1. Foreign applicability. Regulation M applies to all persons (including branches of foreign banks or leasing companies located in the United States) that offer consumer leases to residents of any state (including foreign nationals) as defined in section 1013.2(p), except persons excluded from coverage of this part by section 1029 of the Consumer Financial Protection Act of 2010, Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, 124 Stat. 1376. The regulation does not apply to a foreign branch of a U.S. bank or to a leasing company leasing to a U.S. citizen residing or visiting abroad or to a foreign national abroad.

1. Coverage. The term advertisement includes messages inviting, offering, or otherwise generally announcing to prospective customers the availability of consumer leases, whether in visual, oral, print or electronic media. Examples include:

2. Exclusions. The term does not apply to the following:

3. Persons covered. See the commentary to section 1013.7(a).

1. General. In closed-end leases, sometimes referred to as “walk-away” leases, the lessee is not responsible for the residual value of the leased property at the end of the lease term.

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:

3. Total contractual obligation. The total contractual obligation is not necessarily the same as the total of payments disclosed under section 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:

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:

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:

8. Safe deposit boxes. The lease of a safe deposit box is not a consumer lease under section 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.

11. Threshold. For purposes of section 1013.2(e)(1), the threshold amount in effect during a particular period is the amount stated below for that period.

1. Guarantors. Guarantors are not lessees for purposes of the regulation.

1. Arranger of a lease. To “arrange” for the lease of personal property means to provide or offer to provide a lease that is or will be extended by another person under a business or other relationship pursuant to which the person arranging the lease (a) receives or will receive a fee, compensation, or other consideration for the service or (b) has knowledge of the lease terms and participates in the preparation of the contract documents required in connection with the lease. To illustrate:

2. Consideration. The term “other consideration” as used in comment 2(h)-1 refers to an actual payment corresponding to a fee or similar compensation and not to intangible benefits, such as the advantage of increased business, which may flow from the relationship between the parties.

3. Assignees. An assignee may be a lessor for purposes of the regulation in circumstances where the assignee has substantial involvement in the lease transaction. See cf. Ford Motor Credit Co. v. Cenance, 452 U.S. 155 (1981) (held that an assignee was a creditor for purposes of the pre-1980 Truth in Lending Act and Regulation Z because of its substantial involvement in the credit transaction).

4. Multiple lessors. See the commentary to section 1013.3(c).

1. Coverage. The term “organization” includes joint ventures and persons operating under a business name.

1. Coverage. Whether property is personal property depends on state or other applicable law. For example, a mobile home or houseboat may be considered personal property in one state but real property in another.

1. General. Realized value refers to either the retail or wholesale value of the leased property at early termination or at the end of the lease term. It is not a required disclosure. Realized value is relevant only to leases in which the lessee’s liability at early termination or at the end of the lease term typically is based on the difference between the residual value (or the adjusted lease balance) of the leased property and its realized value.

2. Options. Subject to the contract and to state or other applicable law, the lessor may calculate the realized value in determining the lessee’s liability at the end of the lease term or at early termination in one of the three ways stated in section 1013.2(m). If the lessor sells the property prior to making the determination about liability, the price received for the property (or the fair market value) is the realized value. If the lessor does not sell the property prior to making that determination, the highest offer or the fair market value is the realized value.

3. Determination of realized value. Disposition charges are not subtracted in determining the realized value but amounts attributable to taxes may be subtracted.

4. Offers. In determining the highest offer for disposition, the lessor may disregard offers that an offeror has withdrawn or is unable or unwilling to perform.

5. Lessor’s appraisal. See commentary to section 1013.4(l).

1. Disclosable interests. For purposes of disclosure, a security interest is an interest taken by the lessor to secure performance of the lessee’s obligation. For example, if a bank that is not a lessor makes a loan to a leasing company and takes assignments of consumer leases generated by that company to secure the loan, the bank’s security interest in the lessor’s receivables is not a security interest for purposes of this part.

2. General coverage. An interest the lessor may have in leased property must be disclosed only if it is considered a security interest under state or other applicable law. The term includes, but is not limited to, security interests under the Uniform Commercial Code; real property mortgages, deeds of trust, and other consensual or confessed liens whether or not recorded; mechanic’s, materialman’s, artisan’s, and other similar liens; vendor’s liens in both real and personal property; liens on property arising by operation of law; and any interest in a lease when used to secure payment or performance of an obligation.

3. Insurance exception. The lessor’s right to insurance proceeds or unearned insurance premiums is not a security interest for purposes of this part.

1. Basis of disclosures. Disclosures must reflect the terms of the legal obligation between the parties. For example:

2. Clear and conspicuous standard. The clear and conspicuous standard requires that disclosures be reasonably understandable. For example, the disclosures must be presented in a way that does not obscure the relationship of the terms to each other; Appendix A of this part contains model forms that meet this standard. In addition, although no minimum typesize is required, the disclosures must be legible, whether typewritten, handwritten, or printed by computer.

3. Multipurpose disclosure forms. A lessor may use a multipurpose disclosure form provided the lessor is able to designate the specific disclosures applicable to a given transaction, consistent with the requirement that disclosures be clearly and conspicuously provided.

4. Number of transactions. Lessors have flexibility in handling lease transactions that may be viewed as multiple transactions. For example:

1. Cross-references. Lessors may include in the nonsegregated disclosures a cross-reference to items in the segregated disclosures rather than repeat those items. A lessor may include in the segregated disclosures numeric or alphabetic designations as cross-references to related information so long as such references do not obscure or detract from the segregated disclosures.

2. Identification of parties. While disclosures must be made clearly and conspicuously, lessors are not required to use the word “lessor” and “lessee” to identify the parties to the lease transaction.

3. Lessor’s address. The lessor must be identified by name; an address (and telephone number) may be provided.

4. Multiple lessors and lessees. In transactions involving multiple lessors and multiple lessees, a single lessor may make all the disclosures to a single lessee as long as the disclosure statement identifies all the lessors and lessees.

5. Lessee’s signature. The regulation does not require that the lessee sign the disclosure statement, whether disclosures are separately provided or are part of the lease contract. Nevertheless, to provide evidence that disclosures are given before a lessee becomes obligated on the lease transaction, the lessor may, for example, ask the lessee to sign the disclosure statement or an acknowledgement of receipt, may place disclosures that are included in the lease documents above the lessee’s signature, or include instructions alerting a lessee to read the disclosures prior to signing the lease.

1. Location. The segregated disclosures referred to in section 1013.3(a)(2) may be provided on a separate document and the other required disclosures may be provided in the lease contract, so long as all disclosures are given at the same time. Alternatively, all disclosures may be provided in a separate document or in the lease contract.

2. Additional information among segregated disclosures. The disclosures required to be segregated may contain only the information required or permitted to be included among the segregated disclosures.

3. Substantially similar. See commentary to Appendix A of this part.

1. Consummation. When a contractual relationship is created between the lessor and the lessee is a matter to be determined under state or other applicable law.

1. State law disclosures. A lessor may include in the nonsegregated disclosures any state law disclosures that are not inconsistent with the Act and regulation under section 1013.9 as long as, in accordance with the standard set forth in section 1013.3(b) for additional information, the state law disclosures are not used or placed to mislead or confuse or detract from any disclosure required by the regulation.

1. Multiple lessors. If a single lessor provides disclosures to a lessee on behalf of several lessors, all disclosures for the transaction must be given, even if the lessor making the disclosures would not otherwise have been obligated to make a particular disclosure.

1. Time of estimated disclosure. The lessor may, after making a reasonable effort to obtain information, use estimates to make disclosures if necessary information is unknown or unavailable at the time the disclosures are made.

2. Basis of estimates. Estimates must be made on the basis of the best information reasonably available at the time disclosures are made. The “reasonably available” standard requires that the lessor, acting in good faith, exercise due diligence in obtaining information. The lessor may rely on the representations of other parties. For example, the lessor might look to the consumer to determine the purpose for which leased property will be used, to insurance companies for the cost of insurance, or to an automobile manufacturer or dealer for the date of delivery. See commentary to section 1013.4(n) for estimating official fees and taxes.

3. Residual value of leased property at termination. In an open-end lease where the lessee’s liability at the end of the lease term is based on the residual value of the leased property as determined at consummation, the estimate of the residual value must be reasonable and based on the best information reasonably available to the lessor (see section 1013.4(m)). A lessor should generally use an accepted trade publication listing estimated current or future market prices for the leased property unless other information or a reasonable belief based on its experience provides the better information. For example:

4. Retail or wholesale value. The lessor may choose either a retail or a wholesale value in estimating the value of leased property at termination of an open-end lease provided the choice is consistent with the lessor’s general practice when determining the value of the property at the end of the lease term. The lessor should indicate whether the value disclosed is a retail or wholesale value.

5. Labeling estimates. Generally, only the disclosure for which the exact information is unknown is labeled as an estimate. Nevertheless, when several disclosures are affected because of the unknown information, the lessor has the option of labeling as an estimate every affected disclosure or only the disclosure primarily affected.

1. Subsequent occurrences. Examples of subsequent occurrences include:

2. Redisclosure. When a disclosure becomes inaccurate because of a subsequent occurrence, the lessor need not make new disclosures unless new disclosures are required under section 1013.5.

3. Lessee’s failure to perform. The lessor does not violate the regulation if a previously given disclosure becomes inaccurate when a lessee fails to perform obligations under the contract and a lessor takes actions that are necessary and proper in such circumstances to protect its interest. For example, the addition of insurance or a security interest by the lessor because the lessee has not performed obligations contracted for in the lease is not a violation of the regulation.

1. Placement of description. Although the description of leased property may not be included among the segregated disclosures, a lessor may choose to place the description directly above the segregated disclosures.

1. Consummation. See commentary to section 1013.3(a)(3).

2. Capitalized cost reduction. A capitalized cost reduction is a payment in the nature of a downpayment on the leased property that reduces the amount to be capitalized over the term of the lease. This amount does not include any amounts included in a periodic payment paid at lease signing or delivery.

3. “Negative” equity trade-in allowance. If an amount owed on a prior lease or credit balance exceeds the agreed upon value of a trade-in, the difference is not reflected as a negative trade-in allowance under section 1013.4(b). The lessor may disclose the trade-in allowance as zero or not applicable, or may leave a blank line.

4. Rebates. Only rebates applied toward an amount due at lease signing or delivery are required to be disclosed under section 1013.4(b).

5. Balance sheet approach. In motor vehicle leases, the total for the column labeled “total amount due at lease signing or delivery” must equal the total for the column labeled “how the amount due at lease signing or delivery will be paid.”

6. Amounts to be paid in cash. The term cash is intended to include payments by check or other payment methods in addition to currency; however, a lessor may add a line item under the column “how the amount due at lease signing or delivery will be paid” for non-currency payments such as credit cards.

1. Periodic payments. The phrase “number, amount, and due dates or periods of payments” requires the disclosure of all payments that are made at regular or irregular intervals and generally derived from rent, capitalized or amortized amounts such as depreciation, and other amounts that are collected by the lessor at the same interval(s), including, for example, taxes, maintenance, and insurance charges. Other periodic payments may, but need not, be disclosed under section 1013.4(c).

1. Coverage. Section 1013.4(d) requires the disclosure of charges that are anticipated by the parties incident to the normal operation of the lease agreement. If a lessor is unsure whether a particular fee is an “other charge,” the lessor may disclose the fee as such without violating section 1013.4(d) or the segregation rule under section 1013.3(a)(2).

2. Excluded charges. This section does not require disclosure of charges that are imposed when the lessee terminates early, fails to abide by, or modifies the terms of the existing lease agreement, such as charges for:

3. Third-party fees and charges. Third-party fees or charges collected by the lessor on behalf of third parties, such as taxes, are not disclosed under section 1013.4(d).

4. Relationship to other provisions. The other charges mentioned in this paragraph are charges that are not required to be disclosed under some other provision of section 1013.4. To illustrate:

5. Lessee’s liabilities at the end of the lease term. Liabilities that the lessor imposes upon the lessee at the end of the scheduled lease term and that must be disclosed under section 1013.4(d) include disposition and “pickup” charges.

6. Optional “disposition” charges. Disposition and similar charges that are anticipated by the parties as an incident to the normal operation of the lease agreement must be disclosed under section 1013.4(d). If, under a lease agreement, a lessee may return leased property tovarious locations, and the lessor charges a disposition fee depending upon the location chosen, under section 1013.4(d), the lessor must disclose the highest amount charged. In such circumstances, the lessor may also include a brief explanation of the fee structure in the segregated disclosure. For example, if no fee or a lower fee is imposed for returning a leased vehicle to the originating dealer as opposed to another location, that fact may be disclosed. By contrast, if the terms of the lease treat the return of the leased property to a location outside the lessor’s service area as a default, the fee imposed is not disclosed as an “other charge,” although it may be required to be disclosed under section 1013.4(q).

1. Open-end lease. The additional statement is required under section 1013.4(e) for open-end leases because, with some limitations, a lessee is liable at the end of the lease term for the difference between the residual and realized values of the leased property.

1. Motor vehicle lease. Whether leased property is a motor vehicle is determined by state or other applicable law.

2. Multiple items. If a lease transaction involves multiple items of leased property, one of which is not a motor vehicle under state law, at their option, lessors may include all items in the disclosures required under section 1013.4(f). See comment 3(a)-4 regarding disclosure of multiple transactions.

1. Agreed upon value of the vehicle. The agreed upon value of a motor vehicle includes the amount of capitalized items such as charges for vehicle accessories and options, and delivery or destination charges. The lessor may also include taxes and fees for title, licenses, and registration that are capitalized. Charges for service or maintenance contracts, insurance products, guaranteed automobile protection, or an outstanding balance on a prior lease or credit transaction are not included in the agreed upon value.

2. Itemization of the gross capitalized cost. The lessor may choose to provide the itemization of the gross capitalized cost only on request or may provide the itemization as a matter of course. In the latter case, the lessor need not provide a statement of the lessee’s option to receive an itemization. The gross capitalized cost must be itemized by type and amount. The lessor may include in the itemization an identification of the items and amounts of some or all of the items contained in the agreed upon value of the vehicle. The itemization must be provided at the same time as the other disclosures required by section 1013.4, but it may not be included among the segregated disclosures.

1. Accuracy of disclosure. If the periodic payment calculation under section 1013.4(f) has been calculated correctly, the amount disclosed under section 1013.4(f)(7)—the total of base periodic payments—is correct for disclosure purposes even if that amount differs from the base periodic payment disclosed under section 1013.4(f)(9) multiplied by the number of lease payments disclosed under section 1013.4(f)(8), when the difference is due to rounding.

1. Lease Term. The lease term may be disclosed among the segregated disclosures.

1. Reasonableness of charges. See the commentary to section 1013.4(q).

2. Description of the method. Section 1013.4(g)(1) requires a full description of the method of determining an early termination charge. The lessor should attempt to provide consumers with clear and understandable descriptions of its early termination charges. Descriptions that are full, accurate, and not intended to be misleading will comply with section 1013.4(g)(1), even if the descriptions are complex. In providing a full description of an early termination method, a lessor may use the name of a generally accepted method of computing the unamortized cost portion (also known as the “adjusted lease balance”) of its early termination charges. For example, a lessor may state that the “constant yield” method will be utilized in obtaining the adjusted lease balance, but must specify how that figure, and any other term or figure, is used in computing the total early termination charge imposed upon the consumer. Additionally, if a lessor refers to a named method in this manner, the lessor must provide a written explanation of that method if requested by the consumer. The lessor has the option of providing the explanation as a matter of course in the lease documents or on a separate document.

3. Timing of written explanation of a named method. While a lessor may provide an address or telephone number for the consumer to request a written explanation of the named method used to calculate the adjusted leased balance, if at consummation a consumer requests such an explanation, the lessor must provide a written explanation at that time. If a consumer requests an explanation after consummation, the lessor must provide a written explanation within a reasonable time after the request is made.

4. Default. When default is a condition for early termination of a lease, default charges must be disclosed under section 1013.4(g)(1). See the commentary to section 1013.4(q).

5. Lessee’s liability at early termination. When the lessee is liable for the difference between the unamortized cost and the realized value at early termination, the method of determining the amount of the difference must be disclosed under section 1013.4(g)(1).

1. Standards for wear and use. No disclosure is required if a lessor does not set standards or impose charges for wear and use (such as excess mileage).

1. Mandatory disclosure of no purchase option. Generally the lessor need only make the specific required disclosures that apply to a transaction. In the case of a purchase option disclosure, however, a lessor must disclose affirmatively that the lessee has no option to purchase the leased property if the purchase option is inapplicable.

2. Existence of purchase option. Whether a purchase option exists under the lease is determined by state or other applicable law. The lessee’s right to submit a bid to purchase property at termination of the lease is not an option to purchase under section 1013.4(i) if the lessor is not required to accept the lessee’s bid and the lessee does not receive preferential treatment.

3. Purchase-option fee. A purchase-option fee is disclosed under section 1013.4(i), not section 1013.4(d). The fee may be separately itemized or disclosed as part of the purchase-option price.

4. Official fees and taxes. Official fees such as those for taxes, licenses, and registration charged in connection with the exercise of a purchase option may be disclosed under section 1013.4(i) as part of the purchase-option price (with or without a reference to theirinclusion in that price) or may be separately disclosed and itemized by category. Alternatively, a lessor may provide a statement indicating that the purchase-option price does not include fees for tags, taxes, and registration.

5. Purchase-option price. Lessors must disclose the purchase-option price as a sum certain or as a sum certain to be determined at a future date by reference to a readily available independent source. The reference should provide sufficient information so that the lessee will be able to determine the actual price when the option becomes available. Statements of a purchase price as the “negotiated price” or the “fair market value” do not comply with the requirements of section 1013.4(i).

1. Content. A lessor may delete inapplicable items from the disclosure. For example, if a lease contract does not include a security interest, the reference to a security interest may be omitted.

1. Disclosure inapplicable. The lessee does not have the right to an independent appraisal merely because the lessee is liable at the end of the lease term or at early termination for unreasonable wear or use. Thus, the disclosure under section 1013.4(l) does not apply. For example:

2. Lessor’s appraisal. If the lessor obtains an appraisal of the leased property to determine its realized value, that appraisal does not suffice for purposes of section 183(c) of the Act; the lessor must disclose the lessee’s right to an independent appraisal under section 1013.4(l).

3. Retail or wholesale. In providing the disclosures in section 1013.4(l), a lessor must indicate whether the wholesale or retail appraisal value will be used.

4. Time restriction on appraisal. The regulation does not specify a time period in which the lessee must exercise the appraisal right. The lessor may require a lessee to obtain the appraisal within a reasonable time after termination of the lease.

1. Open-end leases. Section 1013.4(m) applies only to open-end leases.

2. Lessor’s payment of attorney’s fees. Section 183(a) of the Act requires that the lessor pay the lessee’s attorney’s fees in all actions under section 1013.4(m), whether successful or not.

1. General. This disclosure is intended to represent the cost of financing an open-end lease based on charges and fees that the lessor requires the lessee to pay. Examples of disclosable charges, in addition to the rent charge, include acquisition, disposition, or assignment fees. Charges imposed by a third party whose services are not required by the lessor (such as official fees and voluntary insurance) are not included in the section 1013.4(m)(1) disclosure.

1. Coverage. The disclosure limiting the lessee’s liability for the value of the leased property does not apply in the case of early termination.

2. Leases with a minimum term. If a lease has an alternative minimum term, the disclosures governing the liability limitation are not applicable for the minimum term.

3. Charges not subject to rebuttable presumption. The limitation on liability applies only to liability at the end of the lease term that is based on the difference between the residual value of the leased property and its realized value. The regulation does not preclude a lessor from recovering other charges from the lessee at the end of the lease term. Examples of such charges include:

1. Treatment of certain taxes. Taxes paid in connection with the lease are generally disclosed under section 1013.4(n), but there are exceptions. To illustrate:

2. Estimates. In disclosing the total amount of fees and taxes under section 1013.4(n), lessors may need to base the disclosure on estimated tax rates or amounts and are afforded great flexibility in doing so. Where a rate is applied to the future value of leased property, lessors have flexibility in estimating that value, including, but not limited to, using the mathematical average of the agreed upon value and the residual value or published valuation guides; or a lessor could prepare estimates using the agreed upon value and disclose a reasonable estimate of the total fees and taxes. Lessors may include a statement that the actual total of fees and taxes may be higher or lower depending on the tax rates in effect or the value of the leased property at the time a fee or tax is assessed.

1. Coverage. If insurance is obtained through the lessor, information on the type and amount of insurance coverage (whether voluntary or required) as well as the cost, must be disclosed.

2. Lessor’s insurance. Insurance purchased by the lessor primarily for its own benefit, and absorbed as a business expense and not separately charged to the lessee, need not be disclosed under section 1013.4(o) even if it provides an incidental benefit to the lessee.

3. Mechanical breakdown protection and other products. Whether products purchased in conjunction with a lease, such as mechanical breakdown protection (MBP) or guaranteed automobile protection (GAP), should be treated as insurance is determined by state or other applicable law. In states that do not treat MBP or GAP as insurance, section 1013.4(o) disclosures are not required. In such cases the lessor may, however, disclose this information in accordance with the additional information provision in section 1013.3(b). For MBP insurance contracts not capped by a dollar amount, lessors may describe coverage by referring to a limitation by mileage or time period, for example, by indicating that the mechanical breakdown contract insures parts of the automobile for up to 100,000 miles.

1. Brief identification. The statement identifying warranties may be brief and need not describe or list all warranties applicable to specific parts such as for air conditioning, radio, or tires in an automobile. For example, manufacturer’s warranties may be identified simply by a reference to the standard manufacturer’s warranty. If a lessor provides a comprehensive list of warranties that may not all apply, to comply with section 1013.4(p) the lessor must indicate which warranties apply or, alternatively, which warranties do not apply.

2. Warranty disclaimers. Although a disclaimer of warranties is not required by the regulation, the lessor may give a disclaimer as additional information in accordance with section 1013.3(b).

3. State law. Whether an express warranty or guaranty exists is determined by state or other law.

1. Collection costs. The automatic imposition of collection costs or attorney fees upon default must be disclosed under section 1013.4(q). Collection costs or attorney fees that are not imposed automatically, but are contingent upon expenditures in conjunction with a collection proceeding or upon the employment of an attorney to effect collection, need not be disclosed.

2. Charges for early termination. When default is a condition for early termination of a lease, default charges must also be disclosed under section 1013.4(g)(1). The section 1013.4(q) and (g)(1) disclosures may, but need not, be combined. Examples of combined disclosures are provided in the model lease disclosure forms in Appendix A.

3. Simple-interest leases. In a simple-interest accounting lease, the additional rent charge that accrues on the lease balance when a periodic payment is made after the due date does not constitute a penalty or other charge for late payment. Similarly, continued accrual of the rent charge after termination of the lease because the lessee fails to return the leased property does not constitute a default charge. But in either case, if the additional charge accrues at a rate higher than the normal rent charge, the lessor must disclose the amount of or the method of determining the additional charge under section 1013.4(q).

4. Extension charges. Extension charges that exceed the rent charge in a simple-interest accounting lease or that are added separately are disclosed under section 1013.4(q).

5. Reasonableness of charges. Pursuant to section 183(b) of the Act, penalties or other charges for delinquency, default, or early termination may be specified in the lease but only in an amount that is reasonable in light of the anticipated or actual harm caused by the delinquency, default, or early termination, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy.

1. Disclosable security interests. See section 1013.2(o) and accompanying commentary to determine what security interests must be disclosed.

1. Segregated disclosures. A lease rate may not be included among the segregated disclosures referenced in section 1013.3(a)(2).

1. Coverage. Section 1013.5 applies only to existing leases that are covered by the regulation. It does not apply to the renegotiation orextension of leases with an initial term of four months or less, because such leases are not covered by the definition of consumer lease in section 1013.2(e). Whether and when a lease is satisfied and replaced by a new lease is determined by state or other applicable law.

1. Basis of disclosures. Lessors have flexibility in making disclosures so long as they reflect the legal obligation under the renegotiated lease. For example, assume that a 24-month lease is replaced by a 36-month lease. The initial lease began on January 1, 1998, and was renegotiated and replaced on July 1, 1998, so that the new lease term ends on January 1, 2001.

1. Time of extension disclosures. If a consumer lease is extended for a specified term greater than six months, new disclosures are required at the time the extension is agreed upon. If the lease is extended on a month-to-month basis and the cumulative extensions exceed six months, new disclosures are required at the commencement of the seventh month and at the commencement of each seventh month thereafter for as long as the extensions continue. If a consumer lease is extended for terms of varying durations, one of which will exceed six months beyond the originally scheduled termination date of the lease, new disclosures are required at the commencement of the term that will exceed six months beyond the originally scheduled termination date.

2. Content of disclosures for month-to-month extensions. The disclosures for a lease extended on a month-to-month basis for more than six months should reflect the month-to-month nature of the transaction.

3. Basis of disclosures. The disclosures should be based on the extension period, including any upfront costs paid in connection with the extension. For example, assume that initially a lease ends on March 1, 1999. In January 1999, agreement is reached to extend the lease until October 1, 1999. The disclosure would include any extension fee paid in January and the periodic payments for the seven-month extension period beginning in March.

1. Persons covered. All “persons” must comply with the advertising provisions in this section, not just those that meet the definition of a lessor in section 1013.2(h). Thus, automobile dealers (to the extent they are not excluded from the Bureau’s rulemaking authority by section 1029 of the Dodd-Frank Act), merchants, and others who are not themselves lessors must comply with the advertising provisions of the regulation if they advertise consumer lease transactions. Pursuant to section 184(b) of the Act, however, owners and personnel of the media in which an advertisement appears or through which it is disseminated are not subject to civil liability for violations under section 185(b) of the Act.

2. “Usually and customarily.” Section 1013.7(a) does not prohibit the advertising of a single item or the promotion of a new leasing program, but prohibits the advertising of terms that are not and will not be available. Thus, an advertisement may state terms that will be offered for only a limited period or terms that will become available at a future date.

3. Total contractual obligation of advertised lease. Section 1013.7 applies to advertisements for consumer leases, as defined in section 1013.2(e). Under section 1013.2(e), a consumer lease is exempt from the requirements of this part if the total contractual obligation exceeds the threshold amount in effect at the time of consummation. See comment 2(e)-9. Accordingly, section 1013.7 does not apply to an advertisement for a specific consumer lease if the total contractual obligation for that lease exceeds the threshold amount in effect when the advertisement is made. If a lessor promotes multiple consumer leases in a single advertisement, the entire advertisement must comply with section 1013.7 unless all of the advertised leases are exempt under section 1013.2(e). For example:

1. Standard. The disclosures in an advertisement in any media must be reasonably understandable. For example, very fine print in a television advertisement or detailed and very rapidly stated information in a radio advertisement does not meet the clear and conspicuous standard if consumers cannot see and read or hear, and cannot comprehend, the information required to be disclosed.

1. Itemization not required. Only a total of amounts due at lease signing or delivery is required to be disclosed, not an itemization of its component parts. Such an itemization is provided in any transaction-specific disclosures provided under section 1013.4.

2. Prominence rule. Except for a periodic payment, oral or written references to components of the total due at lease signing or delivery (for example, a reference to a capitalized cost reduction, where permitted) may not be more prominent than the disclosure of the total amount due at lease signing or delivery.

1. Location of statement. The notice required to accompany a percentage rate stated in an advertisement must be placed in close proximity to the rate without any other intervening language or symbols. For example, a lessor may not place an asterisk next to the rate and place the notice elsewhere in the advertisement. In addition, with the exception of the notice required by section 1013.4(s), the rate cannot be more prominent than any other section 1013.4 disclosure stated in the advertisement.

1. General rule. The multiple-page advertisements referred to in section 1013.7(c) are advertisements consisting of a series of numbered pages—for example, a supplement to a newspaper. A mailing comprising several separate flyers or pieces of promotional material in a single envelope is not a single multiple-page advertisement.

2. Cross references. A catalog or other multiple-page advertisement or an electronic advertisement (such as an advertisement appearing on an Internet Web site) is a single advertisement (requiring only one set of lease disclosures) if it contains a table, chart, or schedule with the disclosures required under section 1013.7(d)(2)(i) through (v). If one of the triggering terms listed in section 1013.7(d)(1) appears in a catalog, or in a multiple-page or electronic advertisement, it must clearly direct the consumer to the page or location where the table, chart, or schedule begins. For example, in an electronic advertisement, a term triggering additional disclosures may be accompanied by a link that directly connects the consumer to the additional information.

1. Typical example. When any triggering term appears in a lease advertisement, the additional terms enumerated in section 1013.7(d)(2)(i) through (v) must also appear. In a multi-lease advertisement, an example of one or more typical leases with a statement of all the terms applicable to each may be used. The examples must be labeled as such and must reflect representative lease terms that are made available by the lessor to consumers.

1. Third-party fees that vary by state or locality. The disclosure of a periodic payment or total amount due at lease signing or delivery may:

1. Multiple-item leases. Multiple-item leases that utilize merchandise tags requiring additional disclosures may use the alternate disclosure rule.

1. Publication in general circulation. A reference to a written advertisement appearing in a newspaper circulated nationally, for example, USA Today or the Wall Street Journal, may satisfy the general circulation requirement in section 1013.7(f)(1)(ii).

2. Toll-free number, local or collect calls. In complying with the disclosure requirements of section 1013.7(f)(1)(i), a lessor must provide a toll-free number for nonlocal calls made from an area code other than the one used in the lessor’s dialing area. Alternatively, a lessor may provide any telephone number that allows a consumer to reverse the phone charges when calling for information.

3. Multi-purpose number. When an advertised toll-free number responds with a recording, lease disclosures must be provided early in the sequence to ensure that the consumer receives the required disclosures. For example, in providing several dialing options—such as providing directions to the lessor’s place of business—the option allowing the consumer to request lease disclosures should be provided early in the telephone message to ensure that the option to request disclosures is not obscured by other information.

4. Statement accompanying toll free number. Language must accompany a telephone and television number indicating that disclosures are available by calling the toll-free number, such as “call 1-(800) 000-0000 for details about costs and terms.”

1. Manner of retaining evidence. A lessor must retain evidence of having performed required actions and of having made required disclosures. Such records may be retained in paper form, on microfilm, microfiche, or computer, or by any other method designed to reproduce records accurately. The lessor need retain only enough information to reconstruct the required disclosures or other records.

1. Exemptions granted. The Bureau recognizes exemptions granted by the Board of Governors of the Federal Reserve System prior to July 21, 2011, until and unless the Bureau makes and publishes any contrary determination. Effective October 1, 1982, the Board of Governors of the Federal Reserve System granted the following exemptions from portions of the Consumer Leasing Act:

1. Permissible changes. Although use of the model forms is not required, lessors using them properly will be deemed to be in compliance with the regulation. Generally, lessors may make certain changes in the format or content of the forms and may delete any disclosures that are inapplicable to a transaction without losing the Act’s protection from liability. For example, the model form based on monthly periodic payments may be modified for single-payment lease transactions or for quarterly or other regular or irregular periodic payments. The model form may also be modified to reflect that a transaction is an extension. The content, format, and headings for the segregated disclosures must be substantially similar to those contained in the model forms; therefore, any changes should be minimal. The changes to the model forms should not be so extensive as to affect the substance and the clarity of the disclosures.

2. Examples of acceptable changes.

3. Model closed-end or net vehicle lease disclosure. Model A-2 is designed for a closed-end or net vehicle lease. Under the “Early Termination and Default” provision a reference to the lessee’s right to an independent appraisal of the leased vehicle under section 1013.4(l) is included for those closed-end leases in which the lessee’s liability at early termination is based on the vehicle’s realized value.

4. Model furniture lease disclosures. Model A-3 is a closed-end lease disclosure statement designed for a typical furniture lease. It does not include a disclosure of the appraisal right at early termination required under section 1013.4(l) because few closed-end furniture leases base the lessee’s liability at early termination on the realized value of the leased property. The disclosure should be added if it is applicable.