Reg M '09 SS fin_mtd

Supporting Statement for Information Collection
Provisions of Regulation M
(Consumer Leasing Act)
12 CFR 213
(OMB Control Number: 3084-0086)
1.

Necessity for Collecting and Retaining the Information

The Consumer Leasing Act, 15 U.S.C. 1667 et seq. (“CLA”), an amendment to the Truth
in Lending Act (“TILA”), 15 U.S.C. 1601 et seq., was enacted to foster comparison shopping
and informed decision making by requiring accurate disclosure of the costs and terms of leases
to consumers. Lessors are subject to disclosure requirements that apply to both open-end leases
(e.g., with a residual due at lease end) and closed-end leases (e.g., “walkaway” leases, with no
substantial amount due at lease end).
The Federal Reserve FRB (“FRB”) promulgated Regulation M, 12 CFR 213, to
implement the CLA, as required by the statute. The Federal Trade Commission (“FTC” or
“Commission”) enforces the CLA as to all lessors and advertisers except those that are subject to
the regulatory authority of another federal agency (such as federally chartered or insured
depository institutions). The CLA also contains a private right of action with a one-year statute
of limitations for aggrieved consumers.
Recordkeeping
Section 213.8 of Regulation M requires lessors to retain evidence of compliance with its
requirements (other than its advertising rules), but it does not specify the particular records to be
kept. Entities subject to the regulation may choose the records they consider adequate to show
compliance, and each entity may interpret the requirement differently. Records, however, must
be retained for twenty-four months.
Disclosure
Regulation M imposes disclosure requirements on all types of lessors, including
automobile lessors (such as auto dealers, independent leasing companies, and manufacturers’
captive finance companies), computer lessors (such as computer dealers and other retailers),
furniture lessors, various electronic commerce lessors, and diverse types of lease advertisers, and
others. These requirements are intended to ensure that consumers are fully apprised of the terms
of leases prior to consummation of the transaction. The written disclosures required by
Regulation M are derived from statutory disclosures and directives mandated by the CLA. See
12 CFR 213.4; 15 U.S.C. 1667a; 15 U.S.C. 1667f (written disclosures); 12 CFR 213.7; 15 U.S.C.
1667c; 15 U.S.C. 1667f (advertising disclosures).
The FRB has issued model forms and clauses that can be used to comply with the written
disclosure (non-advertising) requirements of the CLA and Regulation M. See, e.g., Appendices
A-1 - A-3 to Regulation M; 12 CFR 213, Appendices A-1 - A-3. Correct use of these model
forms and clauses insulates lessors from liability for the respective requirements under the CLA

and Regulation M. See FRB Official Staff Commentary to Regulation M (“Commentary”),
Appendix A, Comment 1; 12 CFR 213, Supp. I, Appendix A, Comment 1.
2.

Use of the Information

The FTC, other agencies, and private litigants use the records to ascertain whether
accurate and complete disclosures of the cost of leases have been provided to consumers
prior to consummation of the lease. This information provides the primary evidence of
law violations in CLA enforcement actions brought by the FTC. Without the Regulation M
recordkeeping requirement, the FTC's ability to enforce the CLA would be significantly
impaired.
As noted above, consumers rely upon the disclosures for information to comparison shop
among leases, as well as to ascertain the true costs and terms of lease offers. This information
provides the primary evidence of law violations in CLA enforcement actions brought by the FTC
and private actions brought by consumers. Without these requirements, and the resulting
disclosures, the FTC (and consumers) would be unable to enforce the law.
3.

Consideration of the Use of Improved Information Technology

The FRB has issued final rules to establish uniform standards for using electronic
communication to deliver disclosures required under Regulation M, within the context of the
Electronic Signatures in Global and National Commerce Act (“ESIGN”), 15 U.S.C. 7001 et seq.
72 FR 63,456 (Nov. 9, 2007) These rules enable businesses to utilize electronic disclosures and
compliance, consistent with the requirements of ESIGN, which became effective on Oct. 1,
2000. Use of such electronic communications is also consistent with the Government Paperwork
Elimination Act (“GPEA”), Title XVII of Pub. L. 105-277, codified at 44 U.S.C. 3504, note.
ESIGN and GPEA serve to reduce businesses’ compliance burden related to federal
requirements, including Regulation M, by enabling lessors to utilize more efficient electronic
media for disclosures and compliance.
Regulation M also permits a lessor to retain records by microfilm or microfiche or by any
other method that reproduces records accurately (including computer programs). Lessors need
only retain enough information to reconstruct the required disclosure or other records. Section
213.8-1 of the Commentary.
In addition, most lessors use computer support to calculate the required information and
generate the mandated disclosures, thereby limiting the burden on these entities.
4.

Efforts to Identify Duplication/Availability of Similar Information

The recordkeeping requirement of Regulation M preserves the information provided by
the lessor to consumers considering the costs and terms of lease offers. The lessor is the only
source of this information. No other federal law, nor is staff aware of any state law, that
mandates retention of this information. Similarly, the disclosures required by the CLA and
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Regulation M are not required by any other provision of law. Although some lease cost
information is contained in contractual documents, the information is not standardized. As a
result, consumers cannot use it efficiently to comparison shop or fully appreciate lease terms.
The lessor is the only source of this information. No other federal law mandates these
disclosures. State laws do not duplicate these requirements, although some states may have
other rules applicable to consumer leases.
5.

Efforts to Minimize Burdens on Small Businesses

The Regulation M recordkeeping and disclosure requirements are imposed on all lessors.
The recordkeeping requirement is mandated by Regulation M. The disclosure requirements are
mandated jointly by the CLA and Regulation M. As previously noted, the FTC’s role in this
area is limited to enforcement because the CLA vested rulemaking authority in the FRB.
Most lessors today utilize some measure of computerization in their business, and
Regulation M permits lessors to rely on computer support, among other alternatives, to meet its
recordkeeping and disclosure requirements. This flexibility presumably yields reduced
recordkeeping and disclosure costs. (See #3 above.) Moreover, as noted above regarding
disclosures, Regulation M provides model forms and clauses that may be used to comply with its
requirements; correct use of these forms and clauses insulates a lessor from liability for the
respective requirements.
6.

Consequences of Conducting Collection Less Frequently

The current record retention period of two years supports the one-year statute of
limitations for private actions, and the FTC's (and other administrative agencies') need for
sufficient time to bring enforcement actions regarding lease transactions. If the retention period
were shortened, consumers who sue under the CLA, and the administrative agencies, might find
that lessor records needed to prove violations of the CLA no longer exist.
The disclosure requirements are needed to facilitate comparison cost shopping and to
spur informed lease decision making. If these requirements were eliminated, consumers would
not have access to this critical information. Their right to sue under the CLA would be
undermined, and the FTC (and other administrative agencies) could not fulfill their made to
enforce the CLA.
7.

Circumstances Requiring Collection Inconsistent with Guidelines

The recordkeeping and disclosure requirements in Regulation M are consistent with the
applicable guidelines contained in 5 CFR 1320.5(d)(2).
8.

Consultation Outside the Agency

The disclosure and recordkeeping requirements of Regulation M were promulgated by
the FRB. Before the regulation was adopted and prior to each amendment, the FRB published
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the regulation for public comment in the Federal Register.
More recently, the Commission sought public comment in connection with its latest PRA
clearance request for these regulations, in accordance with 5 CFR 1320.8(d). See 73 FR 70,347
(Nov. 20, 2008). No comments were received. Consistent with 5 CFR 1320.12(c), the FTC is
again seeking public comment contemporaneously with this submission.
9.

Payments or Gifts to Respondents
Not applicable.

10. & 11.

Assurances of Confidentiality/Matters of a Sensitive Nature

The required recordkeeping and written disclosures contain private financial information
about consumers who apply for and/or obtain consumer leases. Such information is protected by
the Right to Financial Privacy Act, 12 U.S.C. 3401 et seq. Such records may also constitute
confidential customer lists. Any of these records provided to the FTC would be covered by the
protections of Sections 6(f) and 21 of the FTC Act, 15 U.S.C. 46(f) and 57b-2, by Section 4.10
of the Commission's Rules of Practice, 16 CFR 4.10, and by the exemptions of the Freedom of
Information Act, 5 U.S.C. 552(b), as applicable.
12.

Estimated Hours Burden: 224,000 hours, rounded to the nearest thousand1
Recordkeeping

Staff estimates that Regulation M’s recordkeeping requirements affect approximately
120,000 firms leasing products to consumers and subject to the Commission’s jurisdiction, at an
average annual burden of one hour per firm, for a total of 120,000 hours.
Disclosure
Regulation M applies to automobile lessors (such as auto dealers, independent leasing
companies, and manufacturers’ captive finance companies), computer lessors (such as computer
dealers and other retailers), furniture lessors, various electronic commerce lessors, and diverse
types of lease advertisers, and others. Below is staff’s best estimate of burden applicable to this
very broad spectrum of covered entities.

1

This is an adjustment to the associated Federal Register notice, 74 FR 10584 (March 11, 2009), in which
hours for advertising-related setup/monitoring disclosures were overstated -- shown there as 10,500 hours
instead of 10,000 hours -- which, in turn, led to a rounding up to 225,000 hours. Likewise, labor costs
calculations were mildly overstated by that input error, and are adjusted accordingly herein.

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Regulation M: Disclosures – Burden Hours
--------------- Setup/Monitoring --------------Average
Total Setup/
Burden per
Monitoring
Respondents Respondent
Burden
(hours)
(hours)

Disclosures

Auto Leases1
Other Leases2
Advertising

45,000
75,000
20,000

.75
.50
.50

33,750
37,500
10,000

-------- Transaction-related----------Average
Total
Number of Burden per Transaction
Transactions Transaction
Burden
(minutes)
(hours)
2,000,000
750,000
800,000

.50
.25
.25

16,667
3,125
3,333

Total

Total
Burden
(hours)
50,417
40,625
13,333
104,375

1

This category focuses on consumer vehicle leases. Vehicle leases are subject to more lease disclosure requirements (pertaining to computation
of payment obligations) than other lease transactions. (Only consumer leases for more than four months are covered.) See 15 U.S.C. § 1667(1);
12 CFR § 213.2(e)(1). This reflects a decrease in auto leasing entities and transactions, compared to prior FTC estimates.
2
This category focuses on all types of consumer leases other than vehicle leases. It includes leases for computers, other electronics, small
appliances, furniture, and other transactions. (Only consumers leases for more than four months are covered.) See 15 U.S.C. § 1667(1); 12 CFR
§ 213.2(e)(1). This reflects a decrease in consumer leasing entities and transactions, compared to prior FTC estimates.
____________________________________________________________________________________________________________________

Associated labor costs: $5,334,050
Staff calculated labor costs by applying appropriate hourly cost figures to the burden
hours described above. The hourly rates used below ($41 for managerial or professional time,
$30 for skilled technical time, and $16 for clerical time) are averages.
Recordkeeping
For the 120,000 recordkeeping hours, staff estimates that 10 percent of the burden hours
require skilled technical time and 90 percent require clerical time. As shown below, the total
recordkeeping cost is $2,088,000.
Disclosure
For each notice or information item listed, staff estimates that 10 percent of the burden
hours require managerial or professional time and 90 percent require skilled technical time. As
shown below, the total disclosure cost is $3,246,050.
Regulation M: Recordkeeping and Disclosures – Cost
_________________________________________________________________________

Required Task
(hours)

------Managerial-----Time
Cost
($41/hr.) (hours)

Recordkeeping
Disclosures
Auto Leases
Other Leases
Advertising

-----Skilled Technical----Time
Cost
($30/hr.) (hours)

Time

_____
--------Clerical-------- Total
Cost
Cost
($16/hr.) ($)

0

$0

12,000

$360,000

108,000

$1,728,000

$2,088,000

5,042
4,063
1,333

$206,722
$166,583
$54,665

45,375
36,562
11,999

$1,361,250
$1,096,860
$359,970

0
0
0

$0
$0
$0

$1,567,972
$1,263,443
$414,635

Total Disclosures

$3,246,050

Total Recordkeeping and Disclosures

$5,334,050

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13.

Estimated Capital and Other Non-Labor Costs

The applicable requirements impose minimal start-up costs, as lessors and/or advertisers
generally have or obtain necessary equipment for other business purposes. For the same reason,
staff believes that the cost of printing and copying needed to comply with Regulation M is
minimal. Staff anticipates that the requirements noted above necessitate ongoing, regular
training so that covered entities stay current and have a clear understanding of federal mandates.
However, this training would be a small portion of and subsumed within the ordinary training
that employees receive apart from that associated with collecting information to comply with
Regulation M.
14.

Estimated Cost to the Federal Government

The FRB promulgated the recordkeeping requirement of Regulation M, so there is no
cost to the FTC for that purpose. Enforcement of the recordkeeping requirement of Regulation
M is incidental to overall enforcement of the CLA. Staff estimates that enforcing this
requirement will cost the FTC Bureau of Consumer Protection no more than $6,603, which is a
representative years’ cost of enforcing Regulation M’s requirement during the three-year
clearance period sought. This estimate is based on the assumption that one-twenty-fourth of one
attorney work year will be expended. Clerical and support services are included in this estimate.
The FRB promulgated the Regulation M disclosure requirements, so there is no cost to
the FTC for that purpose. Regarding enforcement, staff estimates that the cost to the FTC
Bureau of Consumer Protection for these requirements will approximate $78,593. This estimate
is based on the assumption that one-half of one attorney work year will be expended. Clerical
and other support services are included in this estimate.
15.

Program Changes or Adjustments

Staff has adjusted downward the FTC’s previous annual burden estimate by
approximately 68,000 hours (from 292,000 to 224,375). This reflects a decrease in auto and
other leasing entities and transactions, relative to prior FTC estimates.
16.

Publishing Results of the Collection of Information
Not applicable.

17.

Display of Expiration Date for OMB Approval
Not applicable.

18.

Exceptions to the Certification for PRA Submissions
Not applicable.

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