Consumer Leasing, 18349-18354 [2011-7377]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 76, Number 64 (Monday, April 4, 2011)]
[Rules and Regulations]
[Pages 18349-18354]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-7377]


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FEDERAL RESERVE SYSTEM

12 CFR Part 213

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


Consumer Leasing

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule.

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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 making 
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 making 
similar amendments to Regulation Z elsewhere in today's Federal 
Register.

DATES: Consistent with Sections 1062 and 1100H of the Dodd-Frank Act, 
this final rule is effective on the transfer date designated by the 
Secretary of the Treasury, which is July 21, 2011.

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. 
The statute and the regulation 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. Currently, 
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 final 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. Effective January 1, 2012, the $50,000 threshold will 
be adjusted annually based on any annual percentage increase in the 
CPI-W.
    In December 2010, the Board proposed 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. See 
75 FR 78632 (Dec. 16, 2010) (December 2010 Proposed Regulation M Rule). 
In addition, because the Dodd-Frank Act makes similar amendments to 
TILA's exemption threshold for consumer credit transactions, the Board 
simultaneously proposed to amend Regulation Z, which implements the 
provisions of TILA that do not address consumer leases. See 75 FR 78636 
(Dec. 16, 2010) (December 2010 Regulation Z Proposed Rule).
    The Board received only two comments on the December 2010 
Regulation M Proposed Rule. As discussed below, the Board is generally 
adopting the rule as proposed. Elsewhere in today's Federal Register, 
the Board is also adopting a final rule amending Regulation Z in order 
to implement the amendments to TILA's exemption threshold for consumer 
credit transactions.

II. Summary of Final Rule

Revisions to Sec.  213.2

    Consistent with the Dodd-Frank Act, the Board's final rule revises 
Sec.  213.2 and the accompanying staff commentary to provide that, 
effective July 21, 2011, a consumer lease is exempt from the 
requirements of Regulation M if the consumer's total contractual 
obligation

[[Page 18350]]

under the lease exceeds $50,000 when the lease is consummated. This 
final rule further provides that, beginning on January 1, 2012, the 
$50,000 threshold will be adjusted annually by any annual percentage 
increase in the CPI-W.

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 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, this final rule will be 
effective on that date. However, if the Secretary of the Treasury 
designates a later transfer date pursuant to Section 1062, this final 
rule will instead be effective on that date.
    One industry commenter requested that the Board delay the statutory 
effective date by one year (i.e., until July 21, 2012). This commenter 
asserted that--in light of the extensive regulatory changes required by 
the Dodd-Frank Act and other statutes--it would be burdensome for small 
institutions to comply with Regulation M for consumer leases of $50,000 
or less by July 21, 2011. However, the Board understands that, as a 
general matter, institutions that engage in consumer leasing already 
have the systems in place to comply with Regulation M. Thus, it should 
not be unduly burdensome for these institutions to comply with 
Regulation M with respect to a larger population of leases. 
Accordingly, in these circumstances, it would not be appropriate to 
deviate from the effective date established by Congress.

III. 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.

IV. 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 is consummated. For that 
reason, the Board proposed 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 further proposed to 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 
did not receive any comment on these revisions, which are adopted as 
proposed.
    The Board also proposed to adopt a new comment 2(e)-9 in order to 
clarify the method for determining the applicable threshold amount with 
respect to a particular lease. Specifically, this comment clarified 
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 further clarified that the threshold amount 
in effect during a particular period of time is the amount stated in 
the comment for that period. The proposed comment also noted that the 
threshold amount would 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. The Board noted 
that 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 will 
facilitate compliance by permitting the publication of an increased 
threshold amount sufficiently in advance of the January 1 effective 
date.
    In addition, proposed comment 2(e)-9 clarified that any increase in 
the threshold amount would 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 this commentary clarifies 
the statutory language in a manner consistent with the intent of 
Section 1100E.
    Finally, the proposed comment clarified that, if a consumer lease 
is exempt from the requirements of

[[Page 18351]]

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. Thus, for example, if a lease with a total contractual 
obligation of $30,000 was consummated in June 2011, 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 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 received only one comment regarding this proposed 
guidance. A Member of Congress suggested that consumer leases with 
total contractual obligations above the applicable threshold amount at 
consummation should not be permanently exempt from Regulation M. 
Instead, this commenter suggested that, if, at any point during the 
term of the lease, the total amount of the consumer's remaining 
obligation is less than the applicable threshold amount, the lessor 
should begin to comply with the regulation. However, the provisions of 
the CLA and Regulation M generally govern disclosures made at or prior 
to consummation of a lease. Thus, it does not appear that requiring 
lessors to comply with Regulation M after consummation would provide 
benefits to consumers that would outweigh the burden on lessors of 
continually monitoring each lease to determine when the remaining 
obligation falls below the applicable threshold amount. Accordingly, 
comment 2(e)-9 is adopted as proposed.

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 proposed to adopt a new comment 7(a)-3. This 
comment clarified 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 clarified 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 also provided illustrative examples. The Board 
did not receive any comment on this guidance, which is adopted as 
proposed.

V. Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
requires an agency to perform an initial and a 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 and final analyses and 
for the reasons stated below, the Board believes that this final rule 
will not have a significant economic impact on a substantial number of 
small entities.
    1. Statement of the need for, and objectives of, the final rule. 
The final rule implements 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 adjusted 
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 final rule.
    2. Summary of the significant issues raised by public comment on 
Board's initial analysis, the Board's assessment of such issues, and a 
statement of any changes made as a result of such comments. An industry 
group representing credit unions requested that, in order to reduce 
regulatory burden, the Board provide additional guidance regarding the 
types of records that institutions are required to retain in order to 
demonstrate compliance with Regulation M. Section 213.8 states that 
lessors must retain ``evidence of compliance with the requirements 
imposed by [Regulation M], other than the advertising requirements 
under section 213.7, for a period of not less than two years after the 
disclosures are required to be made or an action is required to be 
taken.'' Comment 8-1 clarifies that these records may be retained ``in 
paper form, on microfilm, microfiche, or computer, or by any other 
method designed to reproduce records accurately'' and that ``[t]he 
lessor need retain only enough information to reconstruct the required 
disclosures or other records.''
    Because the current regulation and commentary provide lessors with 
considerable flexibility regarding the retention of records, the Board 
is concerned that adopting a more specific set of requirements (such as 
a list of documents that lessors must retain) could increase regulatory 
burden, rather than reducing it. Furthermore, because the Board did not 
propose any amendments to the record retention requirements in Sec.  
213.8, any revisions to those requirements would not have the benefit 
of input from the public, including small institutions. Although the 
commenter suggested that the Board work with a focus group of 
institutions to revise the record retention requirements, it would not 
be possible for the Board to do so and still issue a final rule 
sufficiently in advance of the July 21, 2010 statutory effective date. 
Accordingly, the final rule does not alter the requirements of Sec.  
213.8.
    3. Small entities affected by the final 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 final 
rule applies Regulation M, beginning on July 21, 2011, 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. There are, 
however, 306 thrifts and 92 credit unions with assets of $175 million 
or less that engage in consumer

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leasing. In addition, the Board's 2005 Finance Company Survey indicates 
that fewer than ten small finance companies engage in consumer leasing. 
Commenters did not provide any information on the number of small 
entities affected by the proposed rule. Nevertheless, the Board 
acknowledges that the total number of small entities likely to be 
affected by the final 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.
    4. Recordkeeping, reporting, and compliance requirements. The final 
rule does not impose any new reporting requirements. However, the final 
rule does 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. As noted above, Sec.  213.8 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. Thus, beginning on July 21, 2011, 
the final rule requires 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 final rule also imposes 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 final rule would have a significant economic 
impact on a substantial number of small entities. Except as already 
discussed above, the Board did not receive any comments to the 
contrary.
    5. Significant alternatives to the final rule. The final rule 
implements Section 1100E of the Dodd-Frank Act, which goes into effect 
on July 21, 2011. As discussed in the supplementary information, the 
final rule clarifies 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. Except as already discussed above, the Board did not 
receive any comments suggesting alternatives that would minimize the 
impact of the rule on small entities and would be consistent with 
Section 1100E of the Dodd-Frank Act.

VI. 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 
final 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 is extending 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 final rule will impose a one-time 
increase in the total annual burden under Regulation M. The 4 
respondents will take, on average, 40 hours (one business week) to 
update their systems to comply with the requirements of the final rule. 
This one-time revision will increase the total burden for all 4 
respondents by 160 hours. On a continuing basis, the Board estimates 
that the 4 respondents will each take, on average, an additional 8 
hours (one business day) annually to comply with the requirements, 
which will 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 this rule takes effect. Thereafter, the

[[Page 18353]]

estimated ongoing total annual burden will 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 changes for a given financial 
institution or entity may vary based on the size and complexity of the 
respondent. Furthermore, the Board understands that many lessors 
voluntarily comply with Regulation M for leases that are currently 
exempt. Thus, the estimated burden increase likely overstates the 
actual increase in burden for those lessors.
    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\ will 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 final rule will 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 final rule will 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 this rule takes 
effect. Thereafter, the estimated ongoing total annual burden will 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. As noted above, the 
estimated burden increase likely overstates the actual increase in 
burden because many lessors voluntarily comply with Regulation M for 
exempt leases.
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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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    The Board did not receive any comments specifically addressing the 
foregoing estimates, which were provided in the December 2010 
Regulation M Proposed Rule. The Board did receive one comment generally 
addressing the burdens associated with retaining records pursuant to 
Sec.  213.8, which is discussed above in the Board's final RFA 
analysis.
    The Board has a continuing interest in the public's opinion on the 
collection of information. 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 Final Revisions

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

PART 213--CONSUMER LEASING (REGULATION M)

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

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


0
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 the 
applicable threshold amount, whether or not the lessee has the option 
to purchase or otherwise become the owner of the property at the 
expiration of the lease. 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 (e) for the threshold amount applicable to a specific 
consumer lease. Unless the context indicates otherwise, in this part 
``lease'' means ``consumer lease.''
* * * * *

0
3. In Supplement I to Part 213:
0
A. Under Section 213.2--Definitions, under 2(e) Consumer Lease, 
paragraph 9. is added; and
0
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.
* * * * *
    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.
    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.
* * * * *

Section 213.7--Advertising

    7(a) General Rule.
* * * * *

[[Page 18354]]

    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:
    A. 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.
    B. 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.
    C. 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.
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, March 24, 2011.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 2011-7377 Filed 4-1-11; 8:45 am]
BILLING CODE 6210-01-P