Truth in Lending, 63462-63477 [E7-21700]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 72, Number 217 (Friday, November 9, 2007)]
[Rules and Regulations]
[Pages 63462-63477]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-21700]


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FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Regulation Z; Docket No. R-1284]


Truth in Lending

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 Z, which implements the Truth 
in Lending Act, and the official staff commentary to the regulation, to 
withdraw portions of the interim final rules for the electronic 
delivery of disclosures issued March 30, 2001. The 2001 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 Z 
to provide guidance on the electronic delivery of disclosures. For 
example, the final rules provide that when an application for a credit 
card is accessed by a consumer in electronic form, disclosures may be 
provided to the consumer in electronic form on or with the application 
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 purpose of the Truth in Lending Act (TILA), 15 U.S.C. 1601 et 
seq., is to promote the informed use of consumer credit by requiring 
disclosures about its terms and cost. The Board's Regulation Z (12 CFR 
part 226) implements the act. The act requires creditors to disclose 
the cost of credit as a dollar amount (the finance charge) and as an 
annual percentage rate (the APR). Uniformity in creditors' disclosures 
is intended to promote the informed use of credit and assist in 
shopping for credit. TILA requires additional disclosures for loans 
secured by consumers' homes and permits consumers to rescind certain 
transactions that involve their principal dwellings. TILA and 
Regulation Z require a number of disclosures to be provided in writing.
    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, creditors 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 
Z if the consumer affirmatively consents to receipt of electronic 
disclosures in the manner required by section 101(c) of the E-Sign Act.

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 Z (66 FR 17,329). Similar interim 
final rules for Regulations B, E, M, and DD (implementing the Equal 
Credit Opportunity Act, the Electronic Fund Transfer Act, the Consumer 
Leasing Act, and the Truth in Savings Act, respectively) were published 
on March 30, 2001 (66 FR 17,322) (Regulation M) 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. 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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[[Page 63463]]

    Under the 2001 interim final rules, disclosures could be sent to an 
e-mail address designated by the consumer, or could be made available 
at another location, such as an Internet Web site. If the disclosures 
were not sent by e-mail, creditors would have to provide a notice to 
consumers (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 consumers adequate time to 
access and retain the information. Creditors 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, creditors 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 Z 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 21141, 
April 30, 2007.) Similar amendments were also proposed by the Board 
under Regulations B, E, M, and DD (72 FR 21125, 72 FR 21131, 72 FR 
21135, and 72 FR 21155, respectively). In addition, the Board proposed 
to amend Regulation Z to implement certain provisions of the Bankruptcy 
Abuse Prevention and Consumer Protection Act of 2005, Public Law 109-8, 
119 Stat. 23 (the ``Bankruptcy Act''), that amend TILA and relate to 
electronic credit card disclosures.

III. Summary of the Final Rule

    The Board received about 25 comments on the April 2007 proposal, 
primarily from creditors 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 Z 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. (Certain provisions in the 2001 interim rules, 
including provisions addressing foreign language disclosures, were not 
affected by the lifting of the mandatory compliance date and became 
final in 2001; thus, those provisions are not dealt with in this 
rulemaking.) 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 credit 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.
    As stated above, the Board also proposed to implement certain 
provisions of the Bankruptcy Act that amended TILA and relate to 
electronic disclosures. Action on the proposed provisions to implement 
the Bankruptcy Act is being deferred. The same revisions are contained 
in the Board's proposed amendments to the Regulation Z rules for open-
end credit, which were published for comment in June 2007 (72 FR 
32,948, June 14, 2007). The Board will consider the provisions relating 
to the Bankruptcy Act in connection with its final action on the rules 
for open-end credit after considering the comments submitted on the 
June 2007 proposal.
    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 creditor, 
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 on or with a 
credit application or solicitation (the ``shopping disclosures'') or in 
an advertisement, the 2001 interim final rule allowed creditors to 
provide these disclosures 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 credit, did not necessarily ``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.
    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 105(a) of TILA, as well 
as under section 104(d) of the

[[Page 63464]]

E-Sign Act,\2\ the Board proposed to specify the circumstances under 
which certain disclosures may be provided to a consumer in electronic 
form, rather than in writing as generally required by Regulation Z, 
without obtaining the consumer's consent under section 101(c) of the E-
Sign Act.
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    \2\ Section 105(a) of TILA provides that regulations prescribed 
by the Board under TILA ``may provide for such adjustments and 
exceptions * * * as in the judgment of the Board, are necessary or 
proper to effectuate the purposes of [TILA], * * * or to facilitate 
compliance [with the requirements of TILA].'' 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 application, solicitation, and 
advertising disclosures. In addition, the Board believes TILA 
section 105(a) 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 creditors should not be required to 
obtain the consumer's consent in order to provide shopping or 
advertising disclosures to the consumer in electronic form if the 
consumer accesses an application, solicitation, or advertisement 
containing those disclosures in electronic form, such as at an Internet 
Web site. The Board believes that when shopping for credit or viewing 
credit advertising online, consumers would not be harmed if the E-Sign 
consent procedures do not apply and would obtain significant benefits 
by having timely access to shopping and advertising disclosures in 
electronic form. Conversely, consumers who choose to apply for credit 
online would be unduly burdened if they had to consent in accordance 
with the E-Sign Act in order to access application forms that must be 
accompanied by disclosures. The Board also believes that consumers' 
ability to shop for credit online and compare the terms of various 
credit offers could be substantially diminished if consumers had to 
consent in accordance with the E-Sign Act in order to access 
solicitations and 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 credit.
    At the same time, the Board recognizes that consumers who shop or 
apply for credit online may not want to receive other disclosures 
electronically. Therefore, with respect to account-opening disclosures, 
periodic statements, and change-in-terms notices, creditors are 
required to obtain the consumer'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) and electronic 
signatures are being deleted as unnecessary, because the E-Sign Act is 
a self-effectuating statute. The revisions to Regulation Z and the 
official staff commentary are described more fully below in the 
Section-by-Section Analysis.

IV. Section-by-Section Analysis

12 CFR Part 226 (Regulation Z)

Subpart B--Open-end Credit

Section 226.5 General Disclosure Requirements

    Section 226.5(a) prescribes the form of disclosures required for 
open-end credit plans. Section 226.5(a)(1) generally requires creditors 
to provide open-end credit disclosures in writing and in a form that 
the consumer may keep. As proposed, the Board is revising Sec.  
226.5(a)(1) to clarify that creditors may provide open-end credit 
disclosures to consumers in electronic form, subject to compliance with 
the consumer consent and other applicable provisions of the E-Sign Act. 
Some creditors may provide open-end credit disclosures to consumers 
both in paper and electronic form and rely on the paper form of the 
disclosures to satisfy their compliance obligations. For those 
creditors, the duplicate electronic form of the open-end credit 
disclosures may be provided to consumers 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 open-end 
credit disclosure requirements.
    Section 226.5(a)(1) is also revised, as proposed, to provide that 
the open-end credit disclosures required by Sec. Sec.  226.5a (credit 
card applications and solicitations), 226.5b (home equity credit line 
applications), and 226.16 (open-end credit advertising) may be provided 
to the consumer in electronic form, under the circumstances set forth 
in those sections, without regard to the consumer consent or other 
provisions of the E-Sign Act. Commenters supported this aspect of the 
proposal. The Board believes that this will eliminate a potential 
significant burden on electronic commerce without increasing the risk 
of harm to consumers. This approach will facilitate shopping for credit 
by enabling consumers to receive important disclosures online at the 
same time they access an electronic application, solicitation, or 
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 application, solicitation, or advertisement is potentially 
burdensome and could discourage consumers from shopping for credit 
online. Moreover, because these consumers are viewing the application, 
solicitation, or advertisement online, there appears to be little, if 
any, risk that the consumer will be unable to view the disclosures 
online as well.
    Section 226.5(a)(5) in the 2001 interim final rule refers to Sec.  
226.36, the section of the interim final rule setting forth general 
rules for electronic disclosures. Because the Board is deleting Sec.  
226.36, as discussed below, Sec.  226.5(a)(5) is also deleted, as 
proposed.
    The 2001 interim final rule revised comment 5(b)(2)(ii)-3 to 
reference the E-Sign Act's consumer consent requirements. As proposed, 
this language is being deleted as unnecessary because the E-Sign Act is 
a self-effectuating statute.

Section 226.5a Credit and Charge Card Applications and Solicitations

5a(a) General Rules
    Section 226.5a(a)(2) prescribes the form of disclosures required 
with credit and charge card applications and solicitations. The Board 
proposed to amend Sec.  226.5a(a)(2) by adding a new paragraph (v) to 
provide that if a consumer accesses an application or solicitation for 
a credit or charge card in electronic form, such as on a home computer, 
the disclosures required on or with the application or solicitation 
must also be provided to the consumer in electronic form. The Board 
proposed to add comment 5a(a)(2)-9 to clarify this point and also to 
make clear that if a consumer is provided with a paper application or 
solicitation, the required disclosures must be provided in paper form 
on or with the application or solicitation (and not, for example, by 
including a reference in the paper application or solicitation to the 
Web site where the disclosures are located).

[[Page 63465]]

    Many creditor commenters urged the Board to revise the regulation 
and commentary to permit disclosures to be given in paper form in 
appropriate cases, even where an application or solicitation is in 
electronic form. In particular, commenters noted that requiring 
electronic disclosures could present problems for applications taken in 
person using electronic means. Commenters stated, for example, that a 
consumer or creditor employee might complete an electronic application 
by entering information at a terminal or kiosk in the creditor's 
office. These commenters noted that paper disclosures would be more 
appropriate in such cases, because the applicant would be able to 
retain them. For example, a loan officer could give the disclosures to 
the consumer, or in the case of an unattended kiosk, the kiosk could 
have a printer to provide paper disclosures. (Although the credit card 
application and solicitation disclosures are not required to be given 
in retainable form, application-related disclosures for other types of 
accounts raise the same issue and are required to be in retainable 
form.)
    Some creditor commenters argued that the proposed requirement would 
contravene the E-Sign Act, based on the provisions in E-Sign that state 
(1) that the statute does not require any person to accept or use 
electronic records in place of paper, and (2) that any regulations 
interpreting E-Sign may not add to its requirements. Creditor 
commenters suggested that, at a minimum, the regulation should provide 
an exception to allow paper disclosures for in-person electronic 
applications. Consumer group commenters stated that the regulation 
should not only permit, but should require, paper disclosures in the 
case of in-person electronic applications. For example, the commenters 
noted, a door-to-door solicitor could otherwise simply display certain 
disclosures to a consumer on the screen of a laptop computer, even 
though the consumer would have no way to later access the disclosures.
    One creditor commenter suggested that, in addition to permitting 
paper disclosures for electronic applications, the regulation should 
also permit electronic disclosures for paper applications without 
consumers' consent in certain cases. For example, the commenter 
suggested, a basic or short-form disclosure could be provided in paper 
form along with the paper application, together with a Web site where a 
more complete disclosure could be obtained.
    In the final regulation, new Sec.  226.5a(a)(2)(v) is revised to 
state that if an application or solicitation is accessed by the 
consumer in electronic form, the required application- or solicitation-
related disclosures may (rather than must) be provided in electronic 
form. The proposal to require electronic disclosures for credit card 
applications and solicitations that are accessed electronically was 
intended to ensure that the disclosures are provided ``on or with'' the 
application or solicitation in compliance with the timing and delivery 
requirements of Regulation Z. Section 226.5a(a)(2) already requires 
that the credit card application and solicitation disclosures be 
provided on or with an application or solicitation, and this 
requirement applies to electronic as well as paper applications; the 
only added requirement under the proposal would have been to require 
that, in the case of an electronic application, the disclosures be in 
electronic form.
    Where a consumer accesses and submits an application form using a 
home computer via a card issuer's Web site, the card issuer must 
provide the disclosures in electronic form with the application form on 
the Web site in order to meet the requirement to provide disclosures in 
a timely manner on or with the application. If the issuer instead 
mailed paper disclosures to the consumer, this requirement would not be 
met. This guidance is stated in new comment 5a(a)(2)-9.
    In contrast, if a consumer is physically present in the card 
issuer's office, and accesses and submits an electronic application--
such as via a terminal or kiosk--the Board believes the issuer could 
provide disclosures in paper form and comply with the timing and 
delivery (``on or with'') requirements of the regulation. In addition, 
as discussed by the commenters, paper disclosures may be preferable in 
this situation because they can be retained by the consumer. Therefore, 
paper disclosures are permissible in the case of in-person electronic 
applications in a card issuer's office, when the timing and delivery 
requirements are met. This guidance is also stated in new comment 
5a(a)(2)-9.
    The final regulation, however, does not require paper disclosures 
for such in-person electronic applications, as suggested by the 
consumer group commenters. Electronic disclosures would comply with the 
regulation for these applications in some cases. For example, for an 
electronic in-person credit card application in a card issuer's office, 
the issuer could display the required disclosures to the consumer on a 
terminal or kiosk screen. The requirement to provide disclosures in a 
form the consumer may retain does not apply to the credit card 
application disclosures, so this procedure would comply with the 
regulation. However, the Board anticipates that card issuers will 
provide disclosures in a retainable form in this situation and would 
consider further revisions to the regulation to address this issue if 
necessary. (In other cases--for example, for some of the home equity 
line of credit application disclosures, and all of the adjustable-rate 
mortgage (ARM) application disclosures, discussed below--the 
retainability requirement does apply, and therefore creditors would 
likely have to provide paper disclosures for in-person applications in 
a creditor's office for these types of credit.)
    New comment 5a(a)(2)-9 is modified from the proposal to provide the 
guidance discussed above. In addition, the portion of the proposed 
comment stating that paper applications must be accompanied by paper 
disclosures has been deleted as unnecessary. For example, if a credit 
card application in paper form did not contain all of the required 
Sec.  226.5a disclosures, but instead referred the consumer to a Web 
site where some or all of the disclosures could be found, the 
application would not be in compliance with the Regulation Z 
requirement that the disclosures be provided in a timely manner on or 
with the application. In addition, the provisions that state that 
electronic disclosures may be provided without regard to the consumer 
consent or other provisions of the E-Sign Act are limited to situations 
where the application or solicitation itself is in electronic form. 
Thus, if a card issuer wanted to provide electronic disclosures for a 
paper application or solicitation (for example, where a paper 
application is submitted in person at the issuer's office), the issuer 
would first have to comply with the E-Sign notice and consent 
requirements.
    Comment 5a(a)(2)-8 of the 2001 interim final rule states that a 
consumer must be able to access the electronic disclosures at the time 
the application form or solicitation reply form is made available by 
electronic communication, and lists a number of alternative methods by 
which card issuers may satisfy this requirement. The Board proposed to 
revise this comment to clarify that the listed methods are intended to 
be examples, not an exhaustive list. Proposed revised comment 5a(a)(2)-
8 also cross-references comment 5a(a)(2)-2.ii., which was added in 2000 
and specifies

[[Page 63466]]

how the tabular disclosures required by Sec.  226.5a can be 
``prominently located'' if provided on or with electronic applications 
and solicitations.
    Creditor commenters generally urged that the ``non-bypassable 
link'' example in the comment be deleted, or at least that the final 
comment make clear that the various methods of presenting disclosures 
electronically are only examples and not requirements. (In the ``non-
bypassable link'' method, a card issuer would provide, on the 
application or solicitation web page, a link to the required 
disclosures that would require the consumer to access the disclosures 
before submitting the application or solicitation reply form.)
    Comment 5a(a)(2)-8 has been modified to clarify that the various 
methods of presenting disclosures electronically are not the exclusive 
means of satisfying the disclosure requirements, but examples. In 
addition, another example has been added, and other modifications have 
been made for clarity. Of course, any method used would have to ensure 
that the disclosures are provided (not merely made available) to the 
consumer, clearly and conspicuously, in a timely manner on or with the 
application or solicitation.
    The Bankruptcy Act amends Section 127(c) of TILA to require that 
credit card application and solicitation disclosures provided ``using 
the Internet or other interactive computer service'' must be ``readily 
accessible to consumers in close proximity'' to the solicitation. 15 
U.S.C. 1637(c)(7). The April 2007 proposal contained a discussion of 
whether the Board should retain the existing guidance in comment 
5a(a)(2)-2.ii on ``prominent location'' to interpret the ``close 
proximity'' standard of the Bankruptcy Act. The same issue is raised in 
the Board's proposed amendments to the Regulation Z rules for open-end 
credit, which were published for comment in June 2007 (72 FR 32,948, 
June 14, 2007). The Board will consider this issue in connection with 
its final action on the rules for open-end credit after considering the 
comments submitted on the June 2007 proposal.
    5a(b) Required disclosures and 5a(c) Direct-mail and electronic 
applications and solicitations
    The Bankruptcy Act provides that the disclosures for electronic 
credit card offers must be ``updated regularly to reflect the current 
policies, terms, and fee amounts.'' The April 2007 proposal contained 
proposed amendments to Sec. Sec.  226.5a(b)(1), 226.5a(c), and 
226.5a(e), as well as the staff commentary, to implement this 
requirement, particularly with regard to the accuracy of variable-rate 
APR disclosures in credit card applications and solicitations. The same 
proposals are also contained in the June 2007 proposal to revise the 
rules for open-end credit under Regulation Z. As stated above, the 
Board will consider revisions related to the Bankruptcy Act in 
connection with its final action on the June 2007 proposal.

Section 226.5b Requirements for Home-Equity Plans

    Section 226.5b(a) sets forth requirements for the form of 
disclosures required to be made on or with applications for home equity 
lines of credit (HELOCs). The Board proposed to amend Sec.  226.5b(a) 
by adding a new paragraph (3) to provide that if a consumer accesses a 
HELOC application in electronic form, such as on a home computer, the 
disclosures required on or with the application must also be provided 
to the consumer in electronic form. The Board proposed to add comment 
5b(a)(3)-1 to clarify this point and also to make clear that if a 
consumer is provided with a paper application, the required disclosures 
must be provided in paper form on or with the application (and not, for 
example, by including a reference in the paper application to the Web 
site where the disclosures are located).
    As in the case of the credit card application and solicitation 
disclosures required under Sec.  226.5a, discussed above, many creditor 
commenters urged the Board to revise the regulation and commentary to 
permit disclosures to be given in paper form in appropriate cases, even 
where a HELOC application is in electronic form. Commenters mentioned 
the same reasons as for the credit card disclosures, focusing in 
particular on problems that might arise in the context of in-person 
electronic applications (involving, for example, a consumer completing 
the application in a creditor's office by entering information into a 
terminal or kiosk). Consumer group commenters suggested that the 
regulation not only should permit, but should require, paper 
disclosures in the case of in-person electronic HELOC applications.
    For the same reasons as discussed above in connection with credit 
card application and solicitation disclosures, in the final regulation, 
new Sec.  226.5b(a)(3) is revised to state that if an application is 
accessed by the consumer in electronic form, the required disclosures 
may (rather than must) be provided in electronic form. New comment 
5b(a)(3)-1 has been modified from the proposal to provide guidance 
parallel to that in new comment 5a(a)(2)-9 for credit card applications 
and solicitations. Where a consumer accesses an electronic HELOC 
application in person in a creditor's office, the creditor could 
provide disclosures in paper form and comply with the timing and 
delivery requirements of the regulation. In addition, as discussed by 
the commenters, paper disclosures may be preferable in this situation 
because they can be retained by the consumer. Indeed, paper disclosures 
would likely be necessary to comply with the timing requirements and 
the requirement to provide the home-equity brochure in a form the 
consumer may retain under Sec.  226.5b(e) in the case of an in-person 
electronic application in the creditor's office. (The Board anticipates 
that creditors will provide the other HELOC application disclosures, 
under Sec.  226.5b(d), in retainable form even though not technically 
required, and would consider further revisions to the regulation to 
address this issue if necessary.) In addition, the portion of the 
proposed comment stating that paper applications must be accompanied by 
paper disclosures has been deleted as unnecessary, parallel to comment 
5a(a)(2)-9.
    Section 226.5b(c) states that persons, other than the creditor, 
that provide HELOC applications to consumers must provide the required 
home equity disclosures in certain cases. The 2001 interim final rule 
added a new Sec.  226.5b(c)(2) to clarify that such third parties may 
use electronic disclosures. As proposed, this provision is being 
deleted as unnecessary, because the E-Sign Act is a self-effectuating 
statute and permits any person to use electronic records subject to the 
conditions set forth in the Act.
    Comment 5b(b)-7 of the 2001 interim final rule states that a 
consumer must be able to access the electronic disclosures at the time 
the application form is made available by electronic communication. 
This comment is substantially similar to comment 5a(a)(2)-8 of the 2001 
interim final rule, discussed above.
    The Board proposed to delete comment 5b(b)-7 and substitute a new 
comment 5b(a)(1)-5 in its place, which generally would parallel the 
content of proposed revised comment 5a(a)(2)-8. The new comment would 
describe alternative methods for presenting electronic disclosures, 
which are examples rather than an exhaustive list.
    As in the case of proposed revised comment 5a(a)(2)-8, discussed 
above, creditor commenters addressing the proposed comment generally 
urged that the ``non-bypassable link'' example in

[[Page 63467]]

the comment be deleted, or at least that the final comment make clear 
that the various methods of presenting disclosures electronically are 
only examples and not requirements. The comment has been modified to 
clarify that the methods are not the exclusive means of satisfying the 
disclosure requirements, but examples. In addition, another example has 
been added, and other modifications have been made for clarity. Of 
course, similarly to electronic credit card applications, any method 
used for providing disclosures for electronic HELOC applications would 
have to ensure that the disclosures are provided (not merely made 
available) to the consumer, clearly and conspicuously, in a timely 
manner on or with the application.

Section 226.15 Right of Rescission

    Section 226.15 gives consumers the right to rescind certain open-
end credit plans secured by their principal dwelling. Under Sec.  
226.15(b), creditors must provide two copies of a notice of this right 
to each consumer entitled to rescind. For written (paper) disclosures, 
this allows consumers to return one copy to the creditor if they 
exercise the right of rescission and retain the second copy. The 2001 
interim final rule added language permitting creditors to provide only 
one copy of the rescission notice to each consumer when the notice is 
provided in electronic form in accordance with the consumer consent and 
other applicable provisions of the E-Sign Act. The April 2007 proposal 
retained this provision from the 2001 interim final rule. The few 
commenters that addressed this proposal supported it. The final rule 
adopts this provision as proposed with minor wording changes for 
clarification. It does not appear that consumers would benefit by 
receiving two electronic copies of rescission notices.
    In the 2001 interim final rule, comment 15(b)-1 was revised to 
state that if there is more than one property owner, a single 
rescission notice may be sent to each property owner if electronic 
communication is used, that each co-owner must consent to electronic 
disclosures, and that each must designate an electronic (e-mail) 
address to be used for this purpose. In the April 2007 proposal, the 
Board proposed to modify comment 15(b)-1 by deleting the requirement to 
use e-mail. The statement that each co-owner must consent to electronic 
disclosures was also proposed to be deleted.
    A few commenters expressed concern about the proposed deletion of 
the statement that each co-owner must consent to electronic 
disclosures, and suggested that the Board clarify this issue. The E-
Sign Act clearly states that any consumer to whom written disclosures 
are required to be given must affirmatively consent to the use of 
electronic disclosures before such disclosures may be used in place of 
paper disclosures; accordingly, the Board believes that it is 
unnecessary to address this issue in Regulation Z. In addition, a 
commenter suggested that creditors should be able to provide a single 
electronic rescission notice to co-owners who have the same e-mail 
address or other electronic point of contact, and also that a creditor 
may require that consumers who wish to receive disclosures 
electronically provide such a single contact point. The Board believes 
that these suggestions might not be consistent with the Truth in 
Lending Act, which requires delivery of the rescission notice and 
disclosures to each consumer entitled to rescind. Accordingly, the 
revisions to comment 15(b)-1 are adopted as proposed.

Section 226.16 Advertising

    Section 226.16 contains requirements for advertisements for open-
end credit, and in particular requires that if an advertisement 
includes certain ``trigger terms'' (such as an APR), the advertisement 
must also include certain required disclosures (such as the minimum 
finance charge and transaction charges and annual fees).
    Section 226.16(c) relates to catalogs and other multiple-page 
advertisements and to electronic advertisements. The Board proposed to 
add a new paragraph (3) to Sec.  226.16(c) to provide that if a 
consumer accesses an advertisement for open-end credit in electronic 
form, such as on a home computer, the disclosures required on or with 
the advertisement must also be provided to the consumer in electronic 
form on or with the advertisement. The Board proposed to add comment 
16(c)(3)-1 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, new Sec.  226.16(c)(3) and comment 
16(c)(3)-1 are not being adopted. Section 226.16(b) requires that if an 
advertisement includes trigger terms, the advertisement itself must 
``clearly and conspicuously set forth'' 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.
    Section 226.16(c) provides that in a catalog or other multiple-page 
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 (in Sec.  226.16(c)(1) and (2), and comments 
16(c)(1)-1 and -2) clarified that this multiple-page rule also applies 
to credit 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 provision. Only one commenter 
addressed the provision and expressed concern that consumers may not 
receive clear product information from online advertisements (noting, 
for example, that in one online advertisement the commenter was aware 
of, details were disclosed several linked pages away from the initial 
credit advertisement). The final rule retains this provision as 
proposed.

Subpart C--Closed-end Credit

Section 226.17 General Disclosure Requirements

    Section 226.17(a) prescribes the form of disclosures required for 
closed-end credit. Section 226.17(a)(1) requires creditors to provide 
closed-end credit disclosures in writing and in a form that the 
consumer may keep. As proposed, Sec.  226.17(a)(1) is revised to 
clarify that creditors may provide the closed-end credit disclosures to 
consumers in electronic form, subject to compliance with the consumer 
consent and other applicable provisions of the E-Sign Act. Some 
creditors may provide closed-end credit disclosures to consumers both 
in paper and electronic form and rely on the paper form of the 
disclosures to satisfy their compliance obligations. For those 
creditors, the duplicate electronic form of the closed-end credit 
disclosures may be provided to consumers without regard to the consumer 
consent and other provisions of the E-Sign Act because the electronic 
form of the disclosure is not used to

[[Page 63468]]

satisfy the regulation's closed-end credit disclosure requirements.
    Section 226.17(a)(1) is also revised, as proposed, to provide that 
the closed-end credit disclosures required by Sec. Sec.  226.19(b) 
(adjustable-rate mortgage loan applications) and 226.24 (closed-end 
credit advertising) may be provided to the consumer in electronic form, 
and that the disclosures required by Sec.  226.17(g) (delay in 
disclosures for mail or telephone transactions) may be made available 
to the consumer or to the public in electronic form, under the 
circumstances set forth in those sections, without regard to the 
consumer consent or other provisions of the E-Sign Act. Commenters 
supported this provision. The Board believes that this will eliminate a 
potential significant burden on electronic commerce without increasing 
the risk of harm to consumers. This approach will assist consumers in 
shopping for credit by enabling them to receive important disclosures 
online at the same time they access an application or 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 application or advertisement is potentially burdensome and could 
discourage consumers from shopping for credit online. Moreover, because 
these consumers are viewing the application or advertisement online, 
there appears to be little, if any, risk that the consumer will be 
unable to view the disclosures online as well.
    Section 226.17(a)(3) in the interim final rule cross-references 
Sec.  226.36, the section of the interim final rule setting forth 
general rules for electronic disclosures. Because the Board is deleting 
Sec.  226.36, as discussed below, Sec.  226.17(a)(3) is also being 
deleted.
    Section 227.17(g) applies where a creditor receives a request for 
credit by mail, telephone, or electronic communication without face-to-
face or direct telephone solicitation. In these circumstances, the 
creditor may delay making the TILA disclosures for the credit 
transaction until the due date of the first payment, provided certain 
disclosures (specified in Sec.  226.17(g)(1)-(5)) have been made 
available to the consumer or to the public generally (such as in a 
catalog or advertisement). For example, a retailer may mail catalogs to 
consumers, or provide advertising inserts in newspapers, containing 
information for ordering merchandise by telephone or mail. If a 
consumer calls the retailer, orders an item, and agrees to pay for the 
item by obtaining a closed-end extension of credit from the retailer, 
the TILA closed-end disclosures would normally be required to be 
provided to the consumer before the consummation of the transaction. 
Since this is impracticable where the transaction is consummated by 
telephone, however, Sec.  226.17(g) permits the retailer to delay 
providing the specific disclosures for the transaction, as long as the 
disclosures in Sec.  226.17(g)(1)-(5), for representative amounts or 
ranges of credit, are included in the catalog or newspaper insert.
    In the 2001 interim final rule, the Board replaced the term 
``electronic communication'' in Sec.  226.17(g) with ``facsimile 
machine.'' The Board explained that the rule in Sec.  226.17(g) 
predated Internet commerce, and the term ``electronic communication'' 
was intended to cover credit requests by facsimile or telegram. The 
rationale underlying the rule was that creditors are unable to provide 
written transaction-specific disclosures at the time of the consumer's 
credit request where the request is made by facsimile or telegram, no 
less than in the case of requests made by telephone or mail. That 
practical problem does not exist, however, where a consumer requests 
credit at a Web site. Therefore, the Board believes it would be 
inappropriate to extend the application of Sec.  226.17(g) to 
electronic requests for credit made at an Internet Web site. In the 
April 2007 proposal, the Board proposed to retain the amendment to 
Sec.  226.17(g) from the 2001 interim final rule.
    A few commenters discussed this provision, as well as other 
provisions of Regulation Z permitting delayed disclosures where an 
application is submitted by telephone. These commenters contended that 
the same reasons permitting disclosures to be delayed in the case of a 
telephone application might also apply in other situations, such as 
where applications are conducted through mobile hand-held electronic 
devices, ATMs, or computers not owned by the consumer (such as an 
employer's computer). The Board has determined not to extend the 
telephone provisions to additional situations; refer to the discussion 
below under ``Delayed Disclosures.'' Accordingly, Sec.  226.17(g) 
remains unchanged in this regard.
    Where Sec.  226.17(g) does apply, i.e., where the consumer requests 
credit by telephone, mail, or facsimile machine, the regulation 
requires the creditor (as a condition of delaying the transaction-
specific TILA disclosures) to make available in written form to the 
consumer or the public the disclosures set forth in Sec.  226.17(g)(1)-
(5) before the actual purchase order or request. The Board believes 
that these disclosures can appropriately be made available to the 
consumer or to the public either in electronic form (for example, on 
the creditor's Web site) or in paper form. In the April 2007 proposal, 
the Board proposed to amend Sec.  226.17(g) to provide that the 
requirement to make available the Sec.  226.17(g)(1)-(5) disclosures in 
written form to the consumer or to the public may be satisfied by 
making the disclosures available in electronic form, such as at a 
creditor's Web site. Thus, for example, a consumer might see 
information about a product on a retailer's Web site and order the 
product by telephone using closed-end credit; the transaction-specific 
disclosures could be delayed, provided the Sec.  226.17(g)(1)-(5) 
disclosures are set forth on the Web site. In this situation, the E-
Sign consent procedures would not have to be followed in order for the 
Sec.  226.17(g)(1)-(5) disclosures to be provided in electronic form. 
On the other hand, if the consumer ordered the product via the Web site 
itself, the transaction-specific disclosures could not be delayed and 
would be required to be provided before consummation of the 
transaction. For the disclosures to be provided in electronic form in 
this situation, the E-Sign consent procedures would have to be 
followed. The amendment to Sec.  226.17(g) is adopted as proposed.

Section 226.19 Certain Residential Mortgage and Variable-Rate 
Transactions

    Section 226.19(b) requires creditors to provide certain disclosures 
relating to adjustable-rate mortgage (ARM) loans secured by the 
consumer's principal dwelling. These disclosures must be provided when 
an application form is provided to the consumer or before the consumer 
pays a nonrefundable fee, whichever is earlier. The Board proposed to 
amend Sec.  226.19 by adding a new paragraph (c) to provide that if a 
consumer accesses an ARM application in electronic form, the 
disclosures required on or with an application for an ARM must be 
provided to the consumer in electronic form. The Board also proposed to 
add comment 19(c)-1 to clarify this point, and to make clear that if a 
consumer is provided with a paper ARM application, the required 
disclosures must be provided in paper form on or with the application 
(and not, for example, by including a reference in the application to 
the Web site where the disclosures are located).

[[Page 63469]]

    As in the case of the credit card application and solicitation 
disclosures required under Sec.  226.5a and the HELOC application 
disclosures under Sec.  226.5b, discussed above, many creditor 
commenters urged the Board to revise Sec.  226.19(c) in the final 
regulation and the accompanying commentary provisions to permit 
disclosures to be given in paper form even where an ARM application is 
provided in electronic form. These commenters focused in particular on 
problems that might arise in the context of in-person electronic 
applications (involving, for example, a consumer in a creditor's office 
entering information at an electronic terminal to complete an 
application). Consumer group commenters suggested that the regulation 
should not only permit, but should require, paper disclosures in the 
case of in-person ARM applications made electronically.
    For the same reasons as discussed above in connection with credit 
card application and solicitation disclosures and HELOC application 
disclosures, new Sec.  226.19(c) is revised to state that if an 
application is accessed by the consumer in electronic form, the 
required disclosures may (rather than must) be provided in electronic 
form. New comment 19(c)-1 has been modified from the proposal to 
provide guidance parallel to that in new comments 5a(a)(2)-9 and 
5b(a)(3)-1 for credit card applications and solicitations and for HELOC 
applications, respectively. Where a consumer accesses an electronic ARM 
application in person in a creditor's office, the creditor could 
provide disclosures in paper form and comply with the timing and 
delivery requirements of the regulation. Indeed, in the case of an in-
person electronic application in a creditor's office, paper disclosures 
would likely be necessary to comply with the timing requirements and 
the requirement to provide the ARM disclosures in a form the consumer 
may retain. The portion of the proposed comment stating that paper 
applications must be accompanied by paper disclosures has been deleted 
as unnecessary, to parallel new comments 5a(a)(2)-9 and 5b(a)(3)-1.
    Comment 19(b)-2 of the 2001 interim final rule states that a 
consumer must be able to access the electronic disclosures at the time 
the blank application form for ARMs is made available by electronic 
communication. The Board proposed to revise comment 19(b)-2 in a manner 
substantially similar to proposed comments 5b(a)(1)-5 and 5a(a)(2)-8, 
discussed above. The proposed revised comment described alternative 
methods for presenting electronic disclosures, which are examples 
rather than an exhaustive list.
    As in the case of proposed revised comments 5b(a)(1)-5 and 
5a(a)(2)-8, discussed above, creditor commenters addressing the 
proposed comment generally urged that the ``non-bypassable link'' 
example in the comment be deleted, or at least that the final comment 
make clear that the various methods of presenting disclosures 
electronically are only examples and not requirements. The comment has 
been modified to clarify that the methods are not the exclusive means 
of satisfying the disclosure requirements, but rather examples. In 
addition, another example has been added, and other modifications have 
been made for clarity. Of course, any method used for providing 
disclosures for electronic ARM applications would have to ensure that 
the disclosures are provided (not merely made available) to the 
consumer, clearly and conspicuously, in a timely manner.

Section 226.23 Right of Rescission

    Section 226.23 gives consumers the right to rescind certain closed-
end mortgage loans secured by their principal dwelling. Under Sec.  
226.23(b), creditors must provide two copies of a notice of this right 
to each consumer entitled to rescind. For written (paper) disclosures, 
this allows consumers to return one copy to the creditor if they 
exercise the right of rescission and retain the second copy. The 2001 
interim final rule added language permitting creditors to provide only 
one copy of the rescission notice to each consumer when the notice is 
provided in electronic form in accordance with the consumer consent and 
other applicable provisions of the E-Sign Act. The April 2007 proposal 
retained this provision from the 2001 interim final rule. The few 
commenters that addressed this proposal supported it. The final rule 
adopts this provision as proposed with minor wording changes. It does 
not appear that consumers would benefit by receiving two electronic 
copies of rescission notices.
    In the 2001 interim final rule, comment 23(b)-1 was revised to 
state that if there is more than one property owner, a single 
rescission notice may be sent to each property owner if electronic 
communication is used, that each co-owner must consent to electronic 
disclosures, and that each must designate an electronic (e-mail) 
address to be used for this purpose. In the April 2007 proposal, the 
Board proposed to modify comment 23(b)-1 by deleting the requirement to 
use e-mail. The statement that each co-owner must consent to electronic 
disclosures was also proposed to be deleted, as consent requirements 
are already set forth in the E-Sign Act.
    The comments received by the Board on the proposed revisions to 
comment 15(b)-1 relating to rescission in the open-end context, 
discussed above, apply to closed-end rescission as well. See the 
discussion under Sec.  226.15 above. Accordingly, the revisions to 
comment 23(b)-1 are adopted as proposed.

Section 226.24 Advertising

    Section 226.24 contains requirements for advertisements for closed-
end credit 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 APR, the amount 
or percentage of any downpayment, and the terms of repayment, as 
applicable).
    Section 226.24(d) relates to catalogs and other multiple-page 
advertisements and to electronic advertisements. The Board proposed to 
add a new paragraph (3) to Sec.  226.24(d) (comparable to proposed new 
paragraph (3) to Sec.  226.16(c) for open-end credit advertising) to 
clarify that if a consumer accesses an advertisement for closed-end 
credit in electronic form, the disclosures required on or with the 
closed-end credit advertisement must be provided to the consumer in 
electronic form on or with the advertisement. The Board proposed to add 
comment 24(d)-5 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 advertisement to the Web site 
where the disclosures are located). Commenters did not address this 
provision.
    In the final regulation, new Sec.  226.24(d)(3) and comment 24(d)-5 
are not being adopted. Section 226.24(c) requires that if an 
advertisement includes trigger terms, the advertisement itself must 
``state'' 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 stated in the advertisement itself.
    Section 226.24(d) provides that in a catalog or other multiple-page 
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

[[Page 63470]]

clarified (in Sec.  226.24(d)(1) and (2), and comments 24(d)-2 and 
24(d)-4), as in the case of open-end credit advertising, that the 
multiple-page rule for closed-end credit advertising also applies to 
credit 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 provision. Only one commenter addressed 
this provision and expressed concern that consumers may not receive 
clear product information (see discussion under open-end advertising 
above). The final rule retains this provision as proposed.
    Section 226.24(b) permits creditors to state a simple annual rate 
of interest or periodic rate in addition to the APR, as long as the 
rate is stated in conjunction with, but not more conspicuously than, 
the APR. In the 2001 interim final rule, comment 24(b)-6 was added to 
state that in an advertisement using electronic communication, the 
consumer must be able to view both rates simultaneously, and that this 
requirement is not satisfied if the consumer can view the APR only by 
use of a link that takes the consumer to another web location. In the 
April 2007 proposal, the Board proposed to delete comment 24(b)-6 as 
unnecessary, because the requirement to state the simple annual rate or 
periodic rate in conjunction with, and not more conspicuously than, the 
APR, applies 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 APR 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 (such as Internet-enabled cellphones or personal 
digital assistants) that a consumer might use to view a credit 
advertisement, the small size of the screen might necessitate scrolling 
or the use of links for viewing the APR. Commenters also said the 
proposal was confusing in that comment 24(b)-6, stating that the use of 
links would not comply, was proposed to be deleted, yet the 
supplementary information appeared to impose the same restriction.
    Comment 24(b)-6 is being deleted as proposed. As stated in the 
proposal, the existing regulatory requirement is to state the APR no 
less conspicuously than the simple rate of interest, and this rule 
applies in the electronic context. However, the Board believes that the 
rule 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, 
creditors should ensure that electronic advertisements comply with the 
equal conspicuousness requirement.

Subpart E--Special Rules for Certain Home Mortgage Transactions

Section 226.31 General Rules

    Subpart E implements the Home Ownership and Equity Protection Act 
(HOEPA) and sets forth special rules, including disclosure 
requirements, for certain mortgage loans with rates or fees above 
specified thresholds (HOEPA loans) and for reverse mortgage loans. 
Section 226.31(b) prescribes the form of disclosures required under 
Subpart E. Section 226.31(b)(1) requires creditors to provide the HOEPA 
and reverse mortgage disclosures in writing and in a form that the 
consumer may keep. As proposed, Sec.  226.31(b)(1) is renumbered as 
Sec.  226.31(b) and revised to clarify that the HOEPA and reverse 
mortgage disclosures may be provided to the consumer in electronic 
form, subject to compliance with the consumer consent and other 
applicable provisions of the E-Sign Act. Some creditors may provide the 
HOEPA and reverse mortgage disclosures to consumers both in paper and 
electronic form and rely on the paper form of the disclosures to 
satisfy their compliance obligations. For those creditors, the 
duplicate electronic form of the HOEPA and reverse mortgage disclosures 
may be provided to consumers without regard to the consumer consent and 
other provisions of the E-Sign Act because the electronic form of the 
disclosure is not used to satisfy the regulation's HOEPA and reverse 
mortgage disclosure requirements.
    Section 226.31(b)(2) in the interim final rule cross-references 
Sec.  226.36, the section of the interim final rule setting forth 
general rules for electronic disclosures. Because the Board is deleting 
Sec.  226.36, as discussed below, Sec.  226.31(b)(2) is also being 
deleted in the final rule.

Subpart F--Electronic Communication

Section 226.36 Requirements for Electronic Communication

    Section 226.36 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.  226.36 (which 
constitutes all of Subpart F) from