica b le to e a ch civ il m a y b e u sed . T h e a d d itio n a l term s m u st b e lia b ility fo r v io la tio n s u n d er se c tio n d isc lo s e d e v en i f th e trig g erin g term is n o t 1 8 4 ( b ) o f th e a ct. sta ted e x p lic itly , b u t is rea d ily d eterm in a b le 2. “ Usually and customarily. ” S e c tio n fro m th e a d v e r tise m e n t. F o r ex a m p le , i f an 2 1 3 .5 ( a ) is n o t in te n d ed to p ro h ib it th e a d v er a d v e r tise m e n t sta te s a fiv e-y ea r le a se term tisin g o f a sin g le item o r th e p r o m o tio n o f n ew w ith m o n th ly p a y m e n ts, th e n u m b er o f re lea sin g p ro g ra m s, b u t to bar th e a d v ertisin g o f q u ired p a y m e n ts— a trig g erin g term — is rea d i term s th a t are n o t a n d w ill n o t b e av a ila b le. ly ap p aren t. T h u s, an a d v e r tise m e n t m a y sta te term s th a t w ill b e o ffered for o n ly a lim ite d p erio d or term s th a t w ill b e c o m e a v a ila b le at a fu tu re 5(d) Multiple-Item Leases; Merchandise Tags d a te. 1. Merchandise tags. S e c tio n 2 1 3 .5 ( d ) p ro v id e s a m e th o d for u sin g m e r c h a n d ise ta g s 5(b) Catalogs and Multipage Advertisements w ith o u t in c lu d in g all th e req u ired d isc lo s u r e s o n th e ta g s. A s an a lte r n a tiv e to th is d is c lo 1. General rule. T h e m u ltip le -p a g e a d v e r tise m e n ts to w h ic h se c tio n 2 1 3 .5 ( b ) refers are a d v er tise m e n ts c o n sis tin g o f a n u m b ere d series o f p a g es— fo r ex a m p le, a su p p le m e n t to a su re m e th o d , a m e r c h a n d ise ta g m a y sta te all th e n e c e ssa r y term s o n o n e or b o th sid e s o f th e tag. I f th e term s are o n b o th sid es o f th e tag, b o th sid es m u st b e a c c e ssib le to th e co n su m er. n ew sp a p er . A m a ilin g co m p r ise d o f sev era l sep a ra te flyers o r p ie c e s o f p r o m o tio n a l m a te rial in a sin g le e n v e lo p e is n o t a sin g le m u lti p le-p a g e a d v ertisem en t. 2. Cross-references. A m u ltip le -p a g e adver tise m e n t is a sin g le a d v e r tise m e n t (req u irin g o n ly o n e se t o f lea se d isc lo s u r e s) i f it c o n ta in s References Statute: §§ 1 0 5 ( a ) a n d 184 Other sections: § 2 1 3 . 2 ( a ) ( 2 ) a n d ( 6 ) Previous regulation: § 2 2 6 .1 0 ( a ) , ( b ) , ( g ) , an d ( h ) 1981 changes: N o n e a ta b le, ch a rt, o r sc h e d u le cle a r ly sta tin g suffi c ie n t in fo r m a tio n fo r th e read er to d eterm in e th e d isc lo s u r e s req u ired u n d er se c tio n 2 1 3 . 5 ( c ) ( 1 ) th r o u g h ( 5 ) . I f o n e o f th e tr ig g erin g term s listed in se c tio n 2 1 3 .5 ( c ) ap p ears SECTION 213.6— Preservation and Inspection of Evidence of Compliance o n a n o th e r p a g e o f th e c a ta lo g o r m u ltip le- 1. Preservation methods. L e sso r s m u st retain p a g e a d v e r tise m e n t, th a t p a g e m u st c lea rly re e v id e n c e th a t th e y p erfo rm ed req u ired a c tio n s fer to th e sp ec ific p a g e w h ere th e tab le, ch art, as w e ll as m a d e req u ired d isc lo su r e s. A d e o r sc h e d u le b eg in s. q u a te e v id e n c e o f c o m p lia n c e d o e s n o t req u ire 13 R egulation M Official Staff C om m entary §213.6 a ctu a l p a p er c o p ie s o f d isc lo su r e sta te m e n ts or tio n s o f t h o s e p r o v isio n s m u st b e g e n era lly th e o th e r b u sin ess reco rd s. T h e e v id e n c e m a y be sa m e as th e fed era l a ct an d th e r eg u la tio n . A reta in ed o n m icro film , m icro fich e, or b y an y sta te w ill b e e lig ib le for an e x e m p tio n e v en if o th e r m e th o d d esig n ed to rep ro d u ce reco r d s its la w c o v e r s c la sse s o f tr a n sa c tio n s n o t c o v a cc u r a te ly (in c lu d in g c o m p u te r p r o g r a m s). ered b y th e fed era l law . F o r ex a m p le , i f a T h e lesso r n eed reta in o n ly en o u g h in fo r m a s ta te ’s la w c o v e r s lea ses for a g ricu ltu r a l p u r tio n to reco n str u c t th e req u ired d isc lo s u r e s or p o ses, th is w ill n o t p rev en t th e B o a rd from g ra n tin g an e x e m p tio n for c o n su m e r leases, o th e r reco rd s. ev en th o u g h lea ses for a g ricu ltu r a l p u rp o ses References are n o t c o v e r e d b y th e fed era l law . Statute: § 1 0 5 ( a ) Previous regulation: § 2 2 6 .6 ( i ) 1981 changes: A u n ifo rm tw o -y e a r record q u irin g a d eq u a te p r o v isio n for en fo r c e m e n t reten tio n are ru le rep la ces th e p rev io u s 3. A dequate enforcement. T h e sta n d a rd re g e n era lly m e a n s th a t ap p ro p ria te sta te officials a u th o r iz e d to e n fo r c e th e sta te law req u irem en t th a t reco r d s b e retain ed th r o u g h th r o u g h p r o ced u res a n d sa n c tio n s co m p a ra b le at lea st o n e c o m p lia n c e e x a m in a tio n . to th o s e a v a ila b le to fed era l en fo r c e m e n t a g en cies. SECTION 213.7— Inconsistent State Requirements 1. Procedures. O n ly sta te s (th r o u g h th e ir a u References Statute: §§ 1 1 1 ( a ) ( 2 ) a n d 1 8 6 ( b ) Other sections: §§ 2 1 3 .2 ( a ) ( 1 6 ) an d 2 1 3 .4 ( b ) th o r iz e d o fficia ls) m a y req u est an d r ece iv e d e an d a p p en d ix A te r m in a tio n s Previous regulation: § 2 2 6 . 6 ( b ) ( 3 ) 1981 changes: N o n e on in c o n sis te n c y . The p roce d u res for req u estin g a B oard d e te r m in a tio n o n in c o n sis te n c y are c o n ta in e d in a p p en d ix B. 2. Inconsistent state disclosures. A lesso r th at c h o o s e s to m a k e in c o n sis te n t sta te d isc lo su r e s m u st d o so in th e m a n n er p rescrib ed b y s e c APPENDIX A—Procedures and Criteria for State Exemptions tio n 2 1 3 .4 ( b ) . References References Statute: §§ 1 1 1 ( a ) ( 1 ) a n d 1 8 6 ( a ) Other sections: §§ 2 1 3 .2 ( a ) ( 1 6 ) an d 2 1 3 .4 ( b ) Statute: § 1 8 6 ( b ) Other sections: § 2 1 3 .8 Previous regulation: § 2 2 6 .8 0 (s u p p le m e n t V I, a n d a p p en d ix B Previous regulation: § 2 2 6 . 6 ( b ) ( 3 ) 1981 changes: N o n e §D SECTION 213.8— Exemption of Certain State-Regulated Transactions APPENDIX B—Procedures and Criteria for Board Determination Regarding Preemption 1. Classes eligible. T h e sta te d ete r m in e s th e 1981 changes: N o n e c la sse s o f tr a n sa c tio n s for its e x e m p tio n an d m a k e s it a p p lic a tio n fo r th o s e cla sses. C la sses m ig h t be, for ex a m p le , a ll a u to m o b ile lea ses or all lea ses in w h ic h th e le sso r is a b an k . 2. Substantial similarity. T h e “ su b sta n tia lly sim ila r ” sta n d a rd req u ires th a t sta te sta tu to ry o r reg u la to ry p r o v iso n s an d sta te in terp reta- 14 References Statute: § 1 8 6 ( a ) Other sections: § 2 1 3 .7 Previous regulation: § 2 2 6 .8 0 (s u p p le m e n t V I, §H ) 1981 changes: N o n e R egulation M Official Staff C om m entary A ppendix D 11) APPENDIX C—Model Forms 1. Permissible changes. A lth o u g h u se o f th e m o d e l fo rm s is n o t req u ired , lesso rs u sin g th e m p ro p erly w ill b e d e e m e d to b e in c o m p li a n ce w ith th e reg u la tio n . L e sso r s m a y m a k e certa in c h a n g e s in th e fo rm a t or c o n te n t o f th e fo rm s a n d m a y d e le te a n y d isc lo su r e s th at are to b e d isc lo s e d sim p ly b y cro ss-referen ce to th e p rev io u s item s. S ee th e c o m m e n ta r y to se c tio n 2 1 3 . 2 ( a ) ( 1 7 ) . T h e in c lu sio n o f ta x es in th e b a sic m o n th ly paym ent d isc lo su r e (m e n tio n e d in th e in str u c tio n s to item 4 ( a ) ) is n o t m a d a to ry in all ca ses. (S e e th e c o m m en ta ry to se c tio n 2 1 3 . 4 ( g ) ( 1 5 ) . ) th e a c t’s p ro te c tio n from lia b ility . T h e c h a n g 3. M odel closed-end or net vehicle lease disclo sures. M o d e l C -2 is d e sig n e d for a c lo s e d -e n d es to th e m o d e l fo rm s m a y n o t b e so e x te n siv e or n et lea se o f a v eh icle. A c lo s e d -e n d or net in a p p lica b le to a tra n sa ctio n w ith o u t lo sin g as to affect th e su b sta n ce, cla rity , or m e a n in g lea se is o n e in w h ic h th e le s se e ’s lia b ility at th e fu l se q u e n c e o f th e fo rm s. E x a m p le s o f a c c e p t en d o f th e lea se term is not b a sed o n th e differ a b le c h a n g e s in clu d e: en c e b etw een th e estim a te d v a lu e o f th e lea sed p rop erty an d its rea lized valu e. Ite m 1 3 ( c ) is • U s in g th e first p erso n , in stea d o f th e s e c o n d p erso n , in referrin g to th e lessee • w h ic h th e le s se e ’s lia b ility at early term in a tio n U s in g “ le s se e ,” “ le s so r ,” or n a m e s in stea d o f p ro n o u n s • in clu d ed for th o s e c lo se d -e n d v e h ic le lea ses in is b a sed o n th e v e h ic le ’s estim a te d valu e. (S e e se c tio n 2 1 3 . 4 ( g ) ( 1 4 ) . ) R ea rr a n g in g th e se q u e n c e of th e 4. M odel furniture lease disclosures. d isc lo su r e s M odel • En C - 3 is a c lo s e d -e n d lea se d isc lo su r e sta te m e n t g lis h ” req u irem en ts • d esig n ed for a ty p ic a l fu rn itu re lease. It d o e s D e le tin g in a p p lica b le d isc lo su r e s by w h it n o t in c lu d e a d isc lo s u r e o f th e ap p raisal righ t In c o r p o r a tin g certa in sta te “ p lain in g o u t, b lo c k in g o u t, fillin g in “ N / A ” or “ ’O ,” c r o ssin g o u t, se c tio n 2 1 3 .4 ( g ) ( 1 4 ) b eca u se few c lo s e d -e n d lea v in g b la n k s, c h e c k in g a b o x for a p p lic a fu rn itu re lea ses b a se th e le s se e ’s lia b ility at b le item s. early term in a tio n o n th e estim a te d v a lu e o f ( T h is sh o u ld p erm it u se o f m u ltip u rp o se th e lea sed p ro p erty . T h e d isc lo su r e m ay be sta n d a rd fo r m s .) • at ea rly te r m in a tio n th a t is req u ired u n d er ( n o t a p p lic a b le ) ad d ed , if it is a p p lica b le , w ith o u t lo ss o f th e A d d in g la n g u a g e o r sy m b o ls to in d ica te fo r m ’s p r o te c tio n from c iv il liab ility. item s, o r cir c lin g a p p lica b le estim a te s 2. M odel open-end or finance vehicle lease dis References en d o r fin a n ce lea se o f a v eh icle. A n o p en -e n d Statute: §§ 105, 130, an d 185 Previous regulation: §§ 2 2 6 .1 5 0 1 , 2 2 6 .1 5 0 2 , or fin a n ce lea se is o n e in w h ic h th e le s se e ’s an d 2 2 6 .1 5 0 3 closures. M o d e l C - l is d esig n ed for an op en - lia b ility at th e en d o f th e lea se term is b ased 1981 changes: R efe r e n c e s in th e in str u c tio n s o n th e d ifferen ce b etw een th e estim a te d v alu e to th e p rev io u s r eg u la tio n h a v e b een d eleted . o f th e lea sed p ro p erty a n d its rea lized valu e. S ectio n 2 1 3 .4 ( g ) ( 1 5 ) ( i ) req u ires d isclo su re o f an ite m iz e d to ta l lea se o b lig a tio n for su ch lea ses. T o fa c ilita te th is d isc lo su r e , m o d e l C - l APPENDIX D—Federal Enforcement Agencies d iv id e s th e in itia l ch a rg es (ite m 3 ) in to tw o ca teg o ries: th o s e th a t are in clu d ed in th e total lea se o b lig a tio n a n d th o s e th at are n ot. T h e a m o u n t o f th e m o n th ly p a y m e n t (ite m 4 ) is sim ila rly d iv id ed . T h is form at p erm its th e c o m p o n e n ts o f th e to ta l lea se o b lig a tio n (ite m References Statute: § 108 Previous regulation: A p p e n d ix E 1981 changes: N o n e 15
@FedFRASER