Consumer Leasing, 21135-21141 [E7-7877]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 72, Number 82 (Monday, April 30, 2007)]
[Proposed Rules]
[Pages 21135-21141]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-7877]


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FEDERAL RESERVE SYSTEM

12 CFR Part 213

[Regulation M; Docket No. R-1283]


Consumer Leasing

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed rule; request for comments.

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SUMMARY: The Board is proposing to amend Regulation M, which implements 
the Consumer Leasing Act, to withdraw portions of the interim final 
rules for the electronic delivery of disclosures issued March 30, 2001. 
The interim final rules address the timing and delivery of electronic 
disclosures, consistent with the requirements of the Electronic 
Signatures in Global and National Commerce Act (E-Sign Act). Compliance 
with the 2001 interim final rules is not mandatory. Thus, removing the 
interim rules from the Code of Federal Regulations would reduce 
confusion about the status of the provisions and simplify the 
regulation. The Board is also proposing to amend Regulation M to 
provide that when an advertisement is accessed by a consumer in 
electronic form, certain disclosures must be provided to the consumer 
in electronic form on or with the advertisement, and that in these 
circumstances the consumer consent and other provisions of the E-Sign 
Act do not apply. Similar rules are being proposed under other consumer 
fair lending and financial services regulations administered by the 
Board.

DATES: Comments must be received on or before June 29, 2007.

ADDRESSES: You may submit comments, identified by Docket No. R-1283, by 
any of the following methods:
     Agency Web site: https://www.federalreserve.gov. Follow the 
instructions for submitting comments at https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.

[[Page 21136]]

     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: regs.comments@federalreserve.gov. Include the 
docket number in the subject line of the message.
     FAX: (202) 452-3819 or (202) 452-3102.
     Mail: Jennifer J. Johnson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue, 
NW., Washington, DC 20551.
    All public comments are available from the Board's Web site at 
https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, your 
comments will not be edited to remove any identifying or contact 
information. Public comments may also be viewed electronically or in 
paper form in Room MP-500 of the Board's Martin Building (20th and C 
Streets, NW.) between 9 a.m. and 5 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: John C. Wood or David A. Stein, 
Counsels, Division of Consumer and Community Affairs, at (202) 452-2412 
or (202) 452-3667. For users of Telecommunications Device for the Deaf 
(TDD) only, contact (202) 263-4869.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Consumer Leasing Act (CLA), 15 U.S.C. 1667-1667e, was enacted 
into law in 1976 as an amendment to the Truth in Lending Act (TILA), 15 
U.S.C. 1601 et seq. The CLA requires lessors to provide lessees with 
uniform cost and other disclosures about consumer lease transactions. 
The act generally applies to consumer leases of personal property in 
which the contractual obligation does not exceed $25,000 and has a term 
of more than four months. An automobile lease is the most common type 
of consumer lease covered by the act. The Board's Regulation M (12 CFR 
part 213) implements the act. The CLA and Regulation M require 
disclosures to be provided in writing.

Board Proposals Regarding Electronic Disclosures

    On May 2, 1996, the Board proposed to amend Regulation E 
(Electronic Fund Transfers) to permit financial institutions to provide 
disclosures by sending them electronically (61 FR 19696). Based on 
comments received, in 1998 the Board published an interim rule 
permitting the electronic delivery of disclosures under Regulation E 
(63 FR 14528, March 25, 1998) and proposals under Regulations B (Equal 
Credit Opportunity), M (Consumer Leasing), Z (Truth in Lending), and DD 
(Truth in Savings) (63 FR 14552, 14538, 14548, and 14533, respectively, 
March 25, 1998).
    Based on comments received on the 1998 proposals, in September 1999 
the Board published revised proposals under Regulations B, E, M, Z, and 
DD (64 FR 49688, 49699, 49713, 49722 and 49740, respectively, September 
14, 1999). At the same time, the Board published an interim rule under 
Regulation DD allowing depository institutions to deliver disclosures 
on periodic statements in electronic form if the consumer agreed (64 FR 
49846, September 14, 1999). While these rulemakings were pending, 
federal legislation was enacted addressing the use of electronic 
documents and records, including consumer disclosures.

Federal Legislation Addressing Electronic Commerce

    On June 30, 2000, the President signed into law the Electronic 
Signatures in Global and National Commerce Act (the E-Sign Act) (15 
U.S.C. 7001 et seq.). The E-Sign Act provides that electronic documents 
and electronic signatures have the same validity as paper documents and 
handwritten signatures. The E-Sign Act contains special rules for the 
use of electronic disclosures in consumer transactions. Under the E-
Sign Act, consumer disclosures required by other laws or regulations to 
be provided or made available in writing may be provided or made 
available, as applicable, in electronic form if the consumer 
affirmatively consents after receiving a notice that contains certain 
information specified in the statute, and if certain other conditions 
are met.
    The E-Sign Act, including the special consumer notice provisions, 
became effective October 1, 2000, and did not require implementing 
regulations. Thus, financial institutions are currently permitted to 
provide in electronic form any disclosures that are required to be 
provided or made available to the consumer in writing under Regulations 
B, E, M, Z, and DD if the consumer affirmatively consents to receipt of 
electronic disclosures in the manner required by section 101(c) of the 
E-Sign Act.

The Interim Final Rules

    On March 30, 2001, the Board published for comment interim final 
rules to establish uniform standards for the electronic delivery of 
disclosures required under Regulation M (66 FR 17322). Similar interim 
final rules for Regulations B, E, Z, and DD were published on March 30, 
2001 (66 FR 17329 (Z)) and April 4, 2001 (66 FR 17779 (B), 66 FR 17786 
(E), and 66 FR 17795 (DD)). The interim final rules incorporated most 
of the provisions that were part of the 1999 proposals.
    Each of the interim final rules incorporated, but did not 
interpret, the requirements of the E-Sign Act. Lessors, financial 
institutions, creditors, and other persons, as applicable, generally 
were required to obtain consumers' affirmative consent to provide 
disclosures electronically, consistent with the requirements of the E-
Sign Act.
    The 2001 interim final rule for Regulation M established uniform 
requirements for the timing and delivery of electronic disclosures. 
Under the interim rule, disclosures could be sent to an e-mail address 
designated by the lessee, or could be made available at another 
location, such as an Internet Web site. If the disclosures were not 
sent by e-mail, lessors would have to provide a notice to lessees 
alerting them to the availability of the disclosures. Disclosures 
posted on a Web site would have to be available for at least 90 days to 
allow lessees adequate time to access and retain the information. 
Lessors also would be required to make a good faith attempt to 
redeliver electronic disclosures that were returned undelivered, using 
the address information available in their files. Similar provisions 
were included in the interim final rules adopted under Regulations B, 
E, Z, and DD.
    Commenters on the interim final rules identified significant 
operational and information security concerns with respect to the 
requirement to send the disclosure or an alert notice to an e-mail 
address designated by the consumer. For example, commenters stated that 
some consumers do not have e-mail addresses or may not want personal 
financial information sent to them by e-mail. Commenters also noted 
that e-mail is not a secure medium for delivering confidential 
information and that consumers' e-mail addresses frequently change. The 
commenters also opposed the requirement for redelivery in the event a 
disclosure was returned undelivered. In addition, many commenters 
asserted that making the disclosures available for at least 90 days, as 
required by the interim final rule, would increase costs and would not 
be necessary for consumer protection.
    In August 2001, in response to comments received, the Board lifted 
the previously established October 1, 2001 mandatory compliance date 
for all of the interim final rules. (66 FR 41439,

[[Page 21137]]

August 8, 2001.) Thus, institutions are not required to comply with the 
interim final rules. Since that time, the Board has not taken further 
action with respect to the interim final rules on electronic 
disclosures in order to allow electronic commerce, including electronic 
disclosure practices, to continue to develop without regulatory 
intervention and to allow the Board to gather further information about 
such practices.

II. The Proposed Rules

    The Board is proposing to amend Regulation M and the official staff 
commentary by (1) withdrawing portions of the 2001 interim final rule 
on electronic disclosures that restate or cross-reference provisions of 
the E-Sign Act and accordingly are unnecessary; (2) withdrawing other 
portions of the interim final rule that the Board now believes may 
impose undue burdens on electronic banking and commerce and may be 
unnecessary for consumer protection; and (3) retaining the substance of 
certain provisions of the interim final rule that provide regulatory 
relief or guidance regarding electronic disclosures. (Similar 
amendments are also being proposed by the Board, in today's issue of 
the Federal Register, under Regulations B, E, Z, and DD.)
    Because compliance with the 2001 interim final rules is not 
mandatory, removing most portions of the interim rules from the Code of 
Federal Regulations, while finalizing other provisions, would reduce 
confusion about the status of the electronic disclosure provisions and 
simplify the regulation. The Board is proposing to adopt certain 
provisions that are identical or similar to provisions in the 2001 
interim final rules in order to enhance the ability of consumers to 
shop for leases online, minimize the information-gathering burdens on 
consumers, and provide guidance or eliminate a substantial burden on 
the use of electronic disclosures, as discussed further below.
    Since 2001, industry and consumers have gained considerable 
experience with electronic disclosures. During that period, the Board 
has received no indication that consumers have been harmed by the fact 
that compliance with the interim final rules is not mandatory. The 
Board also has reconsidered certain aspects of the interim final rules, 
such as sending disclosures by e-mail, in light of concerns about data 
security, identity theft, and ``phishing'' (i.e., prompting consumers 
to reveal confidential personal or financial information through 
fraudulent e-mail requests that appear to originate from a financial 
institution, government agency, or other trusted entity) that have 
become more pronounced since 2001. Finally, the Board is proposing to 
eliminate certain aspects of the 2001 interim final rule, such as 
provisions regarding the availability and retention of electronic 
disclosures, as unnecessary in light of current industry practices.
    The 2001 interim final rule allowed lessors to provide certain 
disclosures to lessees electronically, without regard to the consumer 
consent or other provisions of the E-Sign Act, for disclosures provided 
on or with an electronic advertisement. The Board reasoned that these 
disclosures, which would be available to the general public while 
shopping for a lease, did not ``relate to a transaction,'' which is a 
prerequisite for triggering the E-Sign consumer consent provisions, and 
thus were not subject to those provisions. Some commenters on the 
interim final rules did not agree with the Board's rationale. Upon 
further consideration, the Board does not believe it is necessary to 
determine whether or not these disclosures are related to a 
transaction. This proposal does not make such determinations.
    Instead, pursuant to the Board's authority under section 187 of the 
CLA, as well as under section 104(d) of the E-Sign Act,\1\ the Board is 
proposing to specify the circumstances under which certain disclosures 
may be provided to a lessee in electronic form, rather than in writing 
as generally required by Regulation M, without obtaining the lessee's 
consent under section 101(c) of the E-Sign Act. The proposed rule would 
also amend Regulation M, as discussed in detail below, to provide that 
certain disclosures must be provided to a consumer in electronic form 
on or with an advertisement that is accessed by the consumer in 
electronic form.
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    \1\ Section 187 of CLA provides that regulations prescribed by 
the Board under CLA ``may provide for adjustments and exceptions * * 
* as the Board considers appropriate.'' Section 104(d) of the E-Sign 
Act authorizes federal agencies to adopt exemptions for specified 
categories of disclosures from the E-Sign notice and consent 
requirements, ``if such exemption is necessary to eliminate a 
substantial burden on electronic commerce and will not increase the 
material risk of harm to consumers.'' For the reasons stated in this 
Federal Register notice, the Board believes that these criteria are 
met in the case of the advertising disclosures. In addition, the 
Board believes CLA section 187 authorizes the Board to permit 
institutions to provide disclosures electronically, rather than in 
paper form, independent of the E-Sign Act.
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    The Board continues to believe that lessors should not be required 
to obtain the consumer's consent in order to provide advertising 
disclosures to the consumer in electronic form if the consumer accesses 
the advertisement containing those disclosures in electronic form, such 
as at an Internet Web site. The Board believes consumers would not be 
harmed, and in fact would benefit, by having timely access to 
advertising disclosures in electronic form when they are viewing online 
lease advertising. The Board also believes that consumers' ability to 
shop for leases online and compare the terms of various lease offers 
could be substantially diminished if consumers had to consent in 
accordance with the E-Sign Act in order to access advertisements that 
must be accompanied by disclosures. Applying the consumer consent 
provisions of the E-Sign Act to these disclosures could impose 
substantial burdens on electronic commerce and make it more difficult 
for consumers to gather information and shop for leases.
    At the same time, the Board recognizes that consumers who shop or 
apply for leases online may not want to receive other disclosures 
electronically. Therefore, with respect to the disclosures required 
prior to the consummation of a lease, lessors would be required to 
provide written disclosures or obtain the lessee's consent in 
accordance with the E-Sign Act to provide the disclosures in electronic 
form.
    Finally, the Board is proposing to delete, as unnecessary, certain 
provisions that restate or cross-reference the E-Sign Act's general 
rules regarding electronic disclosures (including the consumer consent 
provisions) and electronic signatures because the E-Sign Act is a self-
effectuating statute. The proposed revisions to Regulation M and the 
official staff commentary are described more fully below in the 
Section-by-Section Analysis.
    The Board solicits comment on all aspects of this proposal. 
Specifically, the Board seeks comment on the appropriateness of 
eliminating certain provisions and retaining other provisions contained 
in the 2001 interim final rule.

III. Section-by-Section Analysis

12 CFR Part 213 (Regulation M)

Section 213.3 General Disclosure Requirements

    Section 213.3(a) generally requires lessors to provide disclosures 
in writing and in a form that the lessee may keep. The Board proposes 
to revise Sec.  213.3(a) to clarify that lessors may provide 
disclosures to lessees in electronic form, subject to compliance with 
the consumer consent and other applicable provisions of the E-Sign Act. 
Some lessors may provide disclosures to

[[Page 21138]]

lessees both in paper and electronic form and rely on the paper form of 
the disclosures to satisfy their compliance obligations. For those 
lessors, the duplicate electronic form of the disclosures may be 
provided to lessees without regard to the consumer consent or other 
provisions of the E-Sign Act because the electronic form of the 
disclosure is not used to satisfy the regulation's disclosure 
requirements.
    Section 213.3(a) would also be revised to provide that the 
advertising disclosures required by Sec.  213.7 must be provided to the 
consumer in electronic form if the consumer accesses the advertisement 
electronically. Under those circumstances, those disclosures may be 
provided in electronic form without regard to the consumer consent or 
other provisions of the E-Sign Act. The Board believes that, for an 
advertisement accessed by the consumer in electronic form, permitting 
lessors to provide lease advertising disclosures in electronic form 
without regard to the consumer consent and other provisions of the E-
Sign Act will eliminate a potential significant burden on electronic 
commerce without increasing the risk of harm to consumers. This 
approach will facilitate shopping for leases by enabling consumers to 
receive important disclosures at the same time they access an 
advertisement without first having to provide consent in accordance 
with the requirements of the E-Sign Act. Requiring consumers to follow 
the consent procedures set forth in the E-Sign Act in order to access 
an online advertisement is potentially burdensome and could discourage 
consumers from shopping for leases online. Moreover, because these 
consumers are viewing the advertisement online, there appears to be 
little, if any, risk that the consumer will be unable to view the 
disclosures online as well.
    Section 213.3(a)(5) in the 2001 interim final rule refers to Sec.  
213.6, the section of the interim final rule setting forth general 
rules for electronic disclosures. Because the Board is proposing to 
delete Sec.  213.6, as discussed further below, the Board also proposes 
to delete Sec.  213.3(a)(5).

Section 213.6 Electronic Communication

    Section 213.6 was added by the 2001 interim final rule to address 
the general requirements for electronic communications. The Board 
proposes to delete Sec.  213.6 from Regulation M and the accompanying 
sections of the staff commentary, reserving that section for future 
use.
    In the interim rule, Sec.  213.6(a) defines the term ``electronic 
communication'' to mean a message transmitted electronically that can 
be displayed on equipment as visual text, such as a message displayed 
on a personal computer monitor screen. The deletion of Sec.  213.6(a) 
would not change applicable legal requirements under the E-Sign Act.
    Sections 213.6(b) and (c) incorporate by reference provisions of 
the E-Sign Act, such as the provision allowing disclosures to be 
provided in electronic form and the requirement to obtain the lessee's 
affirmative consent before providing such disclosures. The deletion of 
these provisions will have no impact on the general applicability of 
the E-Sign Act to Regulation M disclosures.
    Sections 213.6(d) and (e) address specific timing and delivery 
requirements for electronic disclosures under Regulation M, such as the 
requirement to send disclosures to a lessee's e-mail address (or post 
the disclosures on a Web site and send a notice alerting the lessee to 
the disclosures). The Board no longer believes that these additional 
provisions are necessary or appropriate. Electronic disclosures have 
evolved since 2001, as industry and consumers have gained experience 
with them. Although many institutions offer e-mail alert notices to 
consumers, some consumers may choose not to receive notifications by e-
mail and the Board sees no reason to require e-mail alert notices. In 
addition, the Board has reconsidered certain aspects of the interim 
final rules, such as sending disclosures by e-mail, in light of 
concerns about data security, identity theft, and phishing that have 
become more pronounced since 2001.
    With regard to the requirement to attempt to redeliver returned 
electronic disclosures, as the commenters noted, lessors would be 
required to search their files for an additional e-mail address to use, 
and might be required to use a postal mail address for redelivery if no 
additional e-mail address was available. The Board believes that both 
requirements would likely be unduly burdensome. In addition, the 
concerns that have been raised about the requirement to use e-mail for 
the initial delivery of a disclosure or notice apply equally to the use 
of e-mail for an attempted redelivery.
    Under the proposed rule, the Board would not require lessors to 
maintain disclosures posted on a Web site for at least 90 days as 
provided in the 2001 interim final rule. While the Board is not 
proposing to require disclosures to be maintained on an Internet Web 
site for any specific time period, the general requirements of 
Regulation M continue to apply to electronic disclosures, such as the 
requirement to provide disclosures to lessees at a specified time and 
in a form that the lessee may keep. Although these general requirements 
apply to electronic disclosures, the Board does not believe that the 
90-day time period set out in Sec.  213.6(d) of the 2001 interim final 
rule is needed to ensure that lessors satisfy these requirements when 
they provide electronic disclosures. The Board, however, will monitor 
lessors' electronic disclosure practices with regard to the ability of 
lessees to retain Regulation M disclosures and will consider further 
regulatory action if it appears necessary.
    The official staff commentary to Sec.  213.6 of the interim final 
rule provides guidance on the provisions set forth in Sec.  213.6 such 
as delivery of disclosures or alert notices by e-mail, redelivery if 
disclosures or a notice is returned undelivered, and retention of 
disclosures on a Web site for 90 days. As noted above, because the 
Board is proposing to delete Sec.  213.6 of the regulation, the Board 
also proposes to delete the accompanying provisions of the official 
staff commentary.

Section 213.7 Advertising

    Section 213.7 contains requirements for lease advertisements and 
requires that if an advertisement includes certain ``trigger terms'' 
(such as the payment amount), the advertisement must also include 
certain required disclosures (such as the total amount due prior to or 
at consummation and a statement that an extra charge may be imposed at 
the end of the lease term).
    Section 213.7(c) relates to catalogs and other multipage 
advertisements and (under this proposal) to electronic advertisements. 
The Board is proposing to add a new comment 7(c)-3 to clarify that if a 
consumer accesses a lease advertisement in electronic form, the 
disclosures required on or with the advertisement must be provided to 
the consumer in electronic form on or with the advertisement. A 
consumer accesses an advertisement in electronic form when, for 
example, the consumer views the advertisement on his or her home 
computer. On the other hand, if a consumer receives a written 
advertisement in the mail, the lessor would not satisfy its obligation 
to provide the disclosures at that time by including a reference in the 
advertisement to the Web site where the disclosures are located.
    Section 213.7(c) provides that in a catalog or other multipage

[[Page 21139]]

advertisement, the required disclosures need not be shown on each page 
where a ``trigger term'' appears, as long as each such page includes a 
cross-reference to the page where the required disclosures appear. The 
2001 interim final rule clarified, in comment 7(c)-2, that the 
multipage rule for lease advertising also applies to advertisements in 
electronic form. For example, if a ``trigger term'' appears on a 
particular web page, the additional disclosures may appear in a table 
or schedule on another web page and still be considered part of a 
single advertisement if there is a clear reference to the page or 
location where the table or schedule begins (which may be accomplished, 
for example, by including a link). The Board proposes to retain the 
rule allowing the use of links or other cross-references in electronic 
credit advertisements to provide guidance on how the advertising rules 
apply to Web sites, by amending Sec.  213.7(c), as well as by retaining 
comment 7(c)-2 with minor wording changes.
    Section 213.7(b)(1) requires that any affirmative or negative 
reference to a charge that constitutes part of the total amount due 
prior to or at consummation of the lease not be more prominent in the 
advertisement than the disclosure of the total amount due. In the 2001 
interim final rule, comment 7(b)(1)-3 was added to state that in an 
advertisement using electronic communication, both the reference to the 
charge and the disclosure of the total amount due must appear in the 
same location so that they can be viewed simultaneously. Section 
213.7(b)(2) requires that a percentage rate in an advertisement not be 
more prominent than any of the required disclosures, except for a 
notice required to accompany the rate under Sec.  213.4(s). The interim 
final rule revised comment 7(b)(2)-1 to state that in an advertisement 
using electronic communication, both the rate and the accompanying 
notice must appear in the same location so that they can be viewed 
simultaneously, and that this requirement is not satisfied by the use 
of a link that connects the consumer to information appearing at 
another location.
    The Board proposes to delete comment 7(b)(1)-3, and to delete the 
language added to comment 7(b)(2)-1 by the interim final rule, as 
unnecessary. The prominence requirements of Sec.  213.7(b) continue to 
apply to electronic advertisements no less than to advertisements in 
other media. Requiring the consumer to scroll to another part of the 
page, or access a link, in order to view the required disclosures would 
likely not satisfy this requirement.

IV. Solicitation of Comments Regarding the Use of ``Plain Language''

    Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the 
Board to use ``plain language'' in all proposed and final rules 
published after January 1, 2000. The Board invites comments on whether 
the proposed rules are clearly stated and effectively organized, and 
how the Board might make the proposed text easier to understand.

V. Initial Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
generally requires an agency to perform an assessment of the impact a 
rule is expected to have on small entities.
    However, under section 605(b) of the RFA, 5 U.S.C. 605(b), the 
regulatory flexibility analysis otherwise required under section 604 of 
the RFA is not required if an agency certifies, along with a statement 
providing the factual basis for such certification, that the rule will 
not have a significant economic impact on a substantial number of small 
entities. Based on its analysis and for the reasons stated below, the 
Board believes that this proposed rule will not have a significant 
economic impact on a substantial number of small entities. A final 
regulatory flexibility analysis will be conducted after consideration 
of comments received during the public comment period.
    1. Statement of the objectives of the proposal. The Board is 
proposing revisions to Regulation M to withdraw the 2001 interim final 
rule on electronic communication and to allow lessors to provide 
certain disclosures to lessees in electronic form on or with an 
advertisement that is accessed by the lessee in electronic form without 
regard to the consumer consent and other provisions of the E-Sign Act. 
The Board is also proposing to clarify that other Regulation M 
disclosures may be provided to lessees in electronic form in accordance 
with the consumer consent and other applicable provisions of the E-Sign 
Act.
    The purpose of CLA is to assure a meaningful disclosure of the 
terms of consumer leases, so that the lessee can compare more readily 
the various lease terms available, limit balloon payments in consumer 
leasing, enable comparison of lease terms with credit terms where 
appropriate, and assure meaningful and accurate disclosures of lease 
terms in advertisements. 15 U.S.C. 1601. CLA authorizes the Board to 
prescribe regulations to carry out the purposes of the statute. 15 
U.S.C. 1604(a), 1667f. The Act expressly states that the Board's 
regulations may contain ``such classifications, differentiations, or 
other provisions, * * *, as in the judgment of the Board are necessary 
or proper to effectuate the purposes of [the Act], to prevent 
circumvention or evasion of [the Act], or to facilitate compliance with 
[the Act].'' 15 U.S.C. 1604(a). The Board believes that the revisions 
to Regulation M discussed above are within Congress's broad grant of 
authority to the Board to adopt provisions that carry out the purposes 
of the statute. These revisions facilitate the informed use of leases 
by consumers in circumstances where a consumer accesses a lease 
advertisement in electronic form.
    2. Small entities affected by the proposal. The ability to provide 
advertising disclosures in electronic form on or with an advertisement 
that is accessed by the consumer in electronic form applies to all 
lessors, regardless of their size. Accordingly, the proposed revisions 
would reduce burden and compliance costs for small entities by 
providing relief, to the extent the E-Sign Act applies in these 
circumstances. The number of small entities affected by this proposal 
is unknown.
    3. Other federal rules. The Board believes no federal rules 
duplicate, overlap, or conflict with the proposed revisions to 
Regulation M.
    4. Significant alternatives to the proposed revisions. The Board 
solicits comment on any significant alternatives that may provide 
additional ways to reduce regulatory burden associated with this 
proposed rule.

VI. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3506; 5 CFR part 1320 Appendix A.1), the Board reviewed the rule under 
the authority delegated to the Board by the Office of Management and 
Budget (OMB). The collection of information that is required by this 
proposed rule is found in 12 CFR part 213. The Federal Reserve may not 
conduct or sponsor, and an organization is not required to respond to, 
this information collection unless it displays a currently valid OMB 
control number. The OMB control number is 7100-0202.
    Sections 105(a) and 187 of TILA (15 U.S.C. 1604(a) and 1667f) 
authorize the Board to issue regulations to carry out the provisions of 
the Consumer Leasing Act (CLA). The CLA and Regulation M are intended 
to provide consumers with meaningful disclosures about the costs and 
terms of leases for personal

[[Page 21140]]

property. The disclosures enable consumers to compare the terms for a 
particular lease with those for other leases and, when appropriate, to 
compare lease terms with those for credit transactions. The act and 
regulation also contain rules about advertising consumer leases and 
limit the size of balloon payments in consumer lease transactions. The 
information collection pursuant to Regulation M is triggered by 
specific events. All disclosures must be provided to the lessee prior 
to the consummation of the lease and when the availability of consumer 
leases on particular terms is advertised. This information collection 
is mandatory. Since the Federal Reserve does not collect any 
information, no issue of confidentiality normally arises. However, in 
the event the Board were to retain records regarding consumer leases 
during the course of an examination, the information regarding the 
consumer and the lease would be kept confidential pursuant to section 
(b)(8) of the Freedom of Information Act (5 U.S.C. 522(b)(8)).
    Regulation M applies to all types of lessors of personal property. 
The Federal Reserve accounts for the paperwork burden associated with 
the regulation only for Federal Reserve-supervised institutions. 
Appendix B of Regulation M defines the Federal Reserve-supervised 
institutions as: State member banks, branches and agencies of foreign 
banks (other than federal branches, federal agencies, and insured state 
branches of foreign banks), commercial lending companies owned or 
controlled by foreign banks, and organizations operating under section 
25 or 25A of the Federal Reserve Act. Other federal agencies account 
for the paperwork burden on other lessors for which they have 
administrative enforcement authority. To ease the compliance cost 
(particularly for small entities) model forms are appended to the 
regulation. Lessors are required to retain evidence of compliance for 
twenty-four months, but the regulation does not specify types of 
records that must be retained.
    The estimated annual burden for the entities supervised by the 
Federal Reserve is approximately 3,534 hours for the 270 State member 
banks that engage in consumer leasing. As mentioned in the Preamble, 
Sec.  213.3 would be revised to clarify the disclosure requirements in 
Sec. Sec.  213.4 and 213.7. The Federal Reserve estimates that 270 
respondents would take approximately 6.5minutes per transaction to 
comply with the existing disclosure requirements in Sec.  213.4 and 
estimates the annual burden to be 3,509 hours. The Federal Reserve 
estimates that 15 respondents would take approximately 2.5 minutes per 
transaction to comply with the existing disclosure requirements in 
Sec.  213.7 and estimates the annual burden to be 25 hours. The Federal 
Reserve requests specific comment on whether the revisions in this 
proposed rule would change the burden on respondents.
    Comments are invited on: a. Whether the collection of information 
is necessary for the proper performance of the Federal Reserve's 
functions; including whether the information has practical utility; b. 
the accuracy of the Federal Reserve's estimate of the burden of the 
information collection, including the cost of compliance; c. ways to 
enhance the quality, utility, and clarity of the information to be 
collected; and d. ways to minimize the burden of information collection 
on respondents, including through the use of automated collection 
techniques or other forms of information technology. Comments on the 
collections of information should be sent to Secretary, Board of 
Governors of the Federal Reserve System, Washington, DC 20551, with 
copies of such comments to be sent to the Office of Management and 
Budget, Paperwork Reduction Project (7100-0202), Washington, DC 20503.

List of Subjects in 12 CFR Part 213

    Advertising, Federal Reserve System, Reporting and recordkeeping 
requirements, Truth in lending.

Text of Proposed Revisions

    Certain conventions have been used to highlight the proposed 
changes to Regulation M. New language is shown inside bold-faced 
arrows, while language that would be removed is set off with bold-faced 
brackets.
    For the reasons set forth in the preamble, the Board proposes to 
amend Regulation M, 12 CFR part 213, as set forth below:

PART 213--CONSUMER LEASING (REGULATION M)

    1. The authority citation for part 213 continues to read as 
follows:

    Authority: 15 U.S.C. 1604 and 1667f.

    2. Section 213.3 would be amended by revising paragraph (a) 
introductory text and removing paragraph (a)(5), to read as follows:


Sec.  213.3  General disclosure requirements.

    (a) General requirements. A lessor shall make the disclosures 
required by Sec.  213.4, as applicable. The disclosures shall be made 
clearly and conspicuously in writing in a form the consumer may keep, 
in accordance with this section. [rtrif]The disclosures required by 
this part may be provided to the lessee in electronic form, subject to 
compliance with the consumer consent and other applicable provisions of 
the Electronic Signatures in Global and National Commerce Act (E-Sign 
Act) (15 U.S.C. Sec.  7001 et seq.). For an advertisement accessed by 
the consumer in electronic form, the disclosures required by Sec.  
213.7 must be provided to the consumer in electronic form on or with 
the advertisement. The Sec.  213.7 disclosures may be made in 
electronic form without regard to the consumer consent or other 
provisions of the E-Sign Act.[ltrif]
* * * * *
    [lsqbb](5) Electronic communication. For rules governing the 
electronic delivery of disclosures, including a definition of 
electronic communication, see Sec.  213.6.[rsqbb]


Sec.  213.6  [Removed and Reserved]

    3. Section 213.6 would be removed and reserved.
    4. Section 213.7 would be amended by revising paragraph (c), to 
read as follows:


Sec.  213.7  Advertising.

* * * * *
    (c) Catalogs or other multipage advertisements [rtrif]; electronic 
advertisements[ltrif]. A catalog or other multipage advertisement 
[rtrif], or an electronic advertisement (such as an advertisement 
appearing on an Internet Web site),[ltrif] that provides a table or 
schedule of the required disclosures shall be considered a single 
advertisement if, for lease terms that appear without all the required 
disclosures, the advertisement refers to the page or pages on which the 
table or schedule appears.
    5. In Supplement I to Part 213, the following amendments would be 
made:
    a. Section 213.6 would be removed and reserved.
    b. In Section 213.7--Advertising, under 7(b)(1) Amount Due at Lease 
Signing or Delivery, paragraph 3. would be removed.
    c. In Section 213.7--Advertising, under 7(b)(2) Advertisement of a 
Lease Rate, paragraph 1., the last two sentences would be removed.
    d. In Section 213.7--Advertising, under 7(c) Catalogs or Other 
Multipage Advertisements; Electronic Advertisements, paragraph 2. would 
be revised and new paragraph 3. would be added.
    The amendments read as follows:

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

* * * * *

[[Page 21141]]

Section 226.7--Advertising

* * * * *
    7(b)(1) Amount Due at Lease Signing or Delivery
* * * * *
    [lsqbb]3. Electronic advertisements. For advertisements using 
electronic communication, to satisfy the prominence rule in Sec.  
213.7(b)(1), both the triggering terms and the required disclosures 
must appear in the same location so that they can be viewed 
simultaneously.[rsqbb]
    7(b)(2) Advertisement of a Lease Rate
    1. Location of statement. The notice required to accompany a 
percentage rate stated in an advertisement must be placed in close 
proximity to the rate without any other intervening language or 
symbols. For example, a lessor may not place an asterisk next to the 
rate and place the notice elsewhere in the advertisement. In 
addition, with the exception of the notice required by Sec.  
213.4(s), the rate cannot be more prominent than any other Sec.  
213.4 disclosure stated in the advertisement. [lsqbb]For 
advertisements using electronic communication, to comply with 
proximity rule in, both the rate and the accompanying notice must 
appear in the same location so that they can be viewed 
simultaneously. The prominent rule in Sec.  213.7(b)(2) is not met 
if the disclosures can be viewed only by use of a link that connects 
the consumer to the information appearing at another 
location.[rsqbb]
    7(c) Catalogs or Other Multipage Advertisements; Electronic 
Advertisements
* * * * *
    2. Cross references. A catalog or other multiple-page 
advertisement or an electronic advertisement [rtrif](such as an 
advertisement appearing on an Internet web site)[ltrif] is a single 
advertisement (requiring only one set of lease disclosures) if it 
contains a table, chart, or schedule with the disclosures required 
under Sec.  213.7(d)(2)(i) through (v). If one of the triggering 
terms listed in Sec.  213.7(d)(1) appears in a catalog, or in a 
multiple-page or electronic advertisement, it must clearly direct 
the consumer to the page or location where the table, chart, or 
schedule begins. For example, in an electronic advertisement, a term 
triggering additional disclosures may be accompanied by a link that 
directly connects the consumer to the additional information 
[lsqbb](but see comments under Sec.  213.7(b) about rules regarding 
the prominence of disclosures)[rsqbb].
    [rtrif]3. Electronic form of disclosures. For an advertisement 
that is accessed by the consumer in electronic form (such as an 
advertisement appearing on an Internet web site), the disclosures 
required under this section must be provided to the consumer in 
electronic form on or with the advertisement. Providing the 
disclosures at a different time or place, or in paper form, would 
not comply. Conversely, if a consumer views a paper advertisement, 
the required disclosures must be provided in paper form on or with 
the advertisement. For example, if a consumer receives an 
advertisement in the mail, the creditor would not satisfy its 
obligation to provide the disclosures at that time by including a 
reference in the advertisement to the web site where the disclosures 
are located.[ltrif]

    By order of the Board of Governors of the Federal Reserve 
System, April 20, 2007.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E7-7877 Filed 4-27-07; 8:45 am]
BILLING CODE 6210-01-P