Consumer Leasing, 63456-63462 [E7-21699]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 72, Number 217 (Friday, November 9, 2007)]
[Rules and Regulations]
[Pages 63456-63462]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-21699]


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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: Final rule; official staff interpretation.

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SUMMARY: The Board is amending 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 addressed the timing and delivery of electronic 
disclosures, consistent with the requirements of the Electronic 
Signatures in Global and National Commerce Act (E-Sign Act). Because 
compliance with the 2001 interim final rules has not been mandatory, 
withdrawal of these provisions from the Code of Federal Regulations 
reduces confusion about the status of the provisions and simplifies the 
regulation.
    In addition, the Board is adopting final amendments to Regulation M 
to provide guidance on the electronic delivery of disclosures. For 
example, the final rules provide that when a lease advertisement is 
accessed by a consumer in electronic form, disclosures may be provided 
to the consumer in electronic form in the advertisement without regard 
to the consumer consent and other provisions of the E-Sign Act. Similar 
final rules are being adopted under other consumer fair lending and 
financial services regulations administered by the Board.

DATES: The final rule is effective December 10, 2007. The mandatory 
compliance date is October 1, 2008.

FOR FURTHER INFORMATION CONTACT: John C. Wood, Counsel, 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. Statutory 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.
    The Electronic Signatures in Global and National Commerce Act (the 
E-Sign Act), 15 U.S.C. 7001 et seq., was enacted in 2000. 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 and consent 
provisions, became effective October 1, 2000, and did not require 
implementing regulations. Thus, lessors 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 Regulation 
M if the consumer affirmatively consents to receipt of electronic 
disclosures in the manner required by section 101(c) of the E-Sign Act.

[[Page 63457]]

II. Board Proposals and Interim Rules Regarding Electronic Disclosures

    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 17,322). Similar interim 
final rules for Regulations B, E, Z, and DD (implementing the Equal 
Credit Opportunity Act, the Electronic Fund Transfer Act, the Truth in 
Lending Act, and the Truth in Savings Act, respectively) were published 
on March 30, 2001 (66 FR 17,329) (Regulation Z) and April 4, 2001 (66 
FR 17,779, 66 FR 17,786, and 66 FR 17,795) (Regulations B, E, and DD, 
respectively). 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 interim final rules also incorporated many of the 
provisions that were part of earlier regulatory proposals issued by the 
Board regarding electronic disclosures.\1\
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    \1\ On May 2, 1996, the Board proposed to amend Regulation E 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 14,528, March 25, 
1998) and similar proposals under Regulations B, M, Z, and DD (63 FR 
14,552, 14,538, 14,548, and 14,533, respectively, March 25, 1998). 
Based on comments received on the 1998 proposals, in 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).
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    Under the 2001 interim final rules, 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 
(typically by e-mail) 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.
    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 who choose to receive electronic disclosures 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, August 8, 2001.) 
Thus, institutions are not required to comply with the interim final 
rules. Since that time, the Board had 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.
    In April 2007, the Board proposed to amend Regulation M and the 
official staff commentary by (1) withdrawing portions of the 2001 
interim final rule 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. (72 FR 21135, 
April 30, 2007.) Similar amendments were also proposed by the Board 
under Regulations B, E, Z, and DD (72 FR 21125, 72 FR 21131, 72 FR 
21141, and 72 FR 21155, respectively).

III. Summary of the Final Rule

    The Board received about 15 comments on the April 2007 proposal 
from financial institutions and retailers and their representatives. 
Most of the financial industry commenters generally supported the 
proposal, although some provided suggestions for clarifications or 
changes to particular elements of the proposal. A comment letter was 
also submitted on behalf of four consumer groups. The consumer group 
commenters suggested a number of changes to strengthen consumer 
protections. The comments are discussed in more detail in the Section-
by-Section Analysis below.
    For the reasons discussed below, the Board is now adopting 
amendments to Regulation M in final form, largely as proposed in April 
2007. As stated in the proposal, because compliance with the 2001 
interim final rules has not been mandatory, the final rule will reduce 
confusion about the status of the electronic disclosure provisions and 
simplify the regulation. The Board is also adopting certain provisions 
that are identical or similar to provisions in the 2001 interim 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 eliminating 
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.
    With regard to disclosures required to be provided in an electronic 
lease advertisement, the 2001 interim final rule allowed lessors to 
provide these disclosures to lessees electronically without regard to 
the consumer consent or other provisions of the E-Sign Act. 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 the consent 
provisions. Some commenters on the interim final rules agreed with the 
result but did not agree with the Board's rationale.

[[Page 63458]]

    In the April 2007 proposal, the Board stated that, upon further 
consideration, it did not believe it was necessary to determine whether 
or not these disclosures are related to a transaction. 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,\2\ the Board proposed 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.
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    \2\ 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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    Commenters supported the Board's approach with regard to this 
issue. This final rule adopts the approach in the April 2007 proposal. 
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 
an advertisement containing those disclosures in electronic form, such 
as at an Internet Web site. The Board believes that when viewing online 
lease advertising, consumers would not be harmed if the E-Sign consent 
procedures do not apply and would obtain significant benefits by having 
timely access to advertising disclosures in electronic form. 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 are required to obtain 
the lessee's consent, in accordance with the E-Sign Act, to provide 
such disclosures in electronic form, or else provide written 
disclosures.
    Finally, as proposed, certain provisions that restate or cross-
reference the E-Sign Act's general rules regarding electronic 
disclosures (including the consumer consent provisions) are being 
deleted as unnecessary, because the E-Sign Act is a self-effectuating 
statute. The revisions to Regulation M and the official staff 
commentary are described more fully below in the Section-by-Section 
Analysis.

IV. 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. As proposed, the 
Board is revising 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 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.
    The Board also proposed to revise Sec.  213.3(a) to provide that 
the advertising disclosures required by Sec.  213.7 must be provided to 
the consumer in electronic form if the consumer accesses an 
advertisement in electronic form (such as on a home computer), and 
that, 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 proposed to add comment 7(c)-3 
to clarify this point and also to make clear that if a consumer 
accesses a paper advertisement, the required disclosures must be 
provided in paper form on or with the advertisement (and not, for 
example, by including a reference in the paper advertisement to the Web 
site where the disclosures are located). Commenters did not address 
this aspect of the proposal.
    In the final regulation, Sec.  213.3(a) is revised to state that if 
an advertisement is accessed by the consumer in electronic form, the 
required disclosures may (rather than must) be provided in electronic 
form, and comment 7(c)-3 is not being adopted. Section 213.7(d) 
requires that if a lease advertisement includes trigger terms, the 
advertisement itself must ``contain'' the required disclosures. 
Therefore, under the existing regulation, providing paper disclosures 
for an advertisement in electronic form, or vice versa, would not 
comply because the disclosures would not be set forth in the 
advertisement itself.
    The Board believes that for an advertisement accessed by the 
consumer in electronic form, permitting (although not requiring) 
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 deleting Sec.  
213.6, as discussed below, Sec.  213.3(a)(5) is also deleted, as 
proposed.

Section 213.6 Electronic Communication

    Section 213.6 was added by the 2001 interim final rule to address 
the general requirements for electronic communications. In the April 
2007 proposal, the Board proposed to delete Sec.  213.6 from Regulation 
M and the accompanying sections of the staff commentary, reserving that 
section for future use. Financial institution and retailer commenters 
largely supported the proposed deletion, and Sec.  213.6 and the 
accompanying commentary are deleted in the final rule.
    In the interim rule, Sec.  213.6(a) defined the term ``electronic 
communication'' to

[[Page 63459]]

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) does not change 
applicable legal requirements under the E-Sign Act.
    Sections 213.6(b) and (c) incorporated 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 has no impact on the general applicability of the E-
Sign Act to Regulation M disclosures.
    Sections 213.6(d) and (e) addressed 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 stated in the proposal that it no longer 
believed that these additional provisions were necessary or 
appropriate. The Board noted that electronic disclosures have evolved 
since 2001, as industry and consumers have gained experience with them, 
and also noted concerns about e-mail related to data security, identity 
theft, and phishing.
    The consumer group commenters urged the Board to require the use of 
e-mail to provide required disclosures in electronic form, arguing that 
e-mail is the only reliable way to ensure that consumers are able to 
actually access, receive, and retain disclosures. The consumer groups 
also disagreed with the statement that concerns relating to phishing, 
identity theft, and data security are a valid reason for not requiring 
the use of e-mail, noting that phishing involves gathering information 
from the consumer, while disclosures would be provided to the consumer, 
and need not include sensitive information.
    While the consumer's receipt of an e-mail message that is actually 
from the consumer's financial institution would not in general pose a 
security risk, consumers might ignore or delete e-mails from such 
parties (real or purported), in order to avoid falling victim to fraud 
schemes. Thus, disclosures sent by consumers' financial institutions 
and retailers may not receive the attention they should. Consequently, 
some companies may be reluctant to communicate by e-mail. To the extent 
consumers are instructed not to ignore electronic mail messages from 
companies they do business with, the risk of consumers being victimized 
by fraudulent e-mail might be increased. In any event, the Board 
believes it is preferable not to mandate the use of any particular 
means of electronic delivery of disclosures, but instead to allow 
flexibility for institutions and retailers to use whatever method may 
be best suited to particular types of disclosure.
    With regard to the requirement to attempt to redeliver returned 
electronic disclosures, 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. As stated in the April 2007 proposal, the Board continues to 
believe that both requirements would likely be unduly burdensome.
    Under the April 2007 proposed rule, the requirement in the 2001 
interim final rule for lessors to maintain disclosures posted on a Web 
site for at least 90 days would be deleted. Industry commenters 
supported the proposed deletion; consumer group commenters expressed 
concern about its impact on consumers. The 90-day retention provision 
is deleted as proposed. However, while the Board is not requiring 
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 certain specified times and in a form that 
the lessee may keep. The Board expects lessees to maintain disclosures 
on Web sites for a reasonable period of time so that consumers have an 
opportunity to access, view, and retain the disclosures. As stated in 
the April 2007 proposal, the Board will monitor lessors' electronic 
disclosure practices with regard to the ability of consumers to retain 
Regulation M disclosures and would consider further revisions to the 
regulation to address this issue if necessary.

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) provides that in a catalog or other multipage 
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). In April 2007, the Board proposed to 
retain this rule, by amending Sec.  213.7(c) and retaining comment 
7(c)-2 with minor wording changes. Commenters did not address this 
provision. The final rule retains these provisions as proposed.
    The Board also proposed 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. This 
comment is not being adopted in the final rule, as discussed above in 
connection with Sec.  213.3.
    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.
    In the April 2007 proposal, the Board proposed 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, because the prominence and 
proximity requirements

[[Page 63460]]

of Sec.  213.7(b) continue to apply to electronic advertisements no 
less than to advertisements in other media. In the supplementary 
information, the Board stated that 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.
    Some commenters were concerned by the foregoing discussion in the 
April 2007 proposal, and contended that in the case of small hand-held 
electronic devices that a consumer might use to view a lease 
advertisement, the small size of the screen might necessitate scrolling 
or the use of links for viewing the required disclosures. Commenters 
also said the proposal was confusing in that the commentary provisions 
stating that the use of links would not comply were proposed to be 
deleted, yet the supplementary information appeared to impose the same 
restrictions.
    Comment 7(b)(1)-3 and the language added to comment 7(b)(2)-1 by 
the interim final rule are being deleted as proposed. As stated in the 
proposal, the prominence and proximity requirements of Sec.  213.7(b) 
apply in the electronic context. However, the Board believes that these 
requirements can be applied with some degree of flexibility, to account 
for variations in devices consumers may use to view electronic 
advertisements. Therefore, the use of scrolling or links would not 
necessarily fail to comply with the regulation in all cases; however, 
lessors should ensure that electronic advertisements comply with the 
prominence and proximity requirements.

V. Other Issues Raised by Commenters

Retainable Form

    Several industry commenters requested guidance on how lessors can 
be sure of meeting the requirement to provide disclosures in a form 
that the consumer can keep. The consumer group commenters were 
concerned about retainability of disclosures in light of the deletion 
of the requirement to maintain disclosures on a Web site for at least 
90 days. They urged that the final regulations require that disclosures 
be delivered in a format that is both downloadable and printable.
    The Board believes that lessors satisfy the requirement for 
providing electronic disclosures in a form the consumer can retain if 
they are provided in a standard electronic format that can be 
downloaded and saved or printed on a typical home personal computer. 
Typically any document that can be downloaded by the consumer can also 
be printed. The Board will, however, monitor lessors' practices to 
evaluate whether further guidance is needed on this issue. In a 
situation where the consumer is provided electronic disclosures through 
equipment under the lessor's control--such as a terminal or kiosk in 
the lessor's offices--the lessor could, for example, provide a printer 
that automatically prints the disclosures.

Expansion of Exceptions from E-Sign Notice and Consent Requirements

    One commenter suggested that the Board adopt another exception from 
the E-Sign notice and consent requirements in addition to the exception 
for lease advertisements. The commenter encouraged the Board to allow 
the delivery of the Regulation M lease consummation disclosures (as 
well as similar disclosures under the other four regulations involved 
in the parallel rulemakings) electronically, without regard to the 
consumer consent provisions of E-Sign, using the Board's authority 
under the E-Sign Act as well as the statutes underlying the 
regulations. The commenter argued that, since Internet commerce has 
expanded greatly over the past few years, when consumers choose to 
conduct financial transactions online, they presume that they will 
receive related disclosures online as well. The Board believes that, at 
this time, there is insufficient evidence that the consent requirements 
are a burden on electronic commerce in this situation; and that 
consumers who shop for leases online may not necessarily want to 
receive disclosures online.

VI. 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. In the proposal, the Board invited 
comments on whether the proposed rules are clearly stated and 
effectively organized, and how the Board might make the proposed text 
easier to understand. No comments were received on ``plain language'' 
issues involving Regulation M.

VII. Final Regulatory Flexibility Analysis

    The Board prepared an initial regulatory flexibility analysis as 
required by the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
in connection with the April 2007 proposal. The Board received no 
comments on its initial regulatory flexibility analysis.
    The 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 
certifies that the rule will not have a significant economic impact on 
a substantial number of small entities.
    1. Statement of the need for, and objectives of, the final rule. 
The Board is adopting 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 clarifying 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 the 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. The 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. Issues raised by comments in response to the initial regulatory 
flexibility analysis. In accordance with section 603(a) of the RFA, the 
Board conducted an initial regulatory

[[Page 63461]]

flexibility analysis in connection with the proposed rule. The Board 
did not receive any comments on its initial regulatory flexibility 
analysis.
    3. Small entities affected by the final rule. 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 
final rule 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 final rule 
is unknown.
    4. Other federal rules. The Board believes no federal rules 
duplicate, overlap, or conflict with the final revisions to Regulation 
M.
    5. Significant alternatives to the proposed revisions. The Board 
solicited comment on any significant alternatives that could provide 
additional ways to reduce regulatory burden associated with the 
proposed rule. Commenters did not suggest any significant alternatives 
to the proposed rule.

VIII. 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 subject to the PRA 
by this final rulemaking 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 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 during 
the course of an examination, the information may 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 
24 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 estimated 270 
state member banks that engage in consumer leasing. As mentioned in the 
Preamble, on April 30, 2007, a notice of proposed rulemaking was 
published in the Federal Register (72 FR 21135). No comments 
specifically addressing the burden estimate were received.
    The Federal Reserve has a continuing interest in the public's 
opinions of our collections of information. At any time, comments 
regarding the burden estimate, or any other aspect of this collection 
of information, including suggestions for reducing the burden, may be 
sent to: Secretary, Board of Governors of the Federal Reserve System, 
20th and C Streets, NW., Washington, DC 20551; and 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 record keeping 
requirements, Truth in lending.


0
For the reasons set forth in the preamble, the Board amends 12 CFR part 
213 as set forth below:

PART 213--CONSUMER LEASING (REGULATION M)

0
1. The authority citation for part 213 continues to read as follows:

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


0
2. Section 213.3 is amended by revising paragraph (a) introductory 
text, to read as follows, and removing paragraph (a)(5):


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. 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 
may be provided to the consumer in electronic form in the 
advertisement, without regard to the consumer consent or other 
provisions of the E-Sign Act.
* * * * *


Sec.  213.6  [Removed]

0
3. Section 213.6 is removed and reserved.


0
4. Section 213.7 is amended by revising paragraph (c), to read as 
follows:


Sec.  213.7  Advertising.

* * * * *
    (c) Catalogs or other multipage advertisements; electronic 
advertisements. A catalog or other multipage advertisement , or an 
electronic advertisement (such as an advertisement appearing on an 
Internet Web site), 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.
* * * * *

0
5. In Supplement I to Part 213, the following amendments are made:
0
a. Section 213.6--Electronic Communication is removed and reserved.

[[Page 63462]]

0
b. In Section 213.7--Advertising, under 7(b)(1) Amount Due at Lease 
Signing or Delivery, paragraph 3 is removed.
0
c. In Section 213.7--Advertising, under 7(b)(2) Advertisement of a 
Lease Rate, paragraph 1., the last two sentences are removed.
0
d. In Section 213.7--Advertising, under 7(c) Catalogs or Other 
Multipage Advertisements; Electronic Advertisements, paragraph 2. is 
revised.
    The amendments read as follows:

SUPPLEMENT I TO PART 213--OFFICIAL STAFF COMMENTARY TO REGULATION M

* * * * *

Section 213.7--Advertising

* * * * *

7(b)(2) Advertisement of a Lease Rate

    7(c) * * *
    2. Cross references. A catalog or other multiple-page 
advertisement or an electronic advertisement (such as an 
advertisement appearing on an Internet Web site) 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.
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, October 31, 2007.
Jennifer J. Johnson,
Secretary of the Board.
 [FR Doc. E7-21699 Filed 11-8-07; 8:45 am]
BILLING CODE 6210-01-P