Consumer Leasing (Regulation M), 51400-51404 [2016-18059]

Download as PDF 51400 Federal Register / Vol. 81, No. 150 / Thursday, August 4, 2016 / Proposed Rules 5. Qualifying for exemption— subsequent changes. A transaction does not meet the condition for an exemption under § 1026.35(c)(2)(ii) merely because it is used to satisfy and replace an existing exempt loan, unless the amount of the new extension of credit is equal to or less than the applicable threshold amount. For example, assume a closedend loan that qualified for a § 1026.35(c)(2)(ii) exemption at consummation in year one is refinanced in year ten and that the new loan amount is greater than the threshold amount in effect in year ten. In these circumstances, the creditor must comply with all of the applicable requirements of § 1026.35(c) with respect to the year ten transaction if the original loan is satisfied and replaced by the new loan, unless another exemption from the requirements of § 1026.35(c) applies. See § 1026.35(c)(2) and (c)(4)(vii). * * * * * Thomas J. Curry, Comptroller of the Currency. By order of the Board of Governors of the Federal Reserve System, July 19, 2016. Robert deV. Frierson, Secretary of the Board. Dated: July 13, 2016. Richard Cordray, Director, Bureau of Consumer Financial Protection. [FR Doc. 2016–18058 Filed 8–3–16; 8:45 am] BILLING CODE 4810–33–P; 6210–01–P; 4810–AM–P FEDERAL RESERVE SYSTEM 12 CFR Part 213 [Docket No. R–1545] RIN 7100 AE–56 BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Part 1013 [Docket No. CFPB–2016–0036] Consumer Leasing (Regulation M) Board of Governors of the Federal Reserve System (Board); and Bureau of Consumer Financial Protection (Bureau). ACTION: Proposed rule; official interpretations. rmajette on DSK2TPTVN1PROD with PROPOSALS AGENCY: The Board and the Bureau are proposing to amend the official interpretations and commentary for the agencies’ regulations that implement the Consumer Leasing Act (CLA). The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank SUMMARY: VerDate Sep<11>2014 14:52 Aug 03, 2016 Jkt 238001 Act) amended the CLA by requiring that the dollar threshold for exempt consumer credit transactions be adjusted annually by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI–W). If there is no annual percentage increase in the CPI– W, the Board and Bureau will not adjust this exemption threshold from the prior year. The proposal would memorialize this as well as the agencies’ calculation method for determining the adjustment in years following a year in which there is no annual percentage increase in the CPI–W. Because the Dodd-Frank Act also requires similar adjustments in the Truth in Lending Act’s threshold for exempt consumer credit transactions, the Board and the Bureau are proposing similar amendments to the commentaries to each of their respective regulations implementing the Truth in Lending Act elsewhere in the Federal Register. Comments must be received on or before September 6, 2016. ADDRESSES: Interested parties are encouraged to submit written comments jointly to the Board and the Bureau. Commenters are encouraged to use the title ‘‘Consumer Leasing (Regulation M)’’ to facilitate the organization and distribution of comments among the agencies. Interested parties are invited to submit written comments to: Board: You may submit comments, identified by Docket No. R–1545 or RIN 7100 AE–56, by any of the following methods: • Agency Web site: http:// www.federalreserve.gov. Follow the instructions for submitting comments at http://www.federalreserve.gov/ generalinfo/foia/ProposedRegs.cfm. • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. • Email: regs.comments@ federalreserve.gov. Include the docket number in the subject line of the message. • Fax: (202) 452–3819 or (202) 452– 3102. • Mail: Robert deV. Frierson, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW., Washington, DC 20551. All public comments will be made available on the Board’s Web site at http://www.federalreserve.gov/ generalinfo/foia/ProposedRegs.cfm as submitted, unless modified for technical reasons. Accordingly, comments will not be edited to remove any identifying or contact information. Public DATES: PO 00000 Frm 00020 Fmt 4702 Sfmt 4702 comments may also be viewed electronically or in paper in Room MP– 500 of the Board’s Martin Building (20th and C Streets NW.,) between 9:00 a.m. and 5:00 p.m. on weekdays. Bureau: You may submit comments, identified by Docket No. CFPB–2016– 0036 by any of the following methods: • Email: FederalRegisterComments@ cfpb.gov. Include Docket No. CFPB– 2016–0036 in the subject line of the email. • Electronic: http:// www.regulations.gov. Follow the instructions for submitting comments. • Mail: Monica Jackson, Office of the Executive Secretary, Consumer Financial Protection Bureau, 1700 G Street NW., Washington, DC 20552. • Hand Delivery/Courier: Monica Jackson, Office of the Executive Secretary, Consumer Financial Protection Bureau, 1275 First Street NE., Washington, DC 20002. Instructions: All submissions should include the agency name and docket number or Regulatory Information Number (RIN) for this rulemaking. Because paper mail in the Washington, DC area and at the Bureau is subject to delay, commenters are encouraged to submit comments electronically. In general, all comments received will be posted without change to http:// www.regulations.gov. In addition, comments will be available for public inspection and copying at 1275 First Street NE., Washington, DC 20002, on official business days between the hours of 10 a.m. and 5 p.m. eastern time. You can make an appointment to inspect the documents by telephoning (202) 435– 7275. All comments, including attachments and other supporting materials, will become part of the public record and subject to public disclosure. Sensitive personal information, such as account numbers or Social Security numbers, should not be included. Comments will not be edited to remove any identifying or contact information. FOR FURTHER INFORMATION CONTACT: Board: Vivian W. Wong, Senior Counsel, Division of Consumer and Community Affairs, Board of Governors of the Federal Reserve System, at (202) 452–3667; for users of Telecommunications Device for the Deaf (TDD) only, contact (202) 263–4869. Bureau: Shaakira Gold-Ramirez, Paralegal Specialist, Jaclyn Maier, Counsel, Office of Regulations, Consumer Financial Protection Bureau, at (202) 435–7700. SUPPLEMENTARY INFORMATION: E:\FR\FM\04AUP1.SGM 04AUP1 Federal Register / Vol. 81, No. 150 / Thursday, August 4, 2016 / Proposed Rules rmajette on DSK2TPTVN1PROD with PROPOSALS I. Background The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) increased the threshold in the Consumer Leasing Act (CLA) for exempt consumer leases from $25,000 to $50,000, effective July 21, 2011.1 In addition, the Dodd-Frank Act requires that, on and after December 31, 2011, this threshold 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. In April 2011, the Board issued a final rule amending Regulation M (which implements the CLA) consistent with these provisions of the Dodd-Frank Act along with a similar final rule amending Regulation Z (which implements the Truth in Lending Act) (collectively, the Board Final Threshold Rules).2 Title X of the Dodd-Frank Act transferred rulemaking authority for a number of consumer financial protection laws from the Board to the Bureau, effective July 21, 2011. In connection with this transfer of rulemaking authority, the Bureau issued its own Regulation M implementing the CLA in an interim final rule, 12 CFR part 1013 (Bureau Interim Final Rule).3 The Bureau Interim Final Rule substantially duplicated the Board’s Regulation M, including the revisions to the threshold for exempt transactions made by the Board in April 2011. In April 2016, the Bureau adopted the Bureau Interim Final Rule as final, subject to intervening final rules published by the Bureau.4 Although the Bureau has the authority to issue rules to implement the CLA for most entities, the Board retains authority to issue rules under the CLA for certain motor vehicle dealers covered by section 1029(a) of the Dodd-Frank Act, and the Board’s Regulation M continues to apply to those entities.5 1 Public Law 111–203, section 1100E, 124 Stat. 1376 (2010). 2 76 FR 18349 (Apr. 4, 2011); 76 FR 18354 (Apr. 4, 2011). 3 76 FR 78500 (Dec. 19, 2011). 4 81 FR 25323 (April 28, 2016). 5 Section 1029(a) of the Dodd-Frank Act states: ‘‘Except as permitted in subsection (b), the Bureau may not exercise any rulemaking, supervisory, enforcement, or any other authority * * * over a motor vehicle dealer that is predominantly engaged in the sale and servicing of motor vehicles, the leasing and servicing of motor vehicles, or both.’’ 12 U.S.C. 5519(a). Section 1029(b) of the DoddFrank Act states: ‘‘Subsection (a) shall not apply to any person, to the extent that such person (1) provides consumers with any services related to residential or commercial mortgages or selffinancing transactions involving real property; (2) operates a line of business (A) that involves the extension of retail credit or retail leases involving VerDate Sep<11>2014 14:52 Aug 03, 2016 Jkt 238001 Section 213.2(e)(1) of the Board’s Regulation M and § 1013.2(e)(1) of the Bureau’s Regulation M, and their accompanying commentaries, provide that the exemption threshold will be adjusted annually effective January 1 of each year based on any annual percentage increase in the CPI–W that was in effect on the preceding June 1. 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 $900.6 If there is no annual percentage increase in the CPI–W, the Board and Bureau will not adjust the exemption threshold from the prior year. Since 2011, the Board and the Bureau have adjusted the Regulation M exemption threshold annually, consistent with these rules. The Board and the Bureau last published final rules implementing the exemption threshold in effect for January 1, 2016, through December 31, 2016, in November 2015.7 II. Commentary Revision The Board and the Bureau are proposing new commentary to memorialize the calculation method used by the agencies each year to adjust the exemption threshold. Comment 2(e)–9 to the Board’s and Bureau’s Regulation M currently provides the threshold amount in effect during a particular period and details the rules the agencies use for rounding the threshold calculation to the nearest $100 or $1,000 increment, as discussed above in part I, ‘‘Background.’’ The Board and the Bureau are proposing to revise comment 2(e)–9 by moving the text regarding the threshold amount that is in effect during a particular period to a new proposed comment 2(e)–11. The discussion of how the agencies round the threshold motor vehicles; and (B) in which (i) the extension of retail credit or retail leases are provided directly to consumers; and (ii) the contract governing such extension of retail credit or retail leases is not routinely assigned to an unaffiliated third party finance or leasing source; or (3) offers or provides a consumer financial product or service not involving or related to the sale, financing, leasing, rental, repair, refurbishment, maintenance, or other servicing of motor vehicles, motor vehicle parts, or any related or ancillary product or service.’’ 12 U.S.C. 5519(b). 6 See comments 2(e)–9 in Supplements I of 12 CFR part 213 and 12 CFR part 1013. 7 80 FR 73945 (Nov. 27, 2015). PO 00000 Frm 00021 Fmt 4702 Sfmt 4702 51401 calculation would remain in comment 2(e)–9. As stated in the Board Final Threshold Rules, if there is no annual percentage increase in the CPI–W, the Board and Bureau will not adjust the exemption threshold from the prior year.8 This position is consistent with Section 1100E(b) of the Dodd-Frank Act, which states that the threshold must be adjusted by the ‘‘annual percentage increase’’ in the CPI–W (emphasis added). The Board and the Bureau are proposing to memorialize this concept in proposed comment 2(e)–10, which would provide that if the CPI–W in effect on June 1 does not increase from the CPI–W in effect on June 1 of the previous year, the threshold amount effective the following January 1 through December 31 will not change from the previous year. For example, if the threshold in effect from January 1, 2019, through December 31, 2019, is $55,500 and the CPI–W in effect on June 1 of 2019, indicates a 1.1 percent decrease from the CPI–W in effect on June 1, 2018, the threshold in effect for January 1, 2020, through December 31, 2020, will remain $55,500. Proposed comment 2(e)–10 would further set forth the calculation method the agencies would use in years following a year in which the exemption threshold was not adjusted because there was no increase in the CPI–W from the previous year. The proposed calculation method would ensure that the values for the exemption threshold keep pace with the CPI–W as contemplated by Section 1100E(b) of the Dodd-Frank Act. Specifically, as set forth under proposed comment 2(e)–10, for the years after a year in which the threshold did not change because the CPI–W in effect on June 1 decreased from the CPI– W in effect on June 1 of the previous year, the threshold is calculated by applying the annual percentage change in the CPI–W to the dollar amount that would have resulted if the decreases and any subsequent increases in the CPI–W had been taken into account. Proposed comment 2(e)–10.i further states that, if the resulting amount is greater than the current threshold, then the threshold effective January 1 the following year will increase accordingly. For example, assume that the threshold in effect from January 1, 2019, through December 31, 2019, is $55,500 and that, due to a 1.1 percent decrease from the CPI–W in effect on June 1, 8 76 FR 18354, 18355 n.1 (Apr. 4, 2011) (‘‘[A]n annual period of deflation or no inflation would not require a change in the threshold amount.’’). E:\FR\FM\04AUP1.SGM 04AUP1 51402 Federal Register / Vol. 81, No. 150 / Thursday, August 4, 2016 / Proposed Rules 2018, to the CPI–W in effect on June 1, 2019, the threshold in effect from January 1, 2020, through December 31, 2020, remains at $55,500. If, however, the threshold had been adjusted downward to reflect the decrease in the CPI–W over that time period, the threshold in effect from January 1, 2020, through December 31, 2020, would have been $54,900. Further assume that the CPI–W in effect on June 1, 2020, increased by 1.6 percent from the CPI– W in effect on June 1, 2019. The calculation for the threshold that will be in effect from January 1, 2021, through December 31, 2021, is based on the impact of a 1.6 percent increase in the CPI–W on $54,900, rather than $55,500, resulting in a 2021 threshold of $55,800. Furthermore, comment 2(e)–10.ii states that, if the resulting amount calculated is equal to or less than the current threshold, then the threshold effective January 1 the following year will not change, but future increases will be calculated based on the amount that would have resulted. To illustrate, assume in the example above that the CPI–W in effect on June 1, 2020, increased by only 0.6 percent from the CPI–W in effect on June 1, 2019. The calculation for the threshold that will be in effect from January 1, 2021, through December 31, 2021, is based on the impact of a 0.6 percent increase in the CPI–W on $54,900. The resulting amount is $55,200, which is lower than $55,500, the threshold in effect from January 1, 2020, through December 31, 2020. Therefore, the threshold in effect from January 1, 2021, through December 31, 2021, will remain $55,500. However, the calculation for the threshold that will be in effect from January 1, 2022, through December 31, 2022, will apply the percentage change in the CPI–W to $55,200, the amount that would have resulted based on the 0.6 percent change from the CPI–W in effect on June 1, 2019, to the CPI–W in effect on June 1, 2020. The agencies request comment on all aspects of the proposed rule. addition, the Bureau has consulted, or offered to consult with, the prudential regulators, the Securities and Exchange Commission, the Department of Housing and Urban Development, the Federal Housing Finance Agency, the Federal Trade Commission, and the Department of the Treasury, including regarding consistency with any prudential, market, or systemic objectives administered by such agencies. The Bureau has chosen to evaluate the benefits, costs and impacts of the proposed commentary against the current state of the world, which takes into account the current regulatory regime. The Bureau is not aware of any significant benefits or costs to consumers or covered persons associated with the proposal relative to the baseline. The Board previously stated that if there is no annual percentage increase in the CPI–W, then the Board (and now the Bureau) will not adjust the exemption threshold from the prior year.10 The proposal memorializes this in official commentary. The proposal also clarifies how the threshold would be calculated for years after a year in which the threshold did not change. The Bureau believes that this clarification memorializes the method that the Bureau would be expected to use: This method holds the threshold fixed until a notional threshold calculated using the Bureau’s methodology, but taking into account both decreases and increases in the CPI– W, exceeds the actual threshold. The Bureau requests comment on this point. Thus, the Bureau believes that the proposed rule does not change the regulatory regime relative to the baseline and creates no significant benefits, costs, or impacts. The proposed rule will have no unique impact on depository institutions or credit unions with $10 billion or less in assets as described in section 1026(a) of the Dodd-Frank Act or on rural consumers. The Bureau does not expect this final rule to affect consumers’ access to credit. III. Regulatory Analysis Regulatory Flexibility Act Board: The Regulatory Flexibility Act (RFA) requires an agency to publish an initial regulatory flexibility analysis with a proposed rule or certify that the proposed rule will not have a significant economic impact on a substantial number of small entities.11 Based on its analysis, and for the reasons stated below, the Board believes that the rule rmajette on DSK2TPTVN1PROD with PROPOSALS Bureau’s Dodd-Frank Act Section 1022(b)(2) Analysis In developing this proposal, the Bureau has considered potential benefits, costs, and impacts.9 In 9 Specifically, section 1022(b)(2)(A) calls for the Bureau to consider the potential benefits and costs of a regulation to consumers and covered persons, including the potential reduction of access by consumers to consumer financial products or services; the impact on depository institutions and credit unions with $10 billion or less in total assets as described in section 1026 of the Act; and the impact on consumers in rural areas. VerDate Sep<11>2014 14:52 Aug 03, 2016 Jkt 238001 10 76 FR 18354, 18355 n.1 (Apr. 4, 2011) (‘‘[A]n annual period of deflation or no inflation would not require a change in the threshold amount.’’). 11 See 5 U.S.C. 601 et seq. PO 00000 Frm 00022 Fmt 4702 Sfmt 4702 will not have a significant economic impact on a substantial number of small entities. Nevertheless, the Board is publishing an initial regulatory flexibility analysis and requests public comment on all aspects of its analysis. The Board will, if necessary, conduct a final regulatory flexibility analysis after considering the comments received during the public comment period. 1. Statement of the need for, and objectives of, the proposed rule. The proposed rule would memorialize the calculation method used by the Board each year to adjust the exemption threshold in accordance with Section 1100E of the Dodd-Frank Act. 2. Small entities affected by the proposed rule. Motor vehicle dealers that are subject to the Board’s Regulation M and offer consumer leases that may be exempt from Regulation M under 12 CFR 213.2(e) would be affected. While the total number of small entities likely to be affected by the proposed rule is unknown, the Board does not believe the proposed rule will have a significant economic impact on the entities that it affects. 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 recordkeeping, reporting, or compliance requirements. 4. Other Federal rules. The Board has not identified any likely duplication, overlap and/or potential conflict between the proposed rule and any Federal rule. 5. Significant alternatives to the proposed revisions. The Board solicits comment on any significant alternatives that would reduce the regulatory burden associated on small entities with this proposed rule. Bureau: The RFA generally requires an agency to conduct an initial regulatory flexibility analysis (IRFA) and a final regulatory flexibility analysis (FRFA) of any rule subject to noticeand-comment rulemaking requirements.12 These analyses must ‘‘describe the impact of the proposed rule on small entities’’.13 An IRFA or 12 5 U.S.C. 601 et seq. at 603(a). For purposes of assessing the impacts of the proposed rule on small entities, ‘‘small entities’’ is defined in the RFA to include small businesses, small not-for-profit organizations, and small government jurisdictions. Id. at 601(6). A ‘‘small business’’ is determined by application of Small Business Administration regulations and reference to the North American Industry Classification System (NAICS) classifications and size standards. Id. at 601(3). A ‘‘small organization’’ is any ‘‘not-for-profit enterprise which is independently owned and operated and is not dominant in its field.’’ Id. at 601(4). A ‘‘small 13 Id. E:\FR\FM\04AUP1.SGM 04AUP1 Federal Register / Vol. 81, No. 150 / Thursday, August 4, 2016 / Proposed Rules FRFA is not required if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities.14 The Bureau also is subject to certain additional procedures under the RFA involving the convening of a panel to consult with small business representatives prior to proposing a rule for which an IRFA is required.15 An IRFA is not required for this proposal because if adopted it would not have a significant economic impact on a substantial number of small entities. As discussed in the Bureau’s Section 1022(b)(2) Analysis above, this proposal does not introduce costs or benefits to covered persons because the proposal seeks only to clarify the method of threshold adjustment which has already been established in previous Agency rules. Therefore this proposed rule would not have a significant impact on small entities. Certification Accordingly, the Bureau Director, by signing below, certifies that this proposal, if adopted, would not have a significant economic impact on a substantial number of small entities. Paperwork Reduction Act In accordance with the Paperwork Reduction Act of 1995,16 the agencies reviewed this proposed rule. No collections of information pursuant to the Paperwork Reduction Act are contained in the proposed rule. List of Subjects 12 CFR Part 213 Advertising, Consumer leasing, Consumer protection, Federal Reserve System, Reporting and recordkeeping requirements. 12 CFR Part 1013 Advertising, Consumer leasing, Reporting and recordkeeping requirements, Truth in Lending. Board of Governors of the Federal Reserve System rmajette on DSK2TPTVN1PROD with PROPOSALS 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: governmental jurisdiction’’ is the government of a city, county, town, township, village, school district, or special district with a population of less than 50,000. Id. at 601(5). 14 Id. at 605(b). 15 Id. at 609. 16 44 U.S.C. 3506; 5 CFR 1320. VerDate Sep<11>2014 14:52 Aug 03, 2016 Jkt 238001 PART 213—CONSUMER LEASING (REGULATION M) 1. The authority citation for part 213 continues to read as follows: ■ Authority: 15 U.S.C. 1604 and 1667f; Pub. L. 111–203 § 1100E, 124 Stat. 1376. 2. In Supplement I to Part 213, under Section 213.2—Definitions, under 2(e) Consumer Lease, paragraph 9. is revised, and paragraphs 10. and 11. are added, to read as follows: ■ Supplement I to Part 213—Official Staff Interpretations * * § 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 in comment 2(e)–11 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. Comment 2(e)–11 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. 10. No increase in the CPI–W. If the CPI–W in effect on June 1 does not increase from the CPI–W in effect on June 1 of the previous year, the threshold amount effective the following January 1 through December 31 will not change from the previous year. When this occurs, for the years that follow, the threshold is calculated based on the annual percentage change PO 00000 Frm 00023 Fmt 4702 Sfmt 4702 51403 in the CPI–W applied to the dollar amount that would have resulted if decreases and any subsequent increases in the CPI–W had been taken into account. i. Net increases. If the resulting amount is greater than the current threshold, then the threshold effective January 1 the following year will increase accordingly. ii. Net decreases. If the resulting amount calculated is equal to or less than the current threshold, then the threshold effective January 1 the following year will not change, but future increases will be calculated based on the amount that would have resulted. 11. Threshold. For purposes of § 213.2(e)(1), the threshold amount in effect during a particular period is the amount stated below for that period. 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. iii. From January 1, 2012 through December 31, 2012, the threshold amount is $51,800. iv. From January 1, 2013 through December 31, 2013, the threshold amount is $53,000. v. From January 1, 2014 through December 31, 2014, the threshold amount is $53,500. vi. From January 1, 2015 through December 31, 2015, the threshold amount is $54,600. vii. From January 1, 2016 through December 31, 2016, the threshold amount is $54,600. Bureau of Consumer Financial Protection Authority and Issuance For the reasons set forth in the preamble, the Bureau proposes to amend Regulation M, 12 CFR part 1013, as set forth below: PART 1013—CONSUMER LEASING (REGULATION M) 3. The authority citation for part 1013 continues to read as follows: ■ Authority: 15 U.S.C. 1604 and 1667f; Pub. L. 111–203 § 1100E, 124 Stat. 1376. 4. In Supplement I to part 1013, under Section 1013.2—Definitions, under 2(e)—Consumer Lease, paragraph 9 is revised, and paragraphs 10 and 11 are added, to read as follows: ■ Supplement I to Part 1013—Official Interpretations * * § 1013.2 * E:\FR\FM\04AUP1.SGM * * * * Definitions. * 04AUP1 * * 51404 2(e) Federal Register / Vol. 81, No. 150 / Thursday, August 4, 2016 / Proposed Rules Consumer Lease rmajette on DSK2TPTVN1PROD with PROPOSALS * * * * * 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 in comment 2(e)–11 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. Comment 2(e)–11 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. 10. No increase in the CPI–W. If the CPI–W in effect on June 1 does not increase from the CPI–W in effect on June 1 of the previous year, the threshold amount effective the following January 1 through December 31 will not change from the previous year. When this occurs, for the years that follow, the threshold is calculated based on the annual percentage change in the CPI–W applied to the dollar amount that would have resulted if decreases and any subsequent increases in the CPI–W had been taken into account. i. Net increases. If the resulting amount is greater than the current threshold, then the threshold effective January 1 the following year will increase accordingly. ii. Net decreases. If the resulting amount calculated is equal to or less than the current threshold, then the threshold effective January 1 the following year will not change, but future increases will be calculated based on the amount that would have resulted. 11. Threshold. For purposes of § 1013.2(e)(1), the threshold amount in VerDate Sep<11>2014 14:52 Aug 03, 2016 Jkt 238001 effect during a particular period is the amount stated below for that period. 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. iii. From January 1, 2012 through December 31, 2012, the threshold amount is $51,800. iv. From January 1, 2013 through December 31, 2013, the threshold amount is $53,000. v. From January 1, 2014 through December 31, 2014, the threshold amount is $53,500. vi. From January 1, 2015 through December 31, 2015, the threshold amount is $54,600. vii. From January 1, 2016 through December 31, 2016, the threshold amount is $54,600. By order of the Board of Governors of the Federal Reserve System, July 19, 2016. Robert deV. Frierson, Secretary of the Board. Dated: July 13, 2016. Richard Cordray, Director, Bureau of Consumer Financial Protection. [FR Doc. 2016–18059 Filed 8–3–16; 8:45 am] BILLING CODE 6210–01–4810–AM–P FEDERAL RESERVE SYSTEM 12 CFR Part 226 [Docket No. R–1546] RIN 7100 AE–57 BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Part 1026 [Docket No. CFPB–2016–0037] Truth in Lending (Regulation Z) Board of Governors of the Federal Reserve System (Board); and Bureau of Consumer Financial Protection (Bureau). ACTION: Proposed rule; official interpretations. AGENCY: The Board and the Bureau are proposing to amend the official interpretations and commentary for the agencies’ regulations that implement the Truth in Lending Act (TILA). The DoddFrank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) amended TILA by requiring that the dollar threshold for exempt consumer credit transactions be adjusted annually by the annual percentage increase in the SUMMARY: PO 00000 Frm 00024 Fmt 4702 Sfmt 4702 Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI–W). If there is no annual percentage increase in the CPI–W, the Board and Bureau will not adjust this exemption threshold from the prior year. The proposal would memorialize this as well as the agencies’ calculation method for determining the adjustment in years following a year in which there is no annual percentage increase in the CPI–W. Because the Dodd-Frank Act also requires similar adjustments in the Consumer Leasing Act’s threshold for exempt consumer leases, the Board and the Bureau are proposing similar amendments to the commentaries to each of their respective regulations implementing the Consumer Leasing Act elsewhere in the Federal Register. DATES: Comments must be received on or before September 6, 2016. ADDRESSES: Interested parties are encouraged to submit written comments jointly to the Board and the Bureau. Commenters are encouraged to use the title ‘‘Truth in Lending (Regulation Z)’’ to facilitate the organization and distribution of comments among the agencies. Interested parties are invited to submit written comments to: Board: You may submit comments, identified by Docket No. R–7100 or RIN 7100 AE–57, by any of the following methods: • Agency Web site: http:// www.federalreserve.gov. Follow the instructions for submitting comments at http://www.federalreserve.gov/ generalinfo/foia/ProposedRegs.cfm. • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. • Email: regs.comments@ federalreserve.gov. Include the docket number in the subject line of the message. • Fax: (202) 452–3819 or (202) 452– 3102. • Mail: Robert deV. Frierson, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW., Washington, DC 20551. All public comments will be made available on the Board’s Web site at http://www.federalreserve.gov/ generalinfo/foia/ProposedRegs.cfm as submitted, unless modified for technical reasons. Accordingly, comments will not be edited to remove any identifying or contact information. Public comments may also be viewed electronically or in paper in Room MP– 500 of the Board’s Martin Building (20th and C Streets NW.) between 9:00 a.m. and 5:00 p.m. on weekdays. E:\FR\FM\04AUP1.SGM 04AUP1

Agencies

[Federal Register Volume 81, Number 150 (Thursday, August 4, 2016)]
[Proposed Rules]
[Pages 51400-51404]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18059]


-----------------------------------------------------------------------

FEDERAL RESERVE SYSTEM

12 CFR Part 213

[Docket No. R-1545]
RIN 7100 AE-56

BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1013

[Docket No. CFPB-2016-0036]


Consumer Leasing (Regulation M)

AGENCY: Board of Governors of the Federal Reserve System (Board); and 
Bureau of Consumer Financial Protection (Bureau).

ACTION: Proposed rule; official interpretations.

-----------------------------------------------------------------------

SUMMARY: The Board and the Bureau are proposing to amend the official 
interpretations and commentary for the agencies' regulations that 
implement the Consumer Leasing Act (CLA). The Dodd-Frank Wall Street 
Reform and Consumer Protection Act (Dodd-Frank Act) amended the CLA by 
requiring that the dollar threshold for exempt consumer credit 
transactions be adjusted annually by the annual percentage increase in 
the Consumer Price Index for Urban Wage Earners and Clerical Workers 
(CPI-W). If there is no annual percentage increase in the CPI-W, the 
Board and Bureau will not adjust this exemption threshold from the 
prior year. The proposal would memorialize this as well as the 
agencies' calculation method for determining the adjustment in years 
following a year in which there is no annual percentage increase in the 
CPI-W.
    Because the Dodd-Frank Act also requires similar adjustments in the 
Truth in Lending Act's threshold for exempt consumer credit 
transactions, the Board and the Bureau are proposing similar amendments 
to the commentaries to each of their respective regulations 
implementing the Truth in Lending Act elsewhere in the Federal 
Register.

DATES: Comments must be received on or before September 6, 2016.

ADDRESSES: Interested parties are encouraged to submit written comments 
jointly to the Board and the Bureau. Commenters are encouraged to use 
the title ``Consumer Leasing (Regulation M)'' to facilitate the 
organization and distribution of comments among the agencies. 
Interested parties are invited to submit written comments to:
    Board: You may submit comments, identified by Docket No. R-1545 or 
RIN 7100 AE-56, by any of the following methods:
     Agency Web site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: regs.comments@federalreserve.gov. Include the 
docket number in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452-3102.
     Mail: Robert deV. Frierson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue NW., 
Washington, DC 20551.
    All public comments will be made available on the Board's Web site 
at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, comments 
will not be edited to remove any identifying or contact information. 
Public comments may also be viewed electronically or in paper in Room 
MP-500 of the Board's Martin Building (20th and C Streets NW.,) between 
9:00 a.m. and 5:00 p.m. on weekdays.
    Bureau: You may submit comments, identified by Docket No. CFPB-
2016-0036 by any of the following methods:
     Email: FederalRegisterComments@cfpb.gov. Include Docket 
No. CFPB-2016-0036 in the subject line of the email.
     Electronic: http://www.regulations.gov. Follow the 
instructions for submitting comments.
     Mail: Monica Jackson, Office of the Executive Secretary, 
Consumer Financial Protection Bureau, 1700 G Street NW., Washington, DC 
20552.
     Hand Delivery/Courier: Monica Jackson, Office of the 
Executive Secretary, Consumer Financial Protection Bureau, 1275 First 
Street NE., Washington, DC 20002.
    Instructions: All submissions should include the agency name and 
docket number or Regulatory Information Number (RIN) for this 
rulemaking. Because paper mail in the Washington, DC area and at the 
Bureau is subject to delay, commenters are encouraged to submit 
comments electronically. In general, all comments received will be 
posted without change to http://www.regulations.gov. In addition, 
comments will be available for public inspection and copying at 1275 
First Street NE., Washington, DC 20002, on official business days 
between the hours of 10 a.m. and 5 p.m. eastern time. You can make an 
appointment to inspect the documents by telephoning (202) 435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Sensitive personal information, such as account numbers or Social 
Security numbers, should not be included. Comments will not be edited 
to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: Board: Vivian W. Wong, Senior Counsel, 
Division of Consumer and Community Affairs, Board of Governors of the 
Federal Reserve System, at (202) 452-3667; for users of 
Telecommunications Device for the Deaf (TDD) only, contact (202) 263-
4869.
    Bureau: Shaakira Gold-Ramirez, Paralegal Specialist, Jaclyn Maier, 
Counsel, Office of Regulations, Consumer Financial Protection Bureau, 
at (202) 435-7700.

SUPPLEMENTARY INFORMATION:

[[Page 51401]]

I. Background

    The Dodd-Frank Wall Street Reform and Consumer Protection Act of 
2010 (Dodd-Frank Act) increased the threshold in the Consumer Leasing 
Act (CLA) for exempt consumer leases from $25,000 to $50,000, effective 
July 21, 2011.\1\ In addition, the Dodd-Frank Act requires that, on and 
after December 31, 2011, this threshold 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. In April 2011, the Board issued a final 
rule amending Regulation M (which implements the CLA) consistent with 
these provisions of the Dodd-Frank Act along with a similar final rule 
amending Regulation Z (which implements the Truth in Lending Act) 
(collectively, the Board Final Threshold Rules).\2\
---------------------------------------------------------------------------

    \1\ Public Law 111-203, section 1100E, 124 Stat. 1376 (2010).
    \2\ 76 FR 18349 (Apr. 4, 2011); 76 FR 18354 (Apr. 4, 2011).
---------------------------------------------------------------------------

    Title X of the Dodd-Frank Act transferred rulemaking authority for 
a number of consumer financial protection laws from the Board to the 
Bureau, effective July 21, 2011. In connection with this transfer of 
rulemaking authority, the Bureau issued its own Regulation M 
implementing the CLA in an interim final rule, 12 CFR part 1013 (Bureau 
Interim Final Rule).\3\ The Bureau Interim Final Rule substantially 
duplicated the Board's Regulation M, including the revisions to the 
threshold for exempt transactions made by the Board in April 2011. In 
April 2016, the Bureau adopted the Bureau Interim Final Rule as final, 
subject to intervening final rules published by the Bureau.\4\ Although 
the Bureau has the authority to issue rules to implement the CLA for 
most entities, the Board retains authority to issue rules under the CLA 
for certain motor vehicle dealers covered by section 1029(a) of the 
Dodd-Frank Act, and the Board's Regulation M continues to apply to 
those entities.\5\
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    \3\ 76 FR 78500 (Dec. 19, 2011).
    \4\ 81 FR 25323 (April 28, 2016).
    \5\ Section 1029(a) of the Dodd-Frank Act states: ``Except as 
permitted in subsection (b), the Bureau may not exercise any 
rulemaking, supervisory, enforcement, or any other authority * * * 
over a motor vehicle dealer that is predominantly engaged in the 
sale and servicing of motor vehicles, the leasing and servicing of 
motor vehicles, or both.'' 12 U.S.C. 5519(a). Section 1029(b) of the 
Dodd-Frank Act states: ``Subsection (a) shall not apply to any 
person, to the extent that such person (1) provides consumers with 
any services related to residential or commercial mortgages or self-
financing transactions involving real property; (2) operates a line 
of business (A) that involves the extension of retail credit or 
retail leases involving motor vehicles; and (B) in which (i) the 
extension of retail credit or retail leases are provided directly to 
consumers; and (ii) the contract governing such extension of retail 
credit or retail leases is not routinely assigned to an unaffiliated 
third party finance or leasing source; or (3) offers or provides a 
consumer financial product or service not involving or related to 
the sale, financing, leasing, rental, repair, refurbishment, 
maintenance, or other servicing of motor vehicles, motor vehicle 
parts, or any related or ancillary product or service.'' 12 U.S.C. 
5519(b).
---------------------------------------------------------------------------

    Section 213.2(e)(1) of the Board's Regulation M and Sec.  
1013.2(e)(1) of the Bureau's Regulation M, and their accompanying 
commentaries, provide that the exemption threshold will be adjusted 
annually effective January 1 of each year based on any annual 
percentage increase in the CPI-W that was in effect on the preceding 
June 1. 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.\6\ If there is no annual percentage increase in the CPI-W, the 
Board and Bureau will not adjust the exemption threshold from the prior 
year.
---------------------------------------------------------------------------

    \6\ See comments 2(e)-9 in Supplements I of 12 CFR part 213 and 
12 CFR part 1013.
---------------------------------------------------------------------------

    Since 2011, the Board and the Bureau have adjusted the Regulation M 
exemption threshold annually, consistent with these rules. The Board 
and the Bureau last published final rules implementing the exemption 
threshold in effect for January 1, 2016, through December 31, 2016, in 
November 2015.\7\
---------------------------------------------------------------------------

    \7\ 80 FR 73945 (Nov. 27, 2015).
---------------------------------------------------------------------------

II. Commentary Revision

    The Board and the Bureau are proposing new commentary to 
memorialize the calculation method used by the agencies each year to 
adjust the exemption threshold. Comment 2(e)-9 to the Board's and 
Bureau's Regulation M currently provides the threshold amount in effect 
during a particular period and details the rules the agencies use for 
rounding the threshold calculation to the nearest $100 or $1,000 
increment, as discussed above in part I, ``Background.''
    The Board and the Bureau are proposing to revise comment 2(e)-9 by 
moving the text regarding the threshold amount that is in effect during 
a particular period to a new proposed comment 2(e)-11. The discussion 
of how the agencies round the threshold calculation would remain in 
comment 2(e)-9.
    As stated in the Board Final Threshold Rules, if there is no annual 
percentage increase in the CPI-W, the Board and Bureau will not adjust 
the exemption threshold from the prior year.\8\ This position is 
consistent with Section 1100E(b) of the Dodd-Frank Act, which states 
that the threshold must be adjusted by the ``annual percentage 
increase'' in the CPI-W (emphasis added). The Board and the Bureau are 
proposing to memorialize this concept in proposed comment 2(e)-10, 
which would provide that if the CPI-W in effect on June 1 does not 
increase from the CPI-W in effect on June 1 of the previous year, the 
threshold amount effective the following January 1 through December 31 
will not change from the previous year. For example, if the threshold 
in effect from January 1, 2019, through December 31, 2019, is $55,500 
and the CPI-W in effect on June 1 of 2019, indicates a 1.1 percent 
decrease from the CPI-W in effect on June 1, 2018, the threshold in 
effect for January 1, 2020, through December 31, 2020, will remain 
$55,500.
---------------------------------------------------------------------------

    \8\ 76 FR 18354, 18355 n.1 (Apr. 4, 2011) (``[A]n annual period 
of deflation or no inflation would not require a change in the 
threshold amount.'').
---------------------------------------------------------------------------

    Proposed comment 2(e)-10 would further set forth the calculation 
method the agencies would use in years following a year in which the 
exemption threshold was not adjusted because there was no increase in 
the CPI-W from the previous year. The proposed calculation method would 
ensure that the values for the exemption threshold keep pace with the 
CPI-W as contemplated by Section 1100E(b) of the Dodd-Frank Act.
    Specifically, as set forth under proposed comment 2(e)-10, for the 
years after a year in which the threshold did not change because the 
CPI-W in effect on June 1 decreased from the CPI-W in effect on June 1 
of the previous year, the threshold is calculated by applying the 
annual percentage change in the CPI-W to the dollar amount that would 
have resulted if the decreases and any subsequent increases in the CPI-
W had been taken into account. Proposed comment 2(e)-10.i further 
states that, if the resulting amount is greater than the current 
threshold, then the threshold effective January 1 the following year 
will increase accordingly.
    For example, assume that the threshold in effect from January 1, 
2019, through December 31, 2019, is $55,500 and that, due to a 1.1 
percent decrease from the CPI-W in effect on June 1,

[[Page 51402]]

2018, to the CPI-W in effect on June 1, 2019, the threshold in effect 
from January 1, 2020, through December 31, 2020, remains at $55,500. 
If, however, the threshold had been adjusted downward to reflect the 
decrease in the CPI-W over that time period, the threshold in effect 
from January 1, 2020, through December 31, 2020, would have been 
$54,900. Further assume that the CPI-W in effect on June 1, 2020, 
increased by 1.6 percent from the CPI-W in effect on June 1, 2019. The 
calculation for the threshold that will be in effect from January 1, 
2021, through December 31, 2021, is based on the impact of a 1.6 
percent increase in the CPI-W on $54,900, rather than $55,500, 
resulting in a 2021 threshold of $55,800.
    Furthermore, comment 2(e)-10.ii states that, if the resulting 
amount calculated is equal to or less than the current threshold, then 
the threshold effective January 1 the following year will not change, 
but future increases will be calculated based on the amount that would 
have resulted. To illustrate, assume in the example above that the CPI-
W in effect on June 1, 2020, increased by only 0.6 percent from the 
CPI-W in effect on June 1, 2019. The calculation for the threshold that 
will be in effect from January 1, 2021, through December 31, 2021, is 
based on the impact of a 0.6 percent increase in the CPI-W on $54,900. 
The resulting amount is $55,200, which is lower than $55,500, the 
threshold in effect from January 1, 2020, through December 31, 2020. 
Therefore, the threshold in effect from January 1, 2021, through 
December 31, 2021, will remain $55,500. However, the calculation for 
the threshold that will be in effect from January 1, 2022, through 
December 31, 2022, will apply the percentage change in the CPI-W to 
$55,200, the amount that would have resulted based on the 0.6 percent 
change from the CPI-W in effect on June 1, 2019, to the CPI-W in effect 
on June 1, 2020.
    The agencies request comment on all aspects of the proposed rule.

III. Regulatory Analysis

Bureau's Dodd-Frank Act Section 1022(b)(2) Analysis

    In developing this proposal, the Bureau has considered potential 
benefits, costs, and impacts.\9\ In addition, the Bureau has consulted, 
or offered to consult with, the prudential regulators, the Securities 
and Exchange Commission, the Department of Housing and Urban 
Development, the Federal Housing Finance Agency, the Federal Trade 
Commission, and the Department of the Treasury, including regarding 
consistency with any prudential, market, or systemic objectives 
administered by such agencies.
---------------------------------------------------------------------------

    \9\ Specifically, section 1022(b)(2)(A) calls for the Bureau to 
consider the potential benefits and costs of a regulation to 
consumers and covered persons, including the potential reduction of 
access by consumers to consumer financial products or services; the 
impact on depository institutions and credit unions with $10 billion 
or less in total assets as described in section 1026 of the Act; and 
the impact on consumers in rural areas.
---------------------------------------------------------------------------

    The Bureau has chosen to evaluate the benefits, costs and impacts 
of the proposed commentary against the current state of the world, 
which takes into account the current regulatory regime. The Bureau is 
not aware of any significant benefits or costs to consumers or covered 
persons associated with the proposal relative to the baseline. The 
Board previously stated that if there is no annual percentage increase 
in the CPI-W, then the Board (and now the Bureau) will not adjust the 
exemption threshold from the prior year.\10\ The proposal memorializes 
this in official commentary. The proposal also clarifies how the 
threshold would be calculated for years after a year in which the 
threshold did not change. The Bureau believes that this clarification 
memorializes the method that the Bureau would be expected to use: This 
method holds the threshold fixed until a notional threshold calculated 
using the Bureau's methodology, but taking into account both decreases 
and increases in the CPI-W, exceeds the actual threshold. The Bureau 
requests comment on this point. Thus, the Bureau believes that the 
proposed rule does not change the regulatory regime relative to the 
baseline and creates no significant benefits, costs, or impacts.
---------------------------------------------------------------------------

    \10\ 76 FR 18354, 18355 n.1 (Apr. 4, 2011) (``[A]n annual period 
of deflation or no inflation would not require a change in the 
threshold amount.'').
---------------------------------------------------------------------------

    The proposed rule will have no unique impact on depository 
institutions or credit unions with $10 billion or less in assets as 
described in section 1026(a) of the Dodd-Frank Act or on rural 
consumers. The Bureau does not expect this final rule to affect 
consumers' access to credit.

Regulatory Flexibility Act

    Board: The Regulatory Flexibility Act (RFA) requires an agency to 
publish an initial regulatory flexibility analysis with a proposed rule 
or certify that the proposed rule will not have a significant economic 
impact on a substantial number of small entities.\11\ Based on its 
analysis, and for the reasons stated below, the Board believes that the 
rule will not have a significant economic impact on a substantial 
number of small entities. Nevertheless, the Board is publishing an 
initial regulatory flexibility analysis and requests public comment on 
all aspects of its analysis. The Board will, if necessary, conduct a 
final regulatory flexibility analysis after considering the comments 
received during the public comment period.
---------------------------------------------------------------------------

    \11\ See 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------

    1. Statement of the need for, and objectives of, the proposed rule. 
The proposed rule would memorialize the calculation method used by the 
Board each year to adjust the exemption threshold in accordance with 
Section 1100E of the Dodd-Frank Act.
    2. Small entities affected by the proposed rule. Motor vehicle 
dealers that are subject to the Board's Regulation M and offer consumer 
leases that may be exempt from Regulation M under 12 CFR 213.2(e) would 
be affected. While the total number of small entities likely to be 
affected by the proposed rule is unknown, the Board does not believe 
the proposed rule will have a significant economic impact on the 
entities that it affects. 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 recordkeeping, reporting, or 
compliance requirements.
    4. Other Federal rules. The Board has not identified any likely 
duplication, overlap and/or potential conflict between the proposed 
rule and any Federal rule.
    5. Significant alternatives to the proposed revisions. The Board 
solicits comment on any significant alternatives that would reduce the 
regulatory burden associated on small entities with this proposed rule.
    Bureau: The RFA generally requires an agency to conduct an initial 
regulatory flexibility analysis (IRFA) and a final regulatory 
flexibility analysis (FRFA) of any rule subject to notice-and-comment 
rulemaking requirements.\12\ These analyses must ``describe the impact 
of the proposed rule on small entities''.\13\ An IRFA or

[[Page 51403]]

FRFA is not required if the agency certifies that the rule will not 
have a significant economic impact on a substantial number of small 
entities.\14\ The Bureau also is subject to certain additional 
procedures under the RFA involving the convening of a panel to consult 
with small business representatives prior to proposing a rule for which 
an IRFA is required.\15\
---------------------------------------------------------------------------

    \12\ 5 U.S.C. 601 et seq.
    \13\ Id. at 603(a). For purposes of assessing the impacts of the 
proposed rule on small entities, ``small entities'' is defined in 
the RFA to include small businesses, small not-for-profit 
organizations, and small government jurisdictions. Id. at 601(6). A 
``small business'' is determined by application of Small Business 
Administration regulations and reference to the North American 
Industry Classification System (NAICS) classifications and size 
standards. Id. at 601(3). A ``small organization'' is any ``not-for-
profit enterprise which is independently owned and operated and is 
not dominant in its field.'' Id. at 601(4). A ``small governmental 
jurisdiction'' is the government of a city, county, town, township, 
village, school district, or special district with a population of 
less than 50,000. Id. at 601(5).
    \14\ Id. at 605(b).
    \15\ Id. at 609.
---------------------------------------------------------------------------

    An IRFA is not required for this proposal because if adopted it 
would not have a significant economic impact on a substantial number of 
small entities. As discussed in the Bureau's Section 1022(b)(2) 
Analysis above, this proposal does not introduce costs or benefits to 
covered persons because the proposal seeks only to clarify the method 
of threshold adjustment which has already been established in previous 
Agency rules. Therefore this proposed rule would not have a significant 
impact on small entities.
Certification
    Accordingly, the Bureau Director, by signing below, certifies that 
this proposal, if adopted, would not have a significant economic impact 
on a substantial number of small entities.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995,\16\ the 
agencies reviewed this proposed rule. No collections of information 
pursuant to the Paperwork Reduction Act are contained in the proposed 
rule.
---------------------------------------------------------------------------

    \16\ 44 U.S.C. 3506; 5 CFR 1320.
---------------------------------------------------------------------------

List of Subjects

12 CFR Part 213

    Advertising, Consumer leasing, Consumer protection, Federal Reserve 
System, Reporting and recordkeeping requirements.

12 CFR Part 1013

    Advertising, Consumer leasing, Reporting and recordkeeping 
requirements, Truth in Lending.

Board of Governors of the Federal Reserve System

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)

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

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

0
2. In Supplement I to Part 213, under Section 213.2--Definitions, under 
2(e) Consumer Lease, paragraph 9. is revised, and paragraphs 10. and 
11. are added, to read as follows:

Supplement I to Part 213--Official Staff Interpretations

* * * * *


Sec.  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 in comment 2(e)-11 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. 
Comment 2(e)-11 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.
    10. No increase in the CPI-W. If the CPI-W in effect on June 1 does 
not increase from the CPI-W in effect on June 1 of the previous year, 
the threshold amount effective the following January 1 through December 
31 will not change from the previous year. When this occurs, for the 
years that follow, the threshold is calculated based on the annual 
percentage change in the CPI-W applied to the dollar amount that would 
have resulted if decreases and any subsequent increases in the CPI-W 
had been taken into account.
    i. Net increases. If the resulting amount is greater than the 
current threshold, then the threshold effective January 1 the following 
year will increase accordingly.
    ii. Net decreases. If the resulting amount calculated is equal to 
or less than the current threshold, then the threshold effective 
January 1 the following year will not change, but future increases will 
be calculated based on the amount that would have resulted.
    11. Threshold. For purposes of Sec.  213.2(e)(1), the threshold 
amount in effect during a particular period is the amount stated below 
for that period.
    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.
    iii. From January 1, 2012 through December 31, 2012, the threshold 
amount is $51,800.
    iv. From January 1, 2013 through December 31, 2013, the threshold 
amount is $53,000.
    v. From January 1, 2014 through December 31, 2014, the threshold 
amount is $53,500.
    vi. From January 1, 2015 through December 31, 2015, the threshold 
amount is $54,600.
    vii. From January 1, 2016 through December 31, 2016, the threshold 
amount is $54,600.

Bureau of Consumer Financial Protection

Authority and Issuance

    For the reasons set forth in the preamble, the Bureau proposes to 
amend Regulation M, 12 CFR part 1013, as set forth below:

PART 1013--CONSUMER LEASING (REGULATION M)

0
3. The authority citation for part 1013 continues to read as follows:

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

0
4. In Supplement I to part 1013, under Section 1013.2--Definitions, 
under 2(e)--Consumer Lease, paragraph 9 is revised, and paragraphs 10 
and 11 are added, to read as follows:

Supplement I to Part 1013--Official Interpretations

* * * * *


Sec.  1013.2  Definitions.

* * * * *

[[Page 51404]]

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 in comment 2(e)-11 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. 
Comment 2(e)-11 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.
    10. No increase in the CPI-W. If the CPI-W in effect on June 1 does 
not increase from the CPI-W in effect on June 1 of the previous year, 
the threshold amount effective the following January 1 through December 
31 will not change from the previous year. When this occurs, for the 
years that follow, the threshold is calculated based on the annual 
percentage change in the CPI-W applied to the dollar amount that would 
have resulted if decreases and any subsequent increases in the CPI-W 
had been taken into account.
    i. Net increases. If the resulting amount is greater than the 
current threshold, then the threshold effective January 1 the following 
year will increase accordingly.
    ii. Net decreases. If the resulting amount calculated is equal to 
or less than the current threshold, then the threshold effective 
January 1 the following year will not change, but future increases will 
be calculated based on the amount that would have resulted.
    11. Threshold. For purposes of Sec.  1013.2(e)(1), the threshold 
amount in effect during a particular period is the amount stated below 
for that period.
    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.
    iii. From January 1, 2012 through December 31, 2012, the threshold 
amount is $51,800.
    iv. From January 1, 2013 through December 31, 2013, the threshold 
amount is $53,000.
    v. From January 1, 2014 through December 31, 2014, the threshold 
amount is $53,500.
    vi. From January 1, 2015 through December 31, 2015, the threshold 
amount is $54,600.
    vii. From January 1, 2016 through December 31, 2016, the threshold 
amount is $54,600.


    By order of the Board of Governors of the Federal Reserve 
System, July 19, 2016.
Robert deV. Frierson,
Secretary of the Board.
    Dated: July 13, 2016.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2016-18059 Filed 8-3-16; 8:45 am]
 BILLING CODE 6210-01-4810-AM-P