Consumer Leasing (Regulation M), 58017-58020 [2019-21554]

Download as PDF Federal Register / Vol. 84, No. 210 / Wednesday, October 30, 2019 / Rules and Regulations 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 closed-end 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). * * * * * Dated: September 27, 2019. Morris R. Morgan, First Deputy Comptroller, Comptroller of the Currency. By order of the Board of Governors of the Federal Reserve System, acting through the Secretary of the Board under delegated authority, September 20, 2019. Ann E. Misback, Secretary of the Board. Dated: September 24, 2019. Thomas Pahl, Policy Associate Director, Bureau of Consumer Financial Protection. [FR Doc. 2019–21559 Filed 10–29–19; 8:45 am] BILLING CODE: 4810–33– 6210–01– 4810–AM–P FEDERAL RESERVE SYSTEM 12 CFR Part 213 [Docket No. R–1676] RIN 7100–AF 59 BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Part 1013 Consumer Leasing (Regulation M) Board of Governors of the Federal Reserve System (Board); and Bureau of Consumer Financial Protection (Bureau). ACTION: Final rules, official interpretations and commentary. AGENCY: The Board and the Bureau are finalizing amendments to 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 leases be adjusted annually by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI–W). SUMMARY: VerDate Sep<11>2014 15:59 Oct 29, 2019 Jkt 250001 If there is no annual percentage increase in the CPI–W, the Board and the Bureau will not adjust this exemption threshold from the prior year. However, in years following a year in which the exemption threshold was not adjusted, the threshold is calculated by applying the annual percentage change in the CPI–W to the dollar amount that would have resulted, after rounding, if the decreases and any subsequent increases in the CPI–W had been taken into account. Based on the annual percentage increase in the CPI–W as of June 1, 2019, the exemption threshold will increase from $57,200 to $58,300 effective January 1, 2020. 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 making similar amendments to each of their respective regulations implementing the Truth in Lending Act elsewhere in this issue of the Federal Register. DATES: This final rule is effective January 1, 2020. 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: Kristen Phinnessee, Counsel, Office of Regulations, Bureau of Consumer Financial Protection, at (202) 435–7700. If you require this document in an alternative electronic format, please contact CFPB_Accessibility@ cfpb.gov. SUPPLEMENTARY INFORMATION: 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, and the threshold in the Truth in Lending Act (TILA) for exempt consumer credit transactions,1 from $25,000 to $50,000, effective July 21, 2011.2 In addition, the Dodd-Frank Act requires that, on and after December 31, 2011, these thresholds be adjusted annually for inflation by the annual percentage increase in the Consumer Price Index 1 Although consumer credit transactions above the threshold are generally exempt, loans secured by real property or by personal property used or expected to be used as the principal dwelling of a consumer and private education loans are covered by TILA regardless of the loan amount. See 12 CFR 226.3(b)(1)(i) (Board) and 12 CFR 1026.3(b)(1)(i) (Bureau). 2 Public Law 111–203, section 1100E, 124 Stat. 1376, 2111 (2010). PO 00000 Frm 00013 Fmt 4700 Sfmt 4700 58017 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 TILA) (collectively, the Board Final Threshold Rules).3 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, 12 CFR part 1013, substantially duplicating the Board’s Regulation M.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 DoddFrank Act, and the Board’s Regulation M continues to apply to those entities.5 The Board’s and the Bureau’s regulations,6 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. They further provide that any increase in the threshold amount will be rounded to the nearest $100 increment. For example, if the annual percentage increase in the 3 76 FR 18349 (Apr. 4, 2011); 76 FR 18354 (Apr. 4, 2011). 4 See 76 FR 78500 (Dec. 19, 2011); 81 FR 25323 (Apr. 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 provides that 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 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 12 CFR 213.2(e)(1) (Board) and 12 CFR 1013.2(e)(1) (Bureau). E:\FR\FM\30OCR1.SGM 30OCR1 58018 Federal Register / Vol. 84, No. 210 / Wednesday, October 30, 2019 / Rules and Regulations 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 $900.7 Since 2011, the Board and the Bureau have adjusted the Regulation M exemption threshold annually, in accordance with these rules. On November 30, 2016, the Board and the Bureau published a final rule in the Federal Register to memorialize the calculation method used by the agencies each year to adjust the exemption threshold to ensure that, as contemplated by section 1100E(b) of the Dodd-Frank Act, the values for the exemption threshold keep pace with the CPI–W (Regulation M Adjustment Calculation Rule).8 The Regulation M Adjustment Calculation Rule memorialized the policy that, 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. The Regulation M Adjustment Calculation Rule also provided that, in years following a year in which the exemption threshold was not adjusted because there was a decrease in the CPI–W from 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, after rounding, if the decreases and any subsequent increases in the CPI–W had been taken into account. If the resulting amount calculated, after rounding, is greater than the current threshold, then the threshold effective January 1 the following year will increase accordingly; if the resulting amount calculated, after rounding, 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, after rounding. II. 2020 Adjustment and Commentary Revision Effective January 1, 2020, the exemption threshold amount is increased from $57,200 to $58,300. This is based on the CPI–W in effect on June 1, 2019, which was reported on May 10, 2019. The Bureau of Labor Statistics publishes consumer-based indices monthly, but does not report a CPI change on June 1; indices are reported 7 See comments 2(e)–9 in Supplements I of 12 CFR parts 213 and 1013. 8 See 81 FR 86256 (Nov. 30, 2016). VerDate Sep<11>2014 15:59 Oct 29, 2019 Jkt 250001 in the middle of the prior month. The CPI–W is a subset of the CPI–U index (based on all urban consumers) and represents approximately 29 percent of the U.S. population. The CPI–W reported on May 10, 2019, reflects a 1.9 percent increase in the CPI–W from April 2018 to April 2019. Accordingly, the 1.9 percent increase in the CPI–W from April 2018 to April 2019 results in an exemption threshold amount of $58,300. The Board and the Bureau are revising the commentaries to their respective regulations to add new comment 2(e)–11.xi to state that, from January 1, 2020 through December 31, 2020, the threshold amount is $58,300. These revisions are effective January 1, 2020.9 III. Regulatory Analysis Administrative Procedure Act Under the Administrative Procedure Act, notice and opportunity for public comment are not required if the Board and the Bureau find that notice and public comment are impracticable, unnecessary, or contrary to the public interest.10 The amendments in this rule are technical and apply the method previously set forth in the Board Final Threshold Rules and the Regulation M Adjustment Calculation Rule. For these reasons, the Board and the Bureau have determined that publishing a notice of proposed rulemaking and providing opportunity for public comment are unnecessary. Therefore, the amendments are adopted in final form. Regulatory Flexibility Act Paperwork Reduction Act are contained in the final rule. Bureau Congressional Review Act Statement Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), the Bureau will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to the rule taking effect. The Office of Information and Regulatory Affairs (OIRA) has designated this rule as not a ‘‘major rule’’ as defined by 5 U.S.C. 804(2). 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 Authority and Issuance 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) 1. The authority citation for part 213 continues to read as follows: ■ The Regulatory Flexibility Act (RFA) does not apply to a rulemaking where a general notice of proposed rulemaking is not required.11 As noted previously, the agencies have determined that it is unnecessary to publish a general notice of proposed rulemaking for this joint final rule. Accordingly, the RFA’s requirements relating to an initial and final regulatory flexibility analysis do not apply. Authority: 15 U.S.C. 1604 and 1667f; Pub. L. 111–203 section 1100E, 124 Stat. 1376. 2. In Supplement I to part 213, under Section 213.2—Definitions, revise 2(e) Consumer Lease to read as follows: ■ Supplement I to Part 213—Official Staff Interpretations * * * * * Section 213.2—Definitions Paperwork Reduction Act * In accordance with the Paperwork Reduction Act of 1995,12 the agencies reviewed this final rule. No collections of information pursuant to the 2(e) Consumer Lease 1. Primary purposes. A lessor must determine in each case if the leased property will be used primarily for personal, family, or household purposes. If a question exists as to the primary purpose for a lease, the fact that a lessor gives disclosures is not controlling on the question of whether the transaction is covered. The primary purpose of a lease is determined before or at consummation and a lessor need not provide Regulation M disclosures where there is a subsequent change in the primary use. 2. Period of time. To be a consumer lease, the initial term of the lease must be more 9 The Office of the Federal Register requires the Board and the Bureau to reprint sections of commentary being amended in their entirety, rather than solely printing the amended portion. Therefore, sections of commentary included in this document show the language of those sections in their entirety. 10 5 U.S.C. 553(b)(B). 11 5 U.S.C. 603(a) and 604(a). 12 44 U.S.C. 3506; 5 CFR part 1320. PO 00000 Frm 00014 Fmt 4700 Sfmt 4700 E:\FR\FM\30OCR1.SGM * * 30OCR1 * * Federal Register / Vol. 84, No. 210 / Wednesday, October 30, 2019 / Rules and Regulations than four months. Thus, a lease of personal property for four months, three months or on a month-to-month or week-to-week basis (even though the lease actually extends beyond four months) is not a consumer lease and is not subject to the disclosure requirements of the regulation. However, a lease that imposes a penalty for not continuing the lease beyond four months is considered to have a term of more than four months. To illustrate: i. A three-month lease extended on a month-to-month basis and terminated after one year is not subject to the regulation. ii. A month-to-month lease with a penalty, such as the forfeiture of a security deposit for terminating before one year, is subject to the regulation. 3. Total contractual obligation. The total contractual obligation is not necessarily the same as the total of payments disclosed under § 213.4(e). The total contractual obligation includes nonrefundable amounts a lessee is contractually obligated to pay to the lessor, but excludes items such as: i. Residual value amounts or purchaseoption prices; ii. Amounts collected by the lessor but paid to a third party, such as taxes, licenses, and registration fees. 4. Credit sale. The regulation does not cover a lease that meets the definition of a credit sale in Regulation Z, 12 CFR 226.2(a)(16), which is defined, in part, as a bailment or lease (unless terminable without penalty at any time by the consumer) under which the consumer: i. Agrees to pay as compensation for use a sum substantially equivalent to, or in excess of, the total value of the property and services involved; and ii. Will become (or has the option to become), for no additional consideration or for nominal consideration, the owner of the property upon compliance with the agreement. 5. Agricultural purpose. Agricultural purpose means a purpose related to the production, harvest, exhibition, marketing, transportation, processing, or manufacture of agricultural products by a natural person who cultivates, plants, propagates, or nurtures those agricultural products, including but not limited to the acquisition of personal property and services used primarily in farming. Agricultural products include horticultural, viticultural, and dairy products, livestock, wildlife, poultry, bees, forest products, fish and shellfish, and any products thereof, including processed and manufactured products, and any and all products raised or produced on farms and any processed or manufactured products thereof. 6. Organization or other entity. A consumer lease does not include a lease made to an organization such as a corporation or a government agency or instrumentality. Such a lease is not covered by the regulation even if the leased property is used (by an employee, for example) primarily for personal, family or household purposes, or is guaranteed by or subsequently assigned to a natural person. 7. Leases of personal property incidental to a service. The following leases of personal VerDate Sep<11>2014 15:59 Oct 29, 2019 Jkt 250001 property are deemed incidental to a service and thus are not subject to the regulation: i. Home entertainment systems requiring the consumer to lease equipment that enables a television to receive the transmitted programming. ii. Security alarm systems requiring the installation of leased equipment intended to monitor unlawful entries into a home and in some cases to provide fire protection. iii. Propane gas service where the consumer must lease a propane tank to receive the service. 8. Safe deposit boxes. The lease of a safe deposit box is not a consumer lease under § 213.2(e). 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, after rounding, if decreases and any subsequent increases in the CPI–W had been taken into account. i. Net increases. If the resulting amount calculated, after rounding, 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, after rounding, 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 PO 00000 Frm 00015 Fmt 4700 Sfmt 4700 58019 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. viii. From January 1, 2017 through December 31, 2017, the threshold amount is $54,600. ix. From January 1, 2018 through December 31, 2018, the threshold amount is $55,800. x. From January 1, 2019 through December 31, 2019, the threshold amount is $57,200. xi. From January 1, 2020 through December 31, 2020, the threshold amount is $58,300. * * * * * BUREAU OF CONSUMER FINANCIAL PROTECTION Authority and Issuance For the reasons set forth in the preamble, the Bureau amends 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 section 1100E, 124 Stat. 1376. 4. In Supplement I to part 1013, under Section 1013.2—Definitions, revise 2(e) Consumer Lease to read as follows: ■ Supplement I to Part 1013—Official Interpretations * * * * * Section 1013.2—Definitions * * * * * 2(e) Consumer Lease 1. Primary purposes. A lessor must determine in each case if the leased property will be used primarily for personal, family, or household purposes. If a question exists as to the primary purpose for a lease, the fact that a lessor gives disclosures is not controlling on the question of whether the transaction is covered. The primary purpose of a lease is determined before or at consummation and a lessor need not provide Regulation M disclosures where there is a subsequent change in the primary use. 2. Period of time. To be a consumer lease, the initial term of the lease must be more than four months. Thus, a lease of personal property for four months, three months or on a month-to-month or week-to-week basis E:\FR\FM\30OCR1.SGM 30OCR1 58020 Federal Register / Vol. 84, No. 210 / Wednesday, October 30, 2019 / Rules and Regulations (even though the lease actually extends beyond four months) is not a consumer lease and is not subject to the disclosure requirements of the regulation. However, a lease that imposes a penalty for not continuing the lease beyond four months is considered to have a term of more than four months. To illustrate: i. A three-month lease extended on a month-to-month basis and terminated after one year is not subject to the regulation. ii. A month-to-month lease with a penalty, such as the forfeiture of a security deposit for terminating before one year, is subject to the regulation. 3. Total contractual obligation. The total contractual obligation is not necessarily the same as the total of payments disclosed under § 1013.4(e). The total contractual obligation includes nonrefundable amounts a lessee is contractually obligated to pay to the lessor, but excludes items such as: i. Residual value amounts or purchaseoption prices; ii. Amounts collected by the lessor but paid to a third party, such as taxes, licenses, and registration fees. 4. Credit sale. The regulation does not cover a lease that meets the definition of a credit sale in Regulation Z, 12 CFR 226.2(a)(16), which is defined, in part, as a bailment or lease (unless terminable without penalty at any time by the consumer) under which the consumer: i. Agrees to pay as compensation for use a sum substantially equivalent to, or in excess of, the total value of the property and services involved; and ii. Will become (or has the option to become), for no additional consideration or for nominal consideration, the owner of the property upon compliance with the agreement. 5. Agricultural purpose. Agricultural purpose means a purpose related to the production, harvest, exhibition, marketing, transportation, processing, or manufacture of agricultural products by a natural person who cultivates, plants, propagates, or nurtures those agricultural products, including but not limited to the acquisition of personal property and services used primarily in farming. Agricultural products include horticultural, viticultural, and dairy products, livestock, wildlife, poultry, bees, forest products, fish and shellfish, and any products thereof, including processed and manufactured products, and any and all products raised or produced on farms and any processed or manufactured products thereof. 6. Organization or other entity. A consumer lease does not include a lease made to an organization such as a corporation or a government agency or instrumentality. Such a lease is not covered by the regulation even if the leased property is used (by an employee, for example) primarily for personal, family or household purposes, or is guaranteed by or subsequently assigned to a natural person. 7. Leases of personal property incidental to a service. The following leases of personal property are deemed incidental to a service and thus are not subject to the regulation: i. Home entertainment systems requiring the consumer to lease equipment that enables VerDate Sep<11>2014 15:59 Oct 29, 2019 Jkt 250001 a television to receive the transmitted programming. ii. Security alarm systems requiring the installation of leased equipment intended to monitor unlawful entries into a home and in some cases to provide fire protection. iii. Propane gas service where the consumer must lease a propane tank to receive the service. 8. Safe deposit boxes. The lease of a safe deposit box is not a consumer lease under § 1013.2(e). 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, after rounding, if decreases and any subsequent increases in the CPI–W had been taken into account. i. Net increases. If the resulting amount calculated, after rounding, 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, after rounding, 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 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. PO 00000 Frm 00016 Fmt 4700 Sfmt 4700 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. viii. From January 1, 2017 through December 31, 2017, the threshold amount is $54,600. ix. From January 1, 2018 through December 31, 2018, the threshold amount is $55,800. x. From January 1, 2019 through December 31, 2019, the threshold amount is $57,200. xi. From January 1, 2020 through December 31, 2020, the threshold amount is $58,300. * * * * * By order of the Board of Governors of the Federal Reserve System, acting through the Secretary of the Board under delegated authority, September 20, 2019. Ann E. Misback, Secretary of the Board. Dated: September 24, 2019. Thomas Pahl, Policy Associate Director, Bureau of Consumer Financial Protection. [FR Doc. 2019–21554 Filed 10–29–19; 8:45 am] BILLING CODE 6210–01–P; 4810–AM–P FEDERAL RESERVE SYSTEM 12 CFR Part 226 [Docket No. R–1677] RIN 7100–AF 60 BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Part 1026 Truth in Lending (Regulation Z) Board of Governors of the Federal Reserve System (Board); and Bureau of Consumer Financial Protection (Bureau). ACTION: Final rules, official interpretations and commentary. AGENCY: The Board and the Bureau are publishing final rules amending the official interpretations and commentary for the agencies’ regulations that implement the Truth in Lending Act (TILA). The Dodd-Frank 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 Consumer SUMMARY: E:\FR\FM\30OCR1.SGM 30OCR1

Agencies

[Federal Register Volume 84, Number 210 (Wednesday, October 30, 2019)]
[Rules and Regulations]
[Pages 58017-58020]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-21554]


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

FEDERAL RESERVE SYSTEM

12 CFR Part 213

[Docket No. R-1676]
RIN 7100-AF 59

BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1013


Consumer Leasing (Regulation M)

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

ACTION: Final rules, official interpretations and commentary.

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

SUMMARY: The Board and the Bureau are finalizing amendments to 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 leases 
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 the 
Bureau will not adjust this exemption threshold from the prior year. 
However, in years following a year in which the exemption threshold was 
not adjusted, the threshold is calculated by applying the annual 
percentage change in the CPI-W to the dollar amount that would have 
resulted, after rounding, if the decreases and any subsequent increases 
in the CPI-W had been taken into account. Based on the annual 
percentage increase in the CPI-W as of June 1, 2019, the exemption 
threshold will increase from $57,200 to $58,300 effective January 1, 
2020. 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 making similar amendments to 
each of their respective regulations implementing the Truth in Lending 
Act elsewhere in this issue of the Federal Register.

DATES: This final rule is effective January 1, 2020.

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: Kristen Phinnessee, Counsel, Office of Regulations, Bureau 
of Consumer Financial Protection, at (202) 435-7700. If you require 
this document in an alternative electronic format, please contact 
[email protected].

SUPPLEMENTARY INFORMATION: 

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, and the threshold in the Truth in 
Lending Act (TILA) for exempt consumer credit transactions,\1\ from 
$25,000 to $50,000, effective July 21, 2011.\2\ In addition, the Dodd-
Frank Act requires that, on and after December 31, 2011, these 
thresholds 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 TILA) (collectively, the Board 
Final Threshold Rules).\3\
---------------------------------------------------------------------------

    \1\ Although consumer credit transactions above the threshold 
are generally exempt, loans secured by real property or by personal 
property used or expected to be used as the principal dwelling of a 
consumer and private education loans are covered by TILA regardless 
of the loan amount. See 12 CFR 226.3(b)(1)(i) (Board) and 12 CFR 
1026.3(b)(1)(i) (Bureau).
    \2\ Public Law 111-203, section 1100E, 124 Stat. 1376, 2111 
(2010).
    \3\ 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, 12 CFR part 1013, substantially duplicating the 
Board's Regulation M.\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\
---------------------------------------------------------------------------

    \4\ See 76 FR 78500 (Dec. 19, 2011); 81 FR 25323 (Apr. 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 provides that 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).
---------------------------------------------------------------------------

    The Board's and the Bureau's regulations,\6\ 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. They further provide that any increase in the threshold amount 
will be rounded to the nearest $100 increment. For example, if the 
annual percentage increase in the

[[Page 58018]]

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.\7\ 
Since 2011, the Board and the Bureau have adjusted the Regulation M 
exemption threshold annually, in accordance with these rules.
---------------------------------------------------------------------------

    \6\ 12 CFR 213.2(e)(1) (Board) and 12 CFR 1013.2(e)(1) (Bureau).
    \7\ See comments 2(e)-9 in Supplements I of 12 CFR parts 213 and 
1013.
---------------------------------------------------------------------------

    On November 30, 2016, the Board and the Bureau published a final 
rule in the Federal Register to memorialize the calculation method used 
by the agencies each year to adjust the exemption threshold to ensure 
that, as contemplated by section 1100E(b) of the Dodd-Frank Act, the 
values for the exemption threshold keep pace with the CPI-W (Regulation 
M Adjustment Calculation Rule).\8\ The Regulation M Adjustment 
Calculation Rule memorialized the policy that, 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. The Regulation M 
Adjustment Calculation Rule also provided that, in years following a 
year in which the exemption threshold was not adjusted because there 
was a decrease in the CPI-W from 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, after rounding, if the 
decreases and any subsequent increases in the CPI-W had been taken into 
account. If the resulting amount calculated, after rounding, is greater 
than the current threshold, then the threshold effective January 1 the 
following year will increase accordingly; if the resulting amount 
calculated, after rounding, 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, after rounding.
---------------------------------------------------------------------------

    \8\ See 81 FR 86256 (Nov. 30, 2016).
---------------------------------------------------------------------------

II. 2020 Adjustment and Commentary Revision

    Effective January 1, 2020, the exemption threshold amount is 
increased from $57,200 to $58,300. This is based on the CPI-W in effect 
on June 1, 2019, which was reported on May 10, 2019. The Bureau of 
Labor Statistics publishes consumer-based indices monthly, but does not 
report a CPI change on June 1; indices are reported in the middle of 
the prior month. The CPI-W is a subset of the CPI-U index (based on all 
urban consumers) and represents approximately 29 percent of the U.S. 
population. The CPI-W reported on May 10, 2019, reflects a 1.9 percent 
increase in the CPI-W from April 2018 to April 2019. Accordingly, the 
1.9 percent increase in the CPI-W from April 2018 to April 2019 results 
in an exemption threshold amount of $58,300. The Board and the Bureau 
are revising the commentaries to their respective regulations to add 
new comment 2(e)-11.xi to state that, from January 1, 2020 through 
December 31, 2020, the threshold amount is $58,300. These revisions are 
effective January 1, 2020.\9\
---------------------------------------------------------------------------

    \9\ The Office of the Federal Register requires the Board and 
the Bureau to reprint sections of commentary being amended in their 
entirety, rather than solely printing the amended portion. 
Therefore, sections of commentary included in this document show the 
language of those sections in their entirety.
---------------------------------------------------------------------------

III. Regulatory Analysis

Administrative Procedure Act

    Under the Administrative Procedure Act, notice and opportunity for 
public comment are not required if the Board and the Bureau find that 
notice and public comment are impracticable, unnecessary, or contrary 
to the public interest.\10\ The amendments in this rule are technical 
and apply the method previously set forth in the Board Final Threshold 
Rules and the Regulation M Adjustment Calculation Rule. For these 
reasons, the Board and the Bureau have determined that publishing a 
notice of proposed rulemaking and providing opportunity for public 
comment are unnecessary. Therefore, the amendments are adopted in final 
form.
---------------------------------------------------------------------------

    \10\ 5 U.S.C. 553(b)(B).
---------------------------------------------------------------------------

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) does not apply to a rulemaking 
where a general notice of proposed rulemaking is not required.\11\ As 
noted previously, the agencies have determined that it is unnecessary 
to publish a general notice of proposed rulemaking for this joint final 
rule. Accordingly, the RFA's requirements relating to an initial and 
final regulatory flexibility analysis do not apply.
---------------------------------------------------------------------------

    \11\ 5 U.S.C. 603(a) and 604(a).
---------------------------------------------------------------------------

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995,\12\ the 
agencies reviewed this final rule. No collections of information 
pursuant to the Paperwork Reduction Act are contained in the final 
rule.
---------------------------------------------------------------------------

    \12\ 44 U.S.C. 3506; 5 CFR part 1320.
---------------------------------------------------------------------------

Bureau Congressional Review Act Statement

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Bureau will submit a report containing this rule and other required 
information to the U.S. Senate, the U.S. House of Representatives, and 
the Comptroller General of the United States prior to the rule taking 
effect. The Office of Information and Regulatory Affairs (OIRA) has 
designated this rule as not a ``major rule'' as defined by 5 U.S.C. 
804(2).

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

Authority and Issuance

    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 continues to read as follows:

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


0
2. In Supplement I to part 213, under Section 213.2--Definitions, 
revise 2(e) Consumer Lease to read as follows:

Supplement I to Part 213--Official Staff Interpretations

* * * * *

Section 213.2--Definitions

* * * * *

2(e) Consumer Lease

    1. Primary purposes. A lessor must determine in each case if the 
leased property will be used primarily for personal, family, or 
household purposes. If a question exists as to the primary purpose 
for a lease, the fact that a lessor gives disclosures is not 
controlling on the question of whether the transaction is covered. 
The primary purpose of a lease is determined before or at 
consummation and a lessor need not provide Regulation M disclosures 
where there is a subsequent change in the primary use.
    2. Period of time. To be a consumer lease, the initial term of 
the lease must be more

[[Page 58019]]

than four months. Thus, a lease of personal property for four 
months, three months or on a month-to-month or week-to-week basis 
(even though the lease actually extends beyond four months) is not a 
consumer lease and is not subject to the disclosure requirements of 
the regulation. However, a lease that imposes a penalty for not 
continuing the lease beyond four months is considered to have a term 
of more than four months. To illustrate:
    i. A three-month lease extended on a month-to-month basis and 
terminated after one year is not subject to the regulation.
    ii. A month-to-month lease with a penalty, such as the 
forfeiture of a security deposit for terminating before one year, is 
subject to the regulation.
    3. Total contractual obligation. The total contractual 
obligation is not necessarily the same as the total of payments 
disclosed under Sec.  213.4(e). The total contractual obligation 
includes nonrefundable amounts a lessee is contractually obligated 
to pay to the lessor, but excludes items such as:
    i. Residual value amounts or purchase-option prices;
    ii. Amounts collected by the lessor but paid to a third party, 
such as taxes, licenses, and registration fees.
    4. Credit sale. The regulation does not cover a lease that meets 
the definition of a credit sale in Regulation Z, 12 CFR 
226.2(a)(16), which is defined, in part, as a bailment or lease 
(unless terminable without penalty at any time by the consumer) 
under which the consumer:
    i. Agrees to pay as compensation for use a sum substantially 
equivalent to, or in excess of, the total value of the property and 
services involved; and
    ii. Will become (or has the option to become), for no additional 
consideration or for nominal consideration, the owner of the 
property upon compliance with the agreement.
    5. Agricultural purpose. Agricultural purpose means a purpose 
related to the production, harvest, exhibition, marketing, 
transportation, processing, or manufacture of agricultural products 
by a natural person who cultivates, plants, propagates, or nurtures 
those agricultural products, including but not limited to the 
acquisition of personal property and services used primarily in 
farming. Agricultural products include horticultural, viticultural, 
and dairy products, livestock, wildlife, poultry, bees, forest 
products, fish and shellfish, and any products thereof, including 
processed and manufactured products, and any and all products raised 
or produced on farms and any processed or manufactured products 
thereof.
    6. Organization or other entity. A consumer lease does not 
include a lease made to an organization such as a corporation or a 
government agency or instrumentality. Such a lease is not covered by 
the regulation even if the leased property is used (by an employee, 
for example) primarily for personal, family or household purposes, 
or is guaranteed by or subsequently assigned to a natural person.
    7. Leases of personal property incidental to a service. The 
following leases of personal property are deemed incidental to a 
service and thus are not subject to the regulation:
    i. Home entertainment systems requiring the consumer to lease 
equipment that enables a television to receive the transmitted 
programming.
    ii. Security alarm systems requiring the installation of leased 
equipment intended to monitor unlawful entries into a home and in 
some cases to provide fire protection.
    iii. Propane gas service where the consumer must lease a propane 
tank to receive the service.
    8. Safe deposit boxes. The lease of a safe deposit box is not a 
consumer lease under Sec.  213.2(e).
    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, after rounding, if decreases and 
any subsequent increases in the CPI-W had been taken into account.
    i. Net increases. If the resulting amount calculated, after 
rounding, 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, after 
rounding, 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.
    viii. From January 1, 2017 through December 31, 2017, the 
threshold amount is $54,600.
    ix. From January 1, 2018 through December 31, 2018, the 
threshold amount is $55,800.
    x. From January 1, 2019 through December 31, 2019, the threshold 
amount is $57,200.
    xi. From January 1, 2020 through December 31, 2020, the 
threshold amount is $58,300.
* * * * *

BUREAU OF CONSUMER FINANCIAL PROTECTION

Authority and Issuance

    For the reasons set forth in the preamble, the Bureau amends 
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 section 
1100E, 124 Stat. 1376.


0
4. In Supplement I to part 1013, under Section 1013.2--Definitions, 
revise 2(e) Consumer Lease to read as follows:

Supplement I to Part 1013--Official Interpretations

* * * * *

Section 1013.2--Definitions

* * * * *

2(e) Consumer Lease

    1. Primary purposes. A lessor must determine in each case if the 
leased property will be used primarily for personal, family, or 
household purposes. If a question exists as to the primary purpose 
for a lease, the fact that a lessor gives disclosures is not 
controlling on the question of whether the transaction is covered. 
The primary purpose of a lease is determined before or at 
consummation and a lessor need not provide Regulation M disclosures 
where there is a subsequent change in the primary use.
    2. Period of time. To be a consumer lease, the initial term of 
the lease must be more than four months. Thus, a lease of personal 
property for four months, three months or on a month-to-month or 
week-to-week basis

[[Page 58020]]

(even though the lease actually extends beyond four months) is not a 
consumer lease and is not subject to the disclosure requirements of 
the regulation. However, a lease that imposes a penalty for not 
continuing the lease beyond four months is considered to have a term 
of more than four months. To illustrate:
    i. A three-month lease extended on a month-to-month basis and 
terminated after one year is not subject to the regulation.
    ii. A month-to-month lease with a penalty, such as the 
forfeiture of a security deposit for terminating before one year, is 
subject to the regulation.
    3. Total contractual obligation. The total contractual 
obligation is not necessarily the same as the total of payments 
disclosed under Sec.  1013.4(e). The total contractual obligation 
includes nonrefundable amounts a lessee is contractually obligated 
to pay to the lessor, but excludes items such as:
    i. Residual value amounts or purchase-option prices;
    ii. Amounts collected by the lessor but paid to a third party, 
such as taxes, licenses, and registration fees.
    4. Credit sale. The regulation does not cover a lease that meets 
the definition of a credit sale in Regulation Z, 12 CFR 
226.2(a)(16), which is defined, in part, as a bailment or lease 
(unless terminable without penalty at any time by the consumer) 
under which the consumer:
    i. Agrees to pay as compensation for use a sum substantially 
equivalent to, or in excess of, the total value of the property and 
services involved; and
    ii. Will become (or has the option to become), for no additional 
consideration or for nominal consideration, the owner of the 
property upon compliance with the agreement.
    5. Agricultural purpose. Agricultural purpose means a purpose 
related to the production, harvest, exhibition, marketing, 
transportation, processing, or manufacture of agricultural products 
by a natural person who cultivates, plants, propagates, or nurtures 
those agricultural products, including but not limited to the 
acquisition of personal property and services used primarily in 
farming. Agricultural products include horticultural, viticultural, 
and dairy products, livestock, wildlife, poultry, bees, forest 
products, fish and shellfish, and any products thereof, including 
processed and manufactured products, and any and all products raised 
or produced on farms and any processed or manufactured products 
thereof.
    6. Organization or other entity. A consumer lease does not 
include a lease made to an organization such as a corporation or a 
government agency or instrumentality. Such a lease is not covered by 
the regulation even if the leased property is used (by an employee, 
for example) primarily for personal, family or household purposes, 
or is guaranteed by or subsequently assigned to a natural person.
    7. Leases of personal property incidental to a service. The 
following leases of personal property are deemed incidental to a 
service and thus are not subject to the regulation:
    i. Home entertainment systems requiring the consumer to lease 
equipment that enables a television to receive the transmitted 
programming.
    ii. Security alarm systems requiring the installation of leased 
equipment intended to monitor unlawful entries into a home and in 
some cases to provide fire protection.
    iii. Propane gas service where the consumer must lease a propane 
tank to receive the service.
    8. Safe deposit boxes. The lease of a safe deposit box is not a 
consumer lease under Sec.  1013.2(e).
    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, after rounding, if decreases and 
any subsequent increases in the CPI-W had been taken into account.
    i. Net increases. If the resulting amount calculated, after 
rounding, 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, after 
rounding, 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.
    viii. From January 1, 2017 through December 31, 2017, the 
threshold amount is $54,600.
    ix. From January 1, 2018 through December 31, 2018, the 
threshold amount is $55,800.
    x. From January 1, 2019 through December 31, 2019, the threshold 
amount is $57,200.
    xi. From January 1, 2020 through December 31, 2020, the 
threshold amount is $58,300.
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, acting through the Secretary of the Board under delegated 
authority, September 20, 2019.
Ann E. Misback,
Secretary of the Board.

    Dated: September 24, 2019.
Thomas Pahl,
Policy Associate Director, Bureau of Consumer Financial Protection.
[FR Doc. 2019-21554 Filed 10-29-19; 8:45 am]
 BILLING CODE 6210-01-P; 4810-AM-P