Consumer Leasing (Regulation M), 79390-79394 [2020-25871]
Download as PDF
<![CDATA[
79390
Federal Register / Vol. 85, No. 238 / Thursday, December 10, 2020 / Rules and Regulations
Regulatory Flexibility Act
FEDERAL RESERVE SYSTEM
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 Board has determined that it is
unnecessary to publish a general notice
of proposed rulemaking for this final
rule. Accordingly, the RFA’s
requirements relating to an initial and
final regulatory flexibility analysis do
not apply.
12 CFR Part 213
Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995,12 the Board has
reviewed this final rule. No collections
of information pursuant to the
Paperwork Reduction Act are contained
in the final rule.
List of Subjects in 12 CFR Part 209
Banks and banking, Federal Reserve
System, Reporting and recordkeeping
requirements, Securities.
Authority and Issuance
For the reasons set forth in the
preamble, the Board amends Regulation
I, 12 CFR part 209, as follows:
PART 209—ISSUE AND
CANCELLATION OF FEDERAL
RESERVE BANK CAPITAL STOCK
(REGULATION I)
1. The authority citation for part 209
continues to read as follows:
■
Authority: 12 U.S.C. 222, 248, 282, 286–
288, 289, 321, 323, 327–328, and 466.
2. In part 209, remove all references to
‘‘$10,715,000,000’’ and add in their
place ‘‘$10,785,000,000’’, wherever they
appear.
■
By order of the Board of Governors of the
Federal Reserve System under delegated
authority.
Ann Misback,
Secretary of the Board.
[FR Doc. 2020–26199 Filed 12–9–20; 8:45 am]
jbell on DSKJLSW7X2PROD with RULES
BILLING CODE P
11 5
U.S.C. 603 and 604.
U.S.C. 3506; 5 CFR 1320.
12 44
VerDate Sep<11>2014
16:15 Dec 09, 2020
Jkt 253001
[Docket No. R–1727]
RIN 7100–AF98
BUREAU OF CONSUMER FINANCIAL
PROTECTION
Bureau: Rachel Ross, AttorneyAdvisor, 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
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).
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, 2020, the
exemption threshold will remain at
$58,300 effective January 1, 2021.
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, 2021.
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.
SUMMARY:
PO 00000
Frm 00008
Fmt 4700
Sfmt 4700
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
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
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).
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,
E:\FR\FM\10DER1.SGM
10DER1
Federal Register / Vol. 85, No. 238 / Thursday, December 10, 2020 / Rules and Regulations
jbell on DSKJLSW7X2PROD with RULES
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
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
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).
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
16:15 Dec 09, 2020
Jkt 253001
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. 2021 Adjustment and Commentary
Revision
Effective January 1, 2021, the
exemption threshold amount remains at
$58,300. This amount is based on the
CPI–W in effect on June 1, 2020, which
was reported on May 12, 2020. 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 12, 2020 reflects a 0.1 percent
increase in the CPI–W from April 2019
to April 2020. Accordingly, the 0.1
percent increase in the CPI–W from
April 2019 to April 2020 results in an
exemption threshold amount of $58,300,
after rounding. The Board and the
Bureau are revising the commentaries to
their respective regulations to add new
comment 2(e)–11.xii to state that, from
January 1, 2021 through December 31,
2021, the threshold amount is $58,300.
These revisions are effective January 1,
2021.9
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
9 The agencies note that to add new comment
2(e)–11.xii to their respective rules, Supplement I
to part 213, section 213.2 paragraph 2(e) (Board)
and Supplement I to part 1013, section 1013.2,
paragraph 2(e) (Bureau) are being republished in
their entirety to comply with the Federal Register’s
publication requirement.
PO 00000
Frm 00009
Fmt 4700
Sfmt 4700
79391
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
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.
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.
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).
Bureau Signing Authority
The Acting Associate Director for
Research, Markets and Regulations, Dan
S. Sokolov, having reviewed and
approved this document, is delegating
the authority to electronically sign this
document to Laura Galban, a Bureau
Federal Register Liaison, for purposes of
publication in the Federal Register.
List of Subjects
12 CFR Part 213
Advertising, Consumer leasing,
Consumer protection, Federal Reserve
System, Reporting and recordkeeping
requirements.
10 5
U.S.C. 553(b)(B).
U.S.C. 603(a) and 604(a).
12 44 U.S.C. 3506; 5 CFR part 1320.
11 5
E:\FR\FM\10DER1.SGM
10DER1
79392
Federal Register / Vol. 85, No. 238 / Thursday, December 10, 2020 / Rules and Regulations
12 CFR Part 1013
Administrative practice and
procedure, Advertising, Consumer
protection, 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:
■
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, revise 2(e)
Consumer Lease, as follows:
■
Supplement I to Part 213—Official Staff
Interpretations
*
*
*
*
*
Section 213.2—Definitions
jbell on DSKJLSW7X2PROD with RULES
*
*
*
*
*
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
(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;
VerDate Sep<11>2014
16:15 Dec 09, 2020
Jkt 253001
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
§ 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
PO 00000
Frm 00010
Fmt 4700
Sfmt 4700
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
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.
E:\FR\FM\10DER1.SGM
10DER1
Federal Register / Vol. 85, No. 238 / Thursday, December 10, 2020 / Rules and Regulations
xii. From January 1, 2021 through
December 31, 2021, 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 sec. 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
jbell on DSKJLSW7X2PROD with RULES
*
*
*
*
*
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
(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;
VerDate Sep<11>2014
16:15 Dec 09, 2020
Jkt 253001
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
§ 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
PO 00000
Frm 00011
Fmt 4700
Sfmt 4700
79393
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.
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.
E:\FR\FM\10DER1.SGM
10DER1
79394
Federal Register / Vol. 85, No. 238 / Thursday, December 10, 2020 / Rules and Regulations
xii. From January 1, 2021 through
December 31, 2021, the threshold amount is
$58,300.
BUREAU OF CONSUMER FINANCIAL
PROTECTION
Consumer Leasing Act’s threshold for
exempt consumer leases, the Board and
the Bureau are making similar
amendments to each of their respective
regulations implementing the Consumer
Leasing Act elsewhere in this issue of
the Federal Register.
DATES: This final rule is effective
January 1, 2021.
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: Rachel Ross, AttorneyAdvisor, 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:
12 CFR Part 1026
I. Background
*
*
*
*
*
By order of the Board of Governors of the
Federal Reserve System, acting through the
Secretary of the Board under delegated
authority.
Ann Misback,
Secretary of the Board.
Laura Galban,
Federal Register Liaison, Bureau of Consumer
Financial Protection.
[FR Doc. 2020–25871 Filed 12–9–20; 8:45 am]
BILLING CODE P
FEDERAL RESERVE SYSTEM
12 CFR Part 226
[Docket No. R–1728]
RIN 7100–AF99
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
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, 2020, the
exemption threshold will remain at
$58,300 effective January 1, 2021.
Because the Dodd-Frank Act also
requires similar adjustments in the
jbell on DSKJLSW7X2PROD with RULES
SUMMARY:
VerDate Sep<11>2014
16:15 Dec 09, 2020
Jkt 253001
The Dodd-Frank Wall Street Reform
and Consumer Protection Act of 2010
(Dodd-Frank Act) increased the
threshold in the Truth in Lending Act
(TILA) for exempt consumer credit
transactions,1 and the threshold in the
Consumer Leasing Act (CLA) for exempt
consumer leases, 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 Z (which
implements TILA) consistent with these
provisions of the Dodd-Frank Act, along
with a similar final rule amending
Regulation M (which implements the
CLA) (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
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 18354 (Apr. 4, 2011); 76 FR 18349 (Apr.
4, 2011).
PO 00000
Frm 00012
Fmt 4700
Sfmt 4700
connection with this transfer of
rulemaking authority, the Bureau issued
its own Regulation Z implementing
TILA, 12 CFR part 1026, substantially
duplicating the Board’s Regulation Z.4
Although the Bureau has the authority
to issue rules to implement TILA for
most entities, the Board retains
authority to issue rules under TILA for
certain motor vehicle dealers covered by
section 1029(a) of the Dodd-Frank Act,
and the Board’s Regulation Z 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
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 Z 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
4 See 76 FR 79768 (Dec. 22, 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 226.3(b)(1)(ii) (Board) and 12 CFR
1026.3(b)(1)(ii) (Bureau).
7 See comments 3(b)–1 in Supplements I of 12
CFR parts 226 and 1026.
E:\FR\FM\10DER1.SGM
10DER1
]]>Agencies
[Federal Register Volume 85, Number 238 (Thursday, December 10, 2020)]
[Rules and Regulations]
[Pages 79390-79394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-25871]
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
12 CFR Part 213
[Docket No. R-1727]
RIN 7100-AF98
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, 2020, the exemption
threshold will remain at $58,300 effective January 1, 2021.
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, 2021.
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: Rachel Ross, Attorney-Advisor, 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).
---------------------------------------------------------------------------
[[Page 79391]]
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 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. 2021 Adjustment and Commentary Revision
Effective January 1, 2021, the exemption threshold amount remains
at $58,300. This amount is based on the CPI-W in effect on June 1,
2020, which was reported on May 12, 2020. 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 12, 2020 reflects a 0.1 percent
increase in the CPI-W from April 2019 to April 2020. Accordingly, the
0.1 percent increase in the CPI-W from April 2019 to April 2020 results
in an exemption threshold amount of $58,300, after rounding. The Board
and the Bureau are revising the commentaries to their respective
regulations to add new comment 2(e)-11.xii to state that, from January
1, 2021 through December 31, 2021, the threshold amount is $58,300.
These revisions are effective January 1, 2021.\9\
---------------------------------------------------------------------------
\9\ The agencies note that to add new comment 2(e)-11.xii to
their respective rules, Supplement I to part 213, section 213.2
paragraph 2(e) (Board) and Supplement I to part 1013, section
1013.2, paragraph 2(e) (Bureau) are being republished in their
entirety to comply with the Federal Register's publication
requirement.
---------------------------------------------------------------------------
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).
Bureau Signing Authority
The Acting Associate Director for Research, Markets and
Regulations, Dan S. Sokolov, having reviewed and approved this
document, is delegating the authority to electronically sign this
document to Laura Galban, a Bureau Federal Register Liaison, for
purposes of publication in the Federal Register.
List of Subjects
12 CFR Part 213
Advertising, Consumer leasing, Consumer protection, Federal Reserve
System, Reporting and recordkeeping requirements.
[[Page 79392]]
12 CFR Part 1013
Administrative practice and procedure, Advertising, Consumer
protection, 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 Sec.
1100E, 124 Stat. 1376.
0
2. In Supplement I to Part 213, under Section 213.2--Definitions,
revise 2(e) Consumer Lease, 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 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.
[[Page 79393]]
xii. From January 1, 2021 through December 31, 2021, 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 sec. 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 (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.
[[Page 79394]]
xii. From January 1, 2021 through December 31, 2021, 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.
Ann Misback,
Secretary of the Board.
Laura Galban,
Federal Register Liaison, Bureau of Consumer Financial Protection.
[FR Doc. 2020-25871 Filed 12-9-20; 8:45 am]
BILLING CODE P
