Consumer Leasing, 78632-78636 [2010-31530]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 75, Number 241 (Thursday, December 16, 2010)]
[Proposed Rules]
[Pages 78632-78636]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-31530]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 75, No. 241 / Thursday, December 16, 2010 / 
Proposed Rules

[[Page 78632]]



FEDERAL RESERVE SYSTEM

12 CFR Part 213

[Regulation M; Docket No. R-1400]
RIN 7100-AD60


Consumer Leasing

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed rule; request for public comment.

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SUMMARY: Effective July 21, 2011, the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (Dodd-Frank Act) amends the Consumer Leasing 
Act (CLA) by increasing the threshold for exempt consumer leases from 
$25,000 to $50,000. In addition, the Dodd-Frank Act provides that, on 
or after December 31, 2011, this threshold must be adjusted annually by 
any annual percentage increase in the Consumer Price Index for Urban 
Wage Earners and Clerical Workers. Accordingly, the Board is proposing 
to make corresponding amendments to Regulation M, which implements the 
CLA, and to the accompanying staff commentary. Because the Dodd-Frank 
Act also increases the Truth in Lending Act's threshold for exempt 
consumer credit transactions from $25,000 to $50,000, the Board is 
proposing similar amendments to Regulation Z elsewhere in today's 
Federal Register.

DATES: Comments must be received on or before February 1, 2011. 
Comments on the Paperwork Reduction Act analysis set forth in Section V 
of this Federal Register notice must be received on or before February 
14, 2011.

ADDRESSES: You may submit comments, identified by Docket No. R-1400 and 
RIN No. 7100-AD60, by any of the following methods:
     Agency Web Site: https://www.federalreserve.gov. Follow the 
instructions for submitting comments at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: regs.comments@federalreserve.gov. Include the 
docket number and RIN in the subject line of the message.
     Facsimile: (202) 452-3819 or (202) 452-3102.
     Mail: Jennifer J. Johnson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue, 
NW., Washington, DC 20551.
    All public comments are available from the Board's Web site at 
https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, your 
comments will not be edited to remove any identifying or contact 
information. Public comments may also be viewed electronically or in 
paper form in Room MP-500 of the Board's Martin Building (20th and C 
Streets, NW.) between 9 a.m. and 5 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: Stephen Shin, Attorney, or Benjamin K. 
Olson, Counsel, Division of Consumer and Community Affairs, Board of 
Governors of the Federal Reserve System, at (202) 452-3667 or 452-2412; 
for users of Telecommunications Device for the Deaf (TDD) only, contact 
(202) 263-4869.

SUPPLEMENTARY INFORMATION: 

I. Background

The Consumer Leasing Act

    The Consumer Leasing Act (CLA), 15 U.S.C. 1667-1667e, was enacted 
in 1976 as an amendment to the Truth in Lending Act (TILA), 15 U.S.C. 
1601 et seq. The purpose of the CLA is to ensure meaningful and 
accurate disclosure of the terms of personal property leases for 
personal, family, or household use. The CLA is implemented by the 
Board's Regulation M (12 CFR part 213).
    The CLA and Regulation M require lessors to provide consumers with 
uniform cost and other disclosures about consumer lease transactions. 
They generally apply to consumer leases for the use of personal 
property in which the contractual obligation has a term of more than 
four months. An automobile lease is the most common type of consumer 
lease covered by the CLA and Regulation M. However, if the lessee's 
total contractual obligation under the lease exceeds $25,000, the CLA 
and Regulation M do not apply. See 15 U.S.C. 1667(1); 12 CFR 
213.2(e).\1\
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    \1\ Specifically, the CLA currently defines a consumer lease as 
``a contract in the form of a lease or bailment for the use of 
personal property by a natural person for a period of time exceeding 
four months, and for a total contractual obligation not exceeding 
$25,000, primarily for personal, family, or household purposes, 
whether or not the lessee has the option to purchase or otherwise 
become the owner of the property at expiration of the lease * * *'' 
15 U.S.C. 1667(1) (emphasis added). Regulation M implements this 
definition in Sec.  213.2(e).
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The Dodd-Frank Wall Street Reform and Consumer Protection Act

    This proposed rule implements Section 1100E of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), 
which was signed into law on July 21, 2010. Public Law 111-203 Sec.  
1100E, 124 Stat. 1376 (2010). The Dodd-Frank Act raises the CLA's 
$25,000 exemption threshold to $50,000. In addition, the Dodd-Frank Act 
requires that, on or after December 31, 2011, the threshold shall be 
adjusted annually for inflation by the annual percentage increase in 
the Consumer Price Index for Urban Wage Earners and Clerical Workers 
(CPI-W), as published by the Bureau of Labor Statistics. Therefore, 
from July 21, 2011 to December 31, 2011, the threshold dollar amount 
will be $50,000. Beginning on January 1, 2012, the $50,000 threshold 
will be adjusted annually based on any annual percentage increase in 
the CPI-W.
    The Board is proposing to amend Sec.  213.2(e), the accompanying 
commentary, and the commentary to Sec.  213.7(a) for consistency with 
the amendments to the CLA's exemption threshold. In addition, because 
the Dodd-Frank Act makes similar amendments to TILA's exemption 
threshold for consumer credit transactions, the Board is proposing 
elsewhere in today's Federal Register to amend Regulation Z, which 
implements the provisions of TILA that do not address consumer leases.

Effective Date

    Section 1100H of the Dodd-Frank Act provides that Section 1100E 
will become effective on the designated transfer date, as defined by 
Section 1062 of that Act. Section 1062 of the Dodd-Frank Act requires, 
in relevant part, the Secretary of the Treasury to designate a

[[Page 78633]]

single calendar date for the transfer of certain functions from other 
agencies to the Bureau of Consumer Financial Protection. Pursuant to 
Section 1062(a) of the Dodd-Frank Act, the Secretary of the Treasury 
has determined that the designated transfer date shall be July 21, 
2011. See 75 FR 57252 (Sept. 20, 2010). Accordingly, because Section 
1100E will become effective on July 21, 2011, the Board intends to make 
the amendments to Regulation M effective on that date.

Comment Period

    The new threshold for exempt consumer leases in the CLA goes into 
effect on July 21, 2011. Accordingly, the Board must issue the final 
rule implementing the new threshold sufficiently in advance of July 21, 
2011 to permit lessors to make the necessary changes to bring their 
systems and practices into compliance. To ensure that the Board has 
adequate time to analyze the comments received on the proposed rule, 
the Board is requiring that those comments be submitted by the later of 
February 1, 2011 or 30 days after publication of the proposal in the 
Federal Register (although comments on the Board's Paperwork Reduction 
Act analysis are not due until 60 days after publication). Because the 
proposal is narrow in scope, the Board believes that interested parties 
will have sufficient time to review the proposed rule and prepare their 
comments.

II. Statutory Authority

    The CLA authorizes the Board to prescribe regulations to update and 
clarify the requirements and definitions applicable to lease 
disclosures and contracts, and any other issues specifically related to 
consumer leasing, to the extent that the Board determines such action 
to be necessary to carry out the CLA, to prevent circumvention, or to 
facilitate compliance. 15 U.S.C. 1667f(a). The CLA also provides that 
any regulations prescribed by the Board may contain classifications and 
differentiations, and may provide for adjustments and exceptions for 
any class of transactions, as the Board considers appropriate. Id. In 
addition, the CLA is a part of TILA, which grants similar authority to 
the Board. See 15 U.S.C. 1604(a) and (f). For the reasons discussed 
below, the Board believes it is necessary and appropriate to implement 
Section 1100E of the Dodd-Frank Act by revising Regulation M to 
effectuate the purposes of the CLA and TILA, to prevent circumvention, 
and to facilitate compliance.

III. Section-by-Section Analysis

Section 213.2--Definitions

2(e) Consumer Lease
    Section 213.2(e) implements the CLA's definition of consumer lease. 
Currently, Sec.  213(e)(1) defines ``consumer lease'' as ``a contract 
in the form of a bailment or lease for the use of personal property by 
a natural person primarily for personal, family, or household purposes, 
for a period exceeding four months and for a total contractual 
obligation not exceeding $25,000, whether or not the lessee has the 
option to purchase or otherwise become the owner of the property at the 
expiration of the lease.'' As discussed in existing comment 2(e)-3, the 
total contractual obligation under a lease includes the total of 
payments as well as non-refundable amounts the lessee is contractually 
obligated to pay to the lessor. However, comment 2(e)-3 also clarifies 
that residual value amounts, purchase-option prices, and amounts 
collected by the lessor but paid to a third party (such as taxes, 
licenses, and registration fees) are excluded from the total 
contractual amount.
    In addition to increasing the threshold for an exemption from 
$25,000 to $50,000 effective July 21, 2011, Section 1100E of the Dodd-
Frank Act provides that, beginning in 2012, the $50,000 threshold will 
be further increased annually to reflect any increases in the CPI-W. 
Accordingly, whether the total contractual obligation under a consumer 
lease is sufficient to exempt that lease from the CLA will depend on 
the threshold amount in effect when the lease was consummated. For that 
reason, the Board is proposing to amend Sec.  213.2(e)(1) to provide 
that a consumer lease is exempt if the total contractual obligation 
exceeds ``the applicable threshold amount,'' which would be listed in 
the official staff commentary. The Board would further amend Sec.  
213.2(e)(1) to provide that the threshold amount will be adjusted 
annually to reflect increases in the CPI-W (as applicable).
    The Board would adopt a new comment 2(e)-9 to clarify the method 
for determining the applicable threshold amount with respect to a 
particular lease. Specifically, this comment would clarify that a 
consumer lease is exempt from the requirements of Regulation M if the 
total contractual obligation exceeds the threshold amount in effect at 
the time of consummation.
    Proposed comment 2(e)-9 would further clarify that the threshold 
amount in effect during a particular period of time is the amount 
stated in the comment for that period. The comment would also note that 
the threshold amount will be adjusted effective January 1 of each year 
by any annual percentage increase in the CPI-W that was in effect on 
the preceding June 1. Once the annual percentage increase in the CPI-W 
in effect on June 1 becomes available, this comment will be amended to 
provide the threshold amount for the upcoming year. This approach is 
consistent with that adopted by the Board in other regulations that 
provide for annual adjustments based on a Consumer Price Index. See, 
e.g., 12 CFR 226.32(a)(1)(ii) and its accompanying commentary. The 
Board believes this approach would facilitate compliance by permitting 
the publication of an increased threshold amount sufficiently in 
advance of the January 1 effective date.
    In addition, new comment 2(e)-9 clarifies that any increase in the 
threshold amount will be rounded to the nearest $100 increment. For 
example, if the annual percentage increase in the CPI-W would result in 
a $950 increase in the threshold amount, the threshold amount will be 
increased by $1,000. However, if the annual percentage increase in the 
CPI-W would result in a $949 increase in the threshold amount, the 
threshold amount will be increased by $900. This approach is consistent 
with Section 1100E(b) of the Dodd-Frank Act, which provides that annual 
CPI-W adjustments should be ``rounded to the nearest multiple of $100, 
or $1,000, as applicable.'' The Board believes that Congress did not 
intend for an annual CPI-W adjustment to be rounded to the nearest $100 
in some circumstances but to the nearest $1,000 in others, which could 
lead to anomalous results. Because $1,000 is itself a multiple of $100, 
the Board believes that the proposed commentary clarifies the statutory 
language in a manner consistent with the intent of Section 1100E.
    Finally, the comment would clarify that, if a consumer lease is 
exempt from the requirements of Regulation M because the total 
contractual obligation exceeds the threshold amount in effect at the 
time of consummation, the lease remains exempt regardless of a 
subsequent increase in the threshold amount as a result of an increase 
in the CPI-W. Thus, for example, if a lease with a total contractual 
obligation of $30,000 was consummated in June 2010, that lease is 
exempt based on the $25,000 threshold in effect at that time and would 
remain exempt after July 21, 2011, notwithstanding the increase in the 
threshold to $50,000. Similarly, if a lease with a total contractual 
obligation

[[Page 78634]]

of $55,000 is consummated in August 2011, that lease would be exempt 
based on the $50,000 threshold in effect at that time and would remain 
exempt even if the threshold were subsequently increased to $56,000 
based on an increase in the CPI-W. This approach is consistent with 
Sec.  213.3(e), which provides that events that occur after 
consummation of a consumer lease generally do not require the lessor to 
provide additional Regulation M disclosures. See comment 3(e)-2. The 
Board, however, solicits comment on any operational difficulties for 
open-end leases posed by this amendment.

Section 213.7--Advertising

7(a) General Rule
    Section 213.7 imposes certain requirements on advertisements for 
consumer leases. In order to provide guidance regarding the interaction 
between Sec.  213.7 and the definition of ``consumer lease'' in Sec.  
213.2(e), the Board proposes to adopt a new comment 7(a)-3. This 
comment would clarify that Sec.  213.7 applies to advertisements for 
consumer leases, as defined in Sec.  213.2(e). As discussed above, a 
lease is exempt from the requirements of Regulation M (including Sec.  
213.7) if the total contractual obligation exceeds the threshold amount 
in effect at the time of consummation. Accordingly, proposed comment 
7(a)-3 would clarify that Sec.  213.7 does not apply to an 
advertisement for a specific consumer lease if the total contractual 
obligation for that lease exceeds the threshold amount in effect when 
the advertisement is made. If a lessor promotes multiple consumer 
leases in a single advertisement, the entire advertisement must comply 
with Sec.  213.7 unless all of the advertised leases are exempt under 
Sec.  213.2(e). The comment would also provide illustrative examples. 
The Board solicits comment on the proposed clarification and whether 
additional examples are needed.

IV. Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
requires an agency to perform an initial and final regulatory 
flexibility analysis on 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 initial analysis and for the 
reasons stated below, the Board believes that this proposed rule would 
not have a significant economic impact on a substantial number of small 
entities.
    1. Statement of the need for, and objectives of, the proposed rule. 
The proposed rule would implement Section 1100E of the Dodd-Frank Act, 
which increases the total contractual obligation necessary to exempt a 
consumer lease from the Consumer Leasing Act (CLA) from more than 
$25,000 to more than $50,000, effective July 21, 2010. Section 1100E 
also provides that, beginning in 2012, this amount shall be increased 
annually to reflect any annual percentage increase in the Consumer 
Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The 
supplementary information above describes in detail the reasons, 
objectives, and legal basis for the proposed rule.
    2. Small entities affected by the proposed rule. Currently, 
Regulation M applies to any person who regularly leases, offers to 
lease, or arranges for the lease of personal property primarily for 
personal, family, or household purposes, for a period exceeding four 
months, and for a total contractual obligation of $25,000 or less. 12 
CFR 213.2(e) and (h). Consistent with Section 1100E of the Dodd-Frank 
Act, the proposed rule would, beginning on July 21, 2011, apply 
Regulation M to any person who provides consumer leases for a total 
contractual obligation of $50,000 or less, adjusted annually to reflect 
increases in the CPI-W.
    Based on 2010 call report data, there are no banks with assets of 
$175 million or less that engage in consumer leasing. In addition, the 
Board's 2005 Finance Company Survey indicates that fewer than ten small 
finance companies engage in consumer leasing. The Board acknowledges, 
however, that the total number of small entities likely to be affected 
by the proposed rule is unknown, in part because it is unclear how many 
of the small entities currently engaged in consumer leasing offer 
leases with total contractual obligations of more than $25,000 but not 
more than $50,000. The Board invites comment on the effect of the 
proposed rule on small entities.
    3. Recordkeeping, reporting, and compliance requirements. The 
proposed rule would not impose any new reporting requirements. However, 
the proposed rule would impose new recordkeeping requirements for small 
entities that offer consumer leases with total contractual obligations 
of more than $25,000 but not more than $50,000. Regulation M requires 
lessors to retain evidence of compliance with its provisions (except 
the advertising requirements in Sec.  213.7) for a period of not less 
than two years after the date the disclosures are required to be made 
or an action is required to be taken. 12 CFR 213.8. Thus, the proposed 
rule would require lessors to retain records for new consumer leases 
with total contractual obligations not exceeding $50,000, adjusted 
annually to reflect increases in the CPI-W.
    The proposed rule would also impose new compliance requirements for 
consumer leases with total contractual obligations of more than $25,000 
but not more than $50,000. Specifically, for consumer leases subject to 
Regulation M, the lessor must provide certain disclosures regarding 
payments, liability, and other terms of the lease prior to consummation 
(Sec. Sec.  213.3 and 213.4) and when the availability of consumer 
leases on particular terms is advertised (Sec.  213.7).
    The Board understands that small entities that offer consumer 
leases generally have systems in place to provide the disclosures 
required by Regulation M and retain records of those disclosures, even 
if some of their leases are currently exempt. Thus, while the precise 
costs to small entities to provide disclosures and retain records for a 
larger population of leases are difficult to predict, the Board does 
not believe that the proposed rule would have a significant economic 
impact on a substantial number of small entities. However, the Board 
seeks information and comment on any costs, compliance requirements, or 
changes in operating procedures arising from the application of the 
proposed rule to small entities.
    4. Other Federal rules. The Board has not identified any Federal 
rules that duplicate, overlap, or conflict with the proposed revisions 
to Regulation M.
    5. Significant alternatives to the proposed revisions. The proposed 
rule would implement Section 1100E of the Dodd-Frank Act, which goes 
into effect on July 21, 2011. As discussed in the supplementary 
information, the proposed rule would clarify that, if a consumer lease 
with a total contractual obligation exceeding $25,000 is consummated 
prior to July 21, 2011, that lease remains exempt, notwithstanding 
subsequent increases in the threshold amount. The Board welcomes 
comment on any significant alternatives, consistent with Section 1100E 
of the Dodd-Frank Act, which would minimize the impact of the proposed 
rule on small entities.

[[Page 78635]]

V. Paperwork Reduction Act Analysis

    In accordance with the Paperwork Reduction Act (PRA) of 1995 (44 
U.S.C. 3506; 5 CFR Part 1320 Appendix A.1), the Board reviewed the 
proposed rule under the authority delegated to the Board by the Office 
of Management and Budget (OMB). In addition, as permitted by the PRA, 
the Board proposes to extend for three years the current recordkeeping 
and disclosure requirements in connection with Regulation M. The 
collection of information that is required by this rule is found in 12 
CFR Part 213. The Board 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.
    This information collection is required to provide benefits for 
consumers and is mandatory (15 U.S.C. 1601 et seq.). The respondents/
recordkeepers are lessors subject to Regulation M, including for-profit 
financial institutions and small businesses. 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 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. 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 Board 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 Board accounts for the paperwork burden associated with the 
regulation only for Board-supervised institutions. Appendix B of 
Regulation M defines the Board-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 current annual burden to comply with the provisions of 
Regulation M is estimated to be 2 hours for each of the 4 State member 
banks \2\ that engage in consumer leasing. Thus, the current total 
annual burden for all respondents is 8 hours.
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    \2\ Federal Financial Institutions Examination Council 
Consolidated Reports of Condition and Income (Call Reports) (FFIEC 
031 & 041; OMB No. 7100-0036), Schedule RC-C, data item 10.a--Leases 
to individuals for household, family, and other personal 
expenditures.
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    The Board estimates that the proposed rule would impose a one-time 
increase in the total annual burden under Regulation M. The 4 
respondents would take, on average, 40 hours (one business week) to 
update their systems to comply with the proposed requirements. This 
one-time revision would increase the total burden for all 4 respondents 
by 160 hours. On a continuing basis, the Board estimates that the 4 
respondents would each take, on average, an additional 8 hours (one 
business day) annually to comply with the requirements, which would 
increase the ongoing total annual burden for all 4 respondents by 32 
hours. Therefore, the total annual burden for all respondents is 
estimated to increase by 192 hours (from 8 to 200 hours) during the 
first year after a final rule is adopted. Thereafter, the ongoing total 
annual burden would be 40 hours.
    The total burden increase represents averages for all respondents 
regulated by the Board. The Board expects that the amount of time 
required to implement each of the proposed changes for a given 
financial institution or entity may vary based on the size and 
complexity of the respondent.
    The other Federal financial agencies are responsible for estimating 
and reporting to OMB the total paperwork burden for the institutions 
for which they have administrative enforcement authority.\3\ They may, 
but are not required to, use the Board's burden estimates. There are 
approximately 16,200 depository institutions of which the Board 
estimates that 58 depository institutions \4\ would be affected by this 
collection of information and considered respondents for purposes of 
the PRA. Using the Board's method, the total estimated annual burden 
for all financial institutions subject to Regulation M is currently 
approximately 116 hours. The proposed rule would impose a one-time 
increase in the estimated annual burden for the estimated 58 
institutions thought to engage in consumer leasing by a total of 2,320 
hours. On a continuing basis, the proposed rule would impose an 
increase in the estimated annual burden by a total of 464 hours. Thus, 
the total annual burden for the 58 institutions is estimated to 
increase by 2,784 hours (from 116 to 2,900 hours) during the first year 
after a final rule is adopted. Thereafter, the ongoing total annual 
burden would be 580 hours. The above estimates represent an average 
across all respondents and reflect variations between institutions 
based on their size, complexity, and practices. In addition, other 
institutions covered by Regulation M, such as retailers and finance 
companies potentially are affected by this collection of information, 
and thus are also respondents for purposes of the PRA.
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    \3\ Appendix B--Federal Enforcement Agencies--of Regulation M 
lists those Federal agencies that enforce the regulation for 
particular classes of business. The Federal financial agencies other 
than the Federal Reserve include: the Office of the Comptroller of 
the Currency (OCC), the Federal Deposit Insurance Corporation 
(FDIC), the Office of Thrift Supervision (OTS), and the National 
Credit Union Administration (NCUA). The Federal non-financial 
agencies include: the Department of Transportation, the Grain 
Inspection, Packers, and Stockyards Administration (Department of 
Agriculture), the Farm Credit Administration, and the Federal Trade 
Commission.
    \4\ Estimate is based on September 30, 2010, consumer lease data 
filed by depository institutions in their reports of condition and 
income: the commercial bank Call Report (FFIEC 031 & 041) (Federal 
Reserve OMB No. 7100-0036), (OCC OMB No. 1557-0081), and (FDIC OMB 
No. 3064-0052); the thrift institution Thrift Financial Report (TFR; 
form 1313) (OTS OMB No. 1500-0023); and the credit union NCUA Call 
Reports (form 5300) (NCUA OMB No. 3133-0004).
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    Comments are invited on: (1) Whether the proposed collection of 
information is necessary for the proper performance of the Board's 
functions, including whether the information has practical utility; (2) 
the accuracy of the Board's estimate of the burden of the proposed 
information collection, including the cost of compliance; (3) ways to 
enhance the quality, utility, and clarity of the information to be 
collected; and (4) ways to minimize the burden of information 
collection on respondents, including through the use of automated

[[Page 78636]]

collection techniques or other forms of information technology. 
Comments on the collection of information should be sent to Cynthia 
Ayouch, Acting Federal Reserve Clearance Officer, Division of Research 
and Statistics, Mail Stop 95-A, Board of Governors of the Federal 
Reserve System, Washington, DC 20551, with copies of such comments sent 
to the Office of Management and Budget, Paperwork Reduction Project 
(7100-0202), Washington, DC 20503.

List of Subjects in 12 CFR Part 213

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

Text of Proposed Revisions

    For the reasons set forth in the preamble, the Board proposes to 
amend Regulation M, 12 CFR part 213, as set forth below:

PART 213--CONSUMER LEASING (REGULATION M)

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

    Authority: 15 U.S.C. 1604 and 1667f; [rtrif]Pub. L. 111-203 
Sec.  1100E, 124 Stat. 1376[ltrif].

    2. Section 213.2(e)(1) is revised to read as follows:


Sec.  213.2  Definitions.

* * * * *
    (e)(1) Consumer lease means a contract in the form of a bailment or 
lease for the use of personal property by a natural person primarily 
for personal, family, or household purposes, for a period exceeding 
four months and for a total contractual obligation not exceeding 
[rtrif]the applicable threshold amount[ltrif] [$25,000], whether or not 
the lessee has the option to purchase or otherwise become the owner of 
the property at the expiration of the lease. [rtrif]For purposes of 
this paragraph, the threshold amount is adjusted annually to reflect 
increases in the Consumer Price Index for Urban Wage Earners and 
Clerical Workers, as applicable. See the official staff commentary to 
this paragraph for the threshold amount applicable to a specific 
consumer lease.[ltrif] Unless the context indicates otherwise, in this 
part ``lease'' means ``consumer lease.''
* * * * *
    3. In Supplement I to Part 213:
    A. Under Section 213.2--Definitions, under 2(e) Consumer Lease, 
paragraph 9. is added; and
    B. Under Section 213.7--Advertising, under 7(a) General Rule, 
paragraph 3. is added to read as follows:

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

* * * * *

Section 213.2--Definitions

* * * * *
    2(e) Consumer Lease.
* * * * *
    [rtrif]9. Threshold amount. A consumer lease is exempt from the 
requirements of this part if the total contractual obligation 
exceeds the threshold amount in effect at the time of consummation. 
The threshold amount in effect during a particular time period is 
the amount stated below for that period. The threshold amount is 
adjusted effective January 1 of each year by any annual percentage 
increase in the Consumer Price Index for Urban Wage Earners and 
Clerical Workers (CPI-W) that was in effect on the preceding June 1. 
This comment will be amended to provide the threshold amount for the 
upcoming year after the annual percentage change in the CPI-W that 
was in effect on June 1 becomes available. Any increase in the 
threshold amount will be rounded to the nearest $100 increment. For 
example, if the annual percentage increase in the CPI-W would result 
in a $950 increase in the threshold amount, the threshold amount 
will be increased by $1,000. However, if the annual percentage 
increase in the CPI-W would result in a $949 increase in the 
threshold amount, the threshold amount will be increased by $900. If 
a consumer lease is exempt from the requirements of this Part 
because the total contractual obligation exceeds the threshold 
amount in effect at the time of consummation, the lease remains 
exempt regardless of a subsequent increase in the threshold amount 
as a result of an increase in the CPI-W.
    i. Prior to July 21, 2011, the threshold amount is $25,000.
    ii. From July 21, 2011 through December 31, 2011, the threshold 
amount is $50,000.[ltrif]
* * * * *

Section 213.7--Advertising

    7(a) General Rule.
* * * * *
    [rtrif]3. Total contractual obligation of advertised lease. 
Section 213.7 applies to advertisements for consumer leases, as 
defined in Sec.  213.2(e). Under Sec.  213.2(e), a consumer lease is 
exempt from the requirements of this Part if the total contractual 
obligation exceeds the threshold amount in effect at the time of 
consummation. See comment 2(e)-9. Accordingly, Sec.  213.7 does not 
apply to an advertisement for a specific consumer lease if the total 
contractual obligation for that lease exceeds the threshold amount 
in effect when the advertisement is made. If a lessor promotes 
multiple consumer leases in a single advertisement, the entire 
advertisement must comply with Sec.  213.7 unless all of the 
advertised leases are exempt under Sec.  213.2(e). For example:
    i. Assume that, in an advertisement, a lessor states that 
certain terms apply to a consumer lease for a specific automobile. 
The total contractual obligation of the advertised lease exceeds the 
threshold amount in effect when the advertisement is made. Although 
the advertisement does not refer to any other lease, some or all of 
the advertised terms for the exempt lease also apply to other leases 
offered by the lessor with total contractual obligations that do not 
exceed the applicable threshold amount. The advertisement is not 
required to comply with Sec.  213.7 because it refers only to an 
exempt lease.
    ii. Assume that, in an advertisement, a lessor states certain 
terms (such as the amount due at lease signing) that will apply to 
consumer leases for automobiles of a particular brand. However, the 
advertisement does not refer to a specific lease. The total 
contractual obligations of the leases for some of the automobiles 
will exceed the threshold amount in effect when the advertisement is 
made, but the total contractual obligations of the leases for other 
automobiles will not exceed the threshold. The entire advertisement 
must comply with Sec.  213.7 because it refers to terms for consumer 
leases that are not exempt.
    iii. Assume that, in a single advertisement, a lessor states 
that certain terms apply to consumer leases for two different 
automobiles. The total contractual obligation of the lease for the 
first automobile exceeds the threshold amount in effect when the 
advertisement is made, but the total contractual obligation of the 
lease for the second automobile does not exceed the threshold. The 
entire advertisement must comply with Sec.  213.7 because it refers 
to a consumer lease that is not exempt.[ltrif]
* * * * *


    By order of the Board of Governors of the Federal Reserve 
System, December 10, 2010.
Robert deV. Frierson,
Deputy Secretary of the Board.

[FR Doc. 2010-31530 Filed 12-15-10; 8:45 am]
BILLING CODE 6210-01-P