REG M_12CFR1013_Consumer Leasing_(1-1-19 ED)

Pt. 1013

12 CFR Ch. X (1–1–18 Edition)

PART 1013—CONSUMER LEASING
(REGULATION M)
Sec.
1013.1 Authority, scope, purpose, and enforcement.
1013.2 Definitions.
1013.3 General disclosure requirements.
1013.4 Content of disclosures.
1013.5 Renegotiations, extensions, and assumptions.
1013.6 [Reserved]
1013.7 Advertising.
1013.8 Record retention.
1013.9 Relation to state laws.
APPENDIX A TO PART 1013—MODEL FORMS
APPENDIX B TO PART 1013 [RESERVED]
APPENDIX C TO PART 1013—ISSUANCE OF OFFICIAL INTERPRETATIONS
SUPPLEMENT I TO PART 1013—OFFICIAL INTERPRETATIONS

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

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SOURCE: 76 FR 78502, Dec. 19, 2011, unless
otherwise noted.

§ 1013.1 Authority, scope, purpose, and
enforcement.
(a) Authority. The regulation in this
part, known as Regulation M, is issued
by the Bureau of Consumer Financial
Protection to implement the consumer
leasing provisions of the Truth in
Lending Act, which is title I of the
Consumer Credit Protection Act, as
amended (15 U.S.C. 1601 et seq.). Information collection requirements contained in this part have been approved
by the Office of Management and Budget under the provisions of 44 U.S.C. 3501
et seq. and have been assigned OMB
control number 3170–0006.
(b) Scope and purpose. This part applies to all persons that are lessors of
personal property under consumer
leases as those terms are defined in
§ 1013.2(e)(1) and (h), 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 (Dodd-Frank
Act), Public Law 111–203, 124 Stat. 1376.
The purpose of this part is:
(1) To ensure that lessees of personal
property receive meaningful disclosures that enable them to compare
lease terms with other leases and,
where appropriate, with credit transactions;

(2) To limit the amount of balloon
payments in consumer lease transactions; and
(3) To provide for the accurate disclosure of lease terms in advertising.
(c) Enforcement and liability. Section
108 of the Act contains the administrative enforcement provisions. Sections
112, 130, 131, and 185 of the Act contain
the liability provisions for failing to
comply with the requirements of the
Act and this part.
§ 1013.2 Definitions.
For the purposes of this part the following definitions apply:
(a) Act means the Truth in Lending
Act (15 U.S.C. 1601 et seq.) and the Consumer Leasing Act is Chapter 5 of the
Truth in Lending Act.
(b) Advertisement means a commercial
message in any medium that directly
or indirectly promotes a consumer
lease transaction.
(c) Bureau refers to the Bureau of
Consumer Financial Protection.
(d) Closed-end lease means a consumer
lease other than an open-end lease as
defined in this section.
(e)(1) Consumer lease means a contract in the form of a bailment or lease
for the use of personal property by a
natural person primarily for personal,
family, or household purposes, for a period exceeding four months and for a
total contractual obligation not exceeding
the
applicable
threshold
amount, whether or not the lessee has
the option to purchase or otherwise become the owner of the property at the
expiration of the lease. The threshold
amount is adjusted annually to reflect
increases in the Consumer Price Index
for Urban Wage Earners and Clerical
Workers, as applicable. See the official
commentary to this paragraph (e) for
the threshold amount applicable to a
specific consumer lease. Unless the
context indicates otherwise, in this
part ‘‘lease’’ means ‘‘consumer lease.’’
(2) The term does not include a lease
that meets the definition of a credit
sale in Regulation Z (12 CFR 226.2(a)).
It also does not include a lease for agricultural, business, or commercial purposes or a lease made to an organization.
(3) This part does not apply to a lease
transaction of personal property which

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Bur. of Consumer Financial Protection

§ 1013.3

is incident to the lease of real property
and which provides that:
(i) The lessee has no liability for the
value of the personal property at the
end of the lease term except for abnormal wear and tear; and
(ii) The lessee has no option to purchase the leased property.
(f) Gross capitalized cost means the
amount agreed upon by the lessor and
the lessee as the value of the leased
property and any items that are capitalized or amortized during the lease
term, including but not limited to
taxes, insurance, service agreements,
and any outstanding prior credit or
lease balance. Capitalized cost reduction
means the total amount of any rebate,
cash payment, net trade-in allowance,
and noncash credit that reduces the
gross capitalized cost. The adjusted capitalized cost equals the gross capitalized
cost less the capitalized cost reduction,
and is the amount used by the lessor in
calculating the base periodic payment.
(g) Lessee means a natural person
who enters into or is offered a consumer lease.
(h) Lessor means a person who regularly leases, offers to lease, or arranges
for the lease of personal property under
a consumer lease. A person who has
leased, offered, or arranged to lease
personal property more than five times
in the preceding calendar year or more
than five times in the current calendar
year is subject to the Act and this part.
(i) Open-end lease means a consumer
lease in which the lessee’s liability at
the end of the lease term is based on
the difference between the residual
value of the leased property and its realized value.
(j) Organization means a corporation,
trust, estate, partnership, cooperative,
association, or government entity or
instrumentality.
(k) Person means a natural person or
an organization.
(l) Personal property means any property that is not real property under the
law of the state where the property is
located at the time it is offered or
made available for lease.
(m) Realized value means:
(1) The price received by the lessor
for the leased property at disposition;
(2) The highest offer for disposition of
the leased property; or

(3) The fair market value of the
leased property at the end of the lease
term.
(n) Residual value means the value of
the leased property at the end of the
lease term, as estimated or assigned at
consummation by the lessor, used in
calculating the base periodic payment.
(o) Security interest and security mean
any interest in property that secures
the payment or performance of an obligation.
(p) State means any state, the District of Columbia, the Commonwealth
of Puerto Rico, and any territory or
possession of the United States.
§ 1013.3 General disclosure requirements.
(a) General requirements. A lessor
shall make the disclosures required by
§ 1013.4, as applicable. The disclosures
shall be made clearly and conspicuously in writing in a form the consumer may keep, in accordance with
this section. The disclosures required
by this part may be provided to the lessee in electronic form, subject to compliance with the consumer consent and
other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15
U.S.C. 7001 et seq.). For an advertisement accessed by the consumer in electronic form, the disclosures required by
§ 1013.7 may be provided to the consumer in electronic form in the advertisement, without regard to the consumer consent or other provisions of
the E-Sign Act.
(1) Form of disclosures. The disclosures
required by § 1013.4 shall be given to the
lessee together in a dated statement
that identifies the lessor and the lessee; the disclosures may be made either
in a separate statement that identifies
the consumer lease transaction or in
the contract or other document evidencing the lease. Alternatively, the
disclosures required to be segregated
from other information under paragraph (a)(2) of this section may be provided in a separate dated statement
that identifies the lease, and the other
required disclosures may be provided in
the lease contract or other document
evidencing the lease. In a lease of multiple items, the property description
required by § 1013.4(a) may be given in a

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§ 1013.4

12 CFR Ch. X (1–1–18 Edition)

separate statement that is included in
the disclosure statement required by
this paragraph.
(2) Segregation of certain disclosures.
The following disclosures shall be segregated from other information and
shall contain only directly related information: §§ 1013.4(b) through (f),
(g)(2), (h)(3), (i)(1), (j), and (m)(1). The
headings, content, and format for the
disclosures referred to in this paragraph (a)(2) shall be provided in a manner substantially similar to the applicable model form in appendix A of this
part.
(3) Timing of disclosures. A lessor shall
provide the disclosures to the lessee
prior to the consummation of a consumer lease.
(4) Language of disclosures. The disclosures required by § 1013.4 may be made
in a language other than English provided that they are made available in
English upon the lessee’s request.
(b) Additional information; nonsegregated disclosures. Additional information may be provided with any disclosure not listed in paragraph (a)(2) of
this section, but it shall not be stated,
used, or placed so as to mislead or confuse the lessee or contradict, obscure,
or detract attention from any disclosure required by this part.
(c) Multiple lessors or lessees. When a
transaction involves more than one lessor, the disclosures required by this
part may be made by one lessor on behalf of all the lessors. When a lease involves more than one lessee, the lessor
may provide the disclosures to any lessee who is primarily liable on the lease.
(d) Use of estimates. If an amount or
other item needed to comply with a required disclosure is unknown or unavailable after reasonable efforts have
been made to ascertain the information, the lessor may use a reasonable
estimate that is based on the best information available to the lessor, is
clearly identified as an estimate, and is
not used to circumvent or evade any
disclosures required by this part.
(e) Effect of subsequent occurrence. If a
required disclosure becomes inaccurate
because of an event occurring after
consummation, the inaccuracy is not a
violation of this part.

(f) Minor variations. A lessor may disregard the effects of the following in
making disclosures:
(1) That payments must be collected
in whole cents;
(2) That dates of scheduled payments
may be different because a scheduled
date is not a business day;
(3) That months have different numbers of days; and
(4) That February 29 occurs in a leap
year.
§ 1013.4 Content of disclosures.
For any consumer lease subject to
this part, the lessor shall disclose the
following information, as applicable:
(a) Description of property. A brief description of the leased property sufficient to identify the property to the
lessee and lessor.
(b) Amount due at lease signing or delivery. The total amount to be paid
prior to or at consummation or by delivery, if delivery occurs after consummation, using the term ‘‘amount
due at lease signing or delivery.’’ The
lessor shall itemize each component by
type and amount, including any refundable security deposit, advance
monthly or other periodic payment,
and capitalized cost reduction; and in
motor vehicle leases, shall itemize how
the amount due will be paid, by type
and amount, including any net trade-in
allowance, rebates, noncash credits,
and cash payments in a format substantially similar to the model forms
in appendix A of this part.
(c) Payment schedule and total amount
of periodic payments. The number,
amount, and due dates or periods of
payments scheduled under the lease,
and the total amount of the periodic
payments.
(d) Other charges. The total amount
of other charges payable to the lessor,
itemized by type and amount, that are
not included in the periodic payments.
Such charges include the amount of
any liability the lease imposes upon
the lessee at the end of the lease term;
the potential difference between the residual and realized values referred to in
paragraph (k) of this section is excluded.
(e) Total of payments. The total of
payments, with a description such as
‘‘the amount you will have paid by the

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Bur. of Consumer Financial Protection

§ 1013.4

end of the lease.’’ This amount is the
sum of the amount due at lease signing
(less any refundable amounts), the
total amount of periodic payments
(less any portion of the periodic payment paid at lease signing), and other
charges under paragraphs (b), (c), and
(d) of this section. In an open-end lease,
a description such as ‘‘you will owe an
additional amount if the actual value
of the vehicle is less than the residual
value’’ shall accompany the disclosure.
(f) Payment calculation. In a motor vehicle lease, a mathematical progression of how the scheduled periodic payment is derived, in a format substantially similar to the applicable model
form in appendix A of this part, which
shall contain the following:
(1) Gross capitalized cost. The gross
capitalized cost, including a disclosure
of the agreed upon value of the vehicle,
a description such as ‘‘the agreed upon
value of the vehicle [state the amount]
and any items you pay for over the
lease term (such as service contracts,
insurance, and any outstanding prior
credit or lease balance),’’ and a statement of the lessee’s option to receive a
separate written itemization of the
gross capitalized cost. If requested by
the lessee, the itemization shall be provided before consummation.
(2) Capitalized cost reduction. The capitalized cost reduction, with a description such as ‘‘the amount of any net
trade-in allowance, rebate, noncash
credit, or cash you pay that reduces
the gross capitalized cost.’’
(3) Adjusted capitalized cost. The adjusted capitalized cost, with a description such as ‘‘the amount used in calculating your base [periodic] payment.’’
(4) Residual value. The residual value,
with a description such as ‘‘the value
of the vehicle at the end of the lease
used in calculating your base [periodic]
payment.’’
(5) Depreciation and any amortized
amounts. The depreciation and any amortized amounts, which is the difference between the adjusted capitalized cost and the residual value, with a
description such as ‘‘the amount
charged for the vehicle’s decline in
value through normal use and for any
other items paid over the lease term.’’

(6) Rent charge. The rent charge, with
a description such as ‘‘the amount
charged in addition to the depreciation
and any amortized amounts.’’ This
amount is the difference between the
total of the base periodic payments
over the lease term minus the depreciation and any amortized amounts.
(7) Total of base periodic payments. The
total of base periodic payments with a
description such as ‘‘depreciation and
any amortized amounts plus the rent
charge.’’
(8) Lease payments. The lease payments with a description such as ‘‘the
number of payments in your lease.’’
(9) Base periodic payment. The total of
the base periodic payments divided by
the number of payment periods in the
lease.
(10) Itemization of other charges. An
itemization of any other charges that
are part of the periodic payment.
(11) Total periodic payment. The sum
of the base periodic payment and any
other charges that are part of the periodic payment.
(g) Early termination—(1) Conditions
and disclosure of charges. A statement
of the conditions under which the lessee or lessor may terminate the lease
prior to the end of the lease term; and
the amount or a description of the
method for determining the amount of
any penalty or other charge for early
termination, which must be reasonable.
(2) Early termination notice. In a
motor vehicle lease, a notice substantially similar to the following: ‘‘Early
Termination. You may have to pay a
substantial charge if you end this lease
early. The charge may be up to several
thousand dollars. The actual charge
will depend on when the lease is terminated. The earlier you end the lease,
the greater this charge is likely to be.’’
(h) Maintenance responsibilities. The
following provisions are required:
(1) Statement of responsibilities. A
statement specifying whether the lessor or the lessee is responsible for
maintaining or servicing the leased
property, together with a brief description of the responsibility;
(2) Wear and use standard. A statement of the lessor’s standards for wear
and use (if any), which must be reasonable; and

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§ 1013.4

12 CFR Ch. X (1–1–18 Edition)

(3) Notice of wear and use standard. In
a motor vehicle lease, a notice regarding wear and use substantially similar
to the following: ‘‘Excessive Wear and
Use. You may be charged for excessive
wear based on our standards for normal
use.’’ The notice shall also specify the
amount or method for determining any
charge for excess mileage.
(i) Purchase option. A statement of
whether or not the lessee has the option to purchase the leased property,
and:
(1) End of lease term. If at the end of
the lease term, the purchase price; and
(2) During lease term. If prior to the
end of the lease term, the purchase
price or the method for determining
the price and when the lessee may exercise this option.
(j) Statement referencing nonsegregated
disclosures. A statement that the lessee
should refer to the lease documents for
additional information on early termination, purchase options and maintenance responsibilities, warranties, late
and default charges, insurance, and any
security interests, if applicable.
(k) Liability between residual and realized values. A statement of the lessee’s
liability, if any, at early termination
or at the end of the lease term for the
difference between the residual value
of the leased property and its realized
value.
(l) Right of appraisal. If the lessee’s liability at early termination or at the
end of the lease term is based on the
realized value of the leased property, a
statement that the lessee may obtain,
at the lessee’s expense, a professional
appraisal by an independent third
party (agreed to by the lessee and the
lessor) of the value that could be realized at sale of the leased property. The
appraisal shall be final and binding on
the parties.
(m) Liability at end of lease term based
on residual value. If the lessee is liable
at the end of the lease term for the difference between the residual value of
the leased property and its realized
value:
(1) Rent and other charges. The rent
and other charges, paid by the lessee
and required by the lessor as an incident to the lease transaction, with a
description such as ‘‘the total amount
of rent and other charges imposed in

connection with your lease [state the
amount].’’
(2) Excess liability. A statement about
a rebuttable presumption that, at the
end of the lease term, the residual
value of the leased property is unreasonable and not in good faith to the extent that the residual value exceeds
the realized value by more than three
times the base monthly payment (or
more than three times the average payment allocable to a monthly period, if
the lease calls for periodic payments
other than monthly); and that the lessor cannot collect the excess amount
unless the lessor brings a successful
court action and pays the lessee’s reasonable attorney’s fees, or unless the
excess of the residual value over the realized value is due to unreasonable or
excessive wear or use of the leased
property (in which case the rebuttable
presumption does not apply).
(3) Mutually agreeable final adjustment. A statement that the lessee and
lessor are permitted, after termination
of the lease, to make any mutually
agreeable final adjustment regarding
excess liability.
(n) Fees and taxes. The total dollar
amount for all official and license fees,
registration, title, or taxes required to
be paid in connection with the lease.
(o) Insurance. A brief identification of
insurance in connection with the lease
including:
(1) Through the lessor. If the insurance
is provided by or paid through the lessor, the types and amounts of coverage
and the cost to the lessee; or
(2) Through a third party. If the lessee
must obtain the insurance, the types
and amounts of coverage required of
the lessee.
(p) Warranties or guarantees. A statement identifying all express warranties
and guarantees from the manufacturer
or lessor with respect to the leased
property that apply to the lessee.
(q) Penalties and other charges for delinquency. The amount or the method
of determining the amount of any penalty or other charge for delinquency,
default, or late payments, which must
be reasonable.
(r) Security interest. A description of
any security interest, other than a security deposit disclosed under paragraph (b) of this section, held or to be

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Bur. of Consumer Financial Protection

§ 1013.7

retained by the lessor; and a clear identification of the property to which the
security interest relates.
(s) Limitations on rate information. If a
lessor provides a percentage rate in an
advertisement or in documents evidencing the lease transaction, a notice
stating that ‘‘this percentage may not
measure the overall cost of financing
this lease’’ shall accompany the rate
disclosure. The lessor shall not use the
term ‘‘annual percentage rate,’’ ‘‘annual lease rate,’’ or any equivalent
term.
(t) Non-motor vehicle open-end leases.
Non-motor vehicle open-end leases remain subject to section 182(10) of the
Act regarding end of term liability.

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§ 1013.5 Renegotiations,
and assumptions.

extensions,

(a) Renegotiation. A renegotiation occurs when a consumer lease subject to
this part is satisfied and replaced by a
new lease undertaken by the same consumer. A renegotiation requires new
disclosures, except as provided in paragraph (d) of this section.
(b) Extension. An extension is a continuation, agreed to by the lessor and
the lessee, of an existing consumer
lease beyond the originally scheduled
end of the lease term, except when the
continuation is the result of a renegotiation. An extension that exceeds six
months requires new disclosures, except as provided in paragraph (d) of
this section.
(c) Assumption. New disclosures are
not required when a consumer lease is
assumed by another person, whether or
not the lessor charges an assumption
fee.
(d) Exceptions. New disclosures are
not required for the following, even if
they meet the definition of a renegotiation or an extension:
(1) A reduction in the rent charge;
(2) The deferment of one or more payments, whether or not a fee is charged;
(3) The extension of a lease for not
more than six months on a month-tomonth basis or otherwise;
(4) A substitution of leased property
with property that has a substantially
equivalent or greater economic value,
provided no other lease terms are
changed;

(5) The addition, deletion, or substitution of leased property in a multipleitem lease, provided the average periodic payment does not change by more
than 25 percent; or
(6) An agreement resulting from a
court proceeding.
§ 1013.6

[Reserved]

§ 1013.7

Advertising.

(a) General rule. An advertisement for
a consumer lease may state that a specific lease of property at specific
amounts or terms is available only if
the lessor usually and customarily
leases or will lease the property at
those amounts or terms.
(b) Clear and conspicuous standard.
Disclosures required by this section
shall be made clearly and conspicuously.
(1) Amount due at lease signing or delivery. Except for the statement of a
periodic payment, any affirmative or
negative reference to a charge that is a
part of the disclosure required under
paragraph (d)(2)(ii) of this section shall
not be more prominent than that disclosure.
(2) Advertisement of a lease rate. If a
lessor provides a percentage rate in an
advertisement, the rate shall not be
more prominent than any of the disclosures in § 1013.4, with the exception of
the notice in § 1013.4(s) required to accompany the rate; and the lessor shall
not use the term ‘‘annual percentage
rate,’’ ‘‘annual lease rate,’’ or equivalent term.
(c) Catalogs or other multipage advertisements; electronic advertisements. A
catalog or other multipage advertisement, or an electronic advertisement
(such as an advertisement appearing on
an Internet Web site), that provides a
table or schedule of the required disclosures shall be considered a single advertisement if, for lease terms that appear without all the required disclosures, the advertisement refers to the
page or pages on which the table or
schedule appears.
(d) Advertisement of terms that require
additional
disclosure—(1)
Triggering
terms. An advertisement that states
any of the following items shall contain the disclosures required by paragraph (d)(2) of this section, except as

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§ 1013.8

12 CFR Ch. X (1–1–18 Edition)

provided in paragraphs (e) and (f) of
this section:
(i) The amount of any payment; or
(ii) A statement of any capitalized
cost reduction or other payment (or
that no payment is required) prior to
or at consummation or by delivery, if
delivery occurs after consummation.
(2) Additional terms. An advertisement
stating any item listed in paragraph
(d)(1) of this section shall also state the
following items:
(i) That the transaction advertised is
a lease;
(ii) The total amount due prior to or
at consummation or by delivery, if delivery occurs after consummation;
(iii) The number, amounts, and due
dates or periods of scheduled payments
under the lease;
(iv) A statement of whether or not a
security deposit is required; and
(v) A statement that an extra charge
may be imposed at the end of the lease
term where the lessee’s liability (if
any) is based on the difference between
the residual value of the leased property and its realized value at the end of
the lease term.
(e) Alternative disclosures—merchandise
tags. A merchandise tag stating any
item listed in paragraph (d)(1) of this
section may comply with paragraph
(d)(2) of this section by referring to a
sign or display prominently posted in
the lessor’s place of business that contains a table or schedule of the required disclosures.
(f) Alternative disclosures—television or
radio advertisements—(1) Toll-free number
or print advertisement. An advertisement made through television or radio
stating any item listed in paragraph
(d)(1) of this section complies with
paragraph (d)(2) of this section if the
advertisement states the items listed
in paragraphs (d)(2)(i) through (iii) of
this section, and:
(i) Lists a toll-free telephone number
along with a reference that such number may be used by consumers to obtain the information required by paragraph (d)(2) of this section; or
(ii) Directs the consumer to a written
advertisement in a publication of general circulation in the community
served by the media station, including
the name and the date of the publication, with a statement that informa-

tion required by paragraph (d)(2) of this
section is included in the advertisement. The written advertisement shall
be published beginning at least three
days before and ending at least ten
days after the broadcast.
(2) Establishment of toll-free number. (i)
The toll-free telephone number shall be
available for no fewer than ten days,
beginning on the date of the broadcast.
(ii) The lessor shall provide the information required by paragraph (d)(2) of
this section orally, or in writing upon
request.
§ 1013.8 Record retention.
A lessor shall retain evidence of compliance with the requirements imposed
by this part, other than the advertising
requirements under § 1013.7, for a period
of not less than two years after the
date the disclosures are required to be
made or an action is required to be
taken.
§ 1013.9 Relation to state laws.
(a) Inconsistent state law. A state law
that is inconsistent with the requirements of the Act and this part is preempted to the extent of the inconsistency. If a lessor cannot comply with a
state law without violating a provision
of this part, the state law is inconsistent within the meaning of section
186(a) of the Act and is preempted, unless the state law gives greater protection and benefit to the consumer. A
state, through an official having primary enforcement or interpretative responsibilities for the state consumer
leasing law, may apply to the Bureau
for a preemption determination.
(b) Exemptions—(1) Application. A
state may apply to the Bureau for an
exemption from the requirements of
the Act and this part for any class of
lease transactions within the state.
The Bureau will grant such an exemption if the Bureau determines that:
(i) The class of leasing transactions
is subject to state law requirements
substantially similar to the Act and
this part or that lessees are afforded
greater protection under state law; and
(ii) There is adequate provision for
state enforcement.
(2) Enforcement and liability. After an
exemption has been granted, the requirements of the applicable state law

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(except for additional requirements not
imposed by Federal law) will constitute the requirements of the Act and
this part. No exemption will extend to
the civil liability provisions of sections
130, 131, and 185 of the Act.

APPENDIX A TO PART 1013—MODEL
FORMS
A–1—Model Open-End or Finance Vehicle
Lease Disclosures
A–2—Model Closed-End or Net Vehicle Lease
Disclosures
A–3—Model Furniture Lease Disclosures

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Pt. 1013, App. C

12 CFR Ch. X (1–1–18 Edition)

APPENDIX B TO PART 1013 [RESERVED]

Section 1013.1—Authority, Scope, Purpose, and
Enforcement

APPENDIX C TO PART 1013—ISSUANCE OF
OFFICIAL INTERPRETATIONS

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 § 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.

Interpretations of this part issued by officials of the Bureau provide the formal protection afforded under section 130(f) of the
Act. Except in unusual circumstances, interpretations will not be issued separately but
will be incorporated in an official commentary to Regulation M (Supplement I of
this part), which will be amended periodically. No official interpretations will be
issued approving a lessor’s forms, statements, or calculation tools or methods.

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SUPPLEMENT I TO PART 1013—OFFICIAL
INTERPRETATIONS

Section 1013.2—Definitions

Introduction

2(b) Advertisement

1. Official status. The commentary in Supplement I is the vehicle by which the Bureau
of Consumer Financial Protection issues official interpretations of Regulation M (12
CFR part 1013). Good faith compliance with
this commentary affords protection from liability under section 130(f) of the Truth in
Lending Act (15 U.S.C. 1640(f)). Section 130(f)
protects lessors from civil liability for any
act done or omitted in good faith in conformity with any interpretation issued by
the Bureau.
2. Procedures for requesting interpretations.
Under appendix C of Regulation M, anyone
may request an official interpretation. Interpretations that are adopted will be incorporated in this commentary following publication in the FEDERAL REGISTER. No official
interpretations are expected to be issued
other than by means of this commentary.
3. Comment designations. Each comment in
the commentary is identified by a number
and the regulatory section or paragraph that
it interprets. The comments are designated
with as much specificity as possible according to the particular regulatory provision
addressed. For example, some of the comments to § 1013.4(f) are further divided by
subparagraph, such as comment 4(f)(1)–1 and
comment 4(f)(2)–1. In other cases, comments
have more general application and are designated, for example, as comment 4(a)–1.
This introduction may be cited as comments
I–1 through I–4. An appendix may be cited as
comment app. A–1.
4. Illustrations. Lists that appear in the
commentary may be exhaustive or illustrative; the appropriate construction should
be clear from the context. Illustrative lists
are introduced by phrases such as ‘‘including,’’ ‘‘such as,’’ ‘‘to illustrate,’’ and ‘‘for example.’’

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:
i. Messages in newspapers, magazines, leaflets, catalogs, and fliers.
ii. Messages on radio, television, and public
address systems.
iii. Direct mail literature.
iv. Printed material on any interior or exterior sign or display, in any window display,
in any point-of-transaction literature or
price tag that is delivered or made available
to a lessee or prospective lessee in any manner whatsoever.
v. Telephone solicitations.
vi. Online messages, such as those on the
Internet.
2. Exclusions. The term does not apply to
the following:
i. Direct personal contacts, including follow-up letters, cost estimates for individual
lessees, or oral or written communications
relating to the negotiation of a specific
transaction.
ii. Informational material distributed only
to businesses.
iii. Notices required by Federal or state
law, if the law mandates that specific information be displayed and only the mandated
information is included in the notice.
iv. News articles controlled by the news
medium.
v. Market research or educational materials that do not solicit business.
3. Persons covered. See the commentary to
§ 1013.7(a).
2(d) Closed-End Lease
1. General. In closed-end leases, sometimes
referred to as ‘‘walk-away’’ leases, the lessee
is not responsible for the residual value of

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Bur. of Consumer Financial Protection

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the leased property at the end of the lease
term.

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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 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, trans-

portation, 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 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

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$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.
2(g) Lessee
1. Guarantors. Guarantors are not lessees
for purposes of the regulation.

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2(h) Lessor
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:
i. An entity that, pursuant to a business
relationship, completes the necessary lease
agreement before forwarding it for execution
to the leasing company (to whom the obligation is payable on its face) is ‘‘arranging’’ for
the lease.
ii. An entity that, without receiving a fee
for the service, refers a customer to a leasing
company that will prepare all relevant contract documents is not ‘‘arranging’’ for the
lease.
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
§ 1013.3(c).
2(j) Organization
1. Coverage. The term ‘‘organization’’ includes joint ventures and persons operating
under a business name.
2(l) Personal Property
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.
2(m) Realized Value
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

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three ways stated in § 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
§ 1013.4(l).
2(o) Security Interest and Security
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.
Section 1013.3—General Disclosure Requirements

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3(a) General Requirements
1. Basis of disclosures. Disclosures must reflect the terms of the legal obligation between the parties. For example:
i. In a three-year lease with no penalty for
termination after a one-year minimum term,
disclosures are based on the full three-year
term of the lease. The one-year minimum
term is only relevant to the early termination provisions of §§ 1013.4 (g)(1), (k) and
(l).
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:
i. When a lessor leases two items to the
same lessee on the same day, the lessor may
disclose the leases as either one or two lease
transactions.
ii. When a lessor sells insurance or other
incidental services in connection with a
lease, the lessor may disclose in one of two
ways: As a single lease transaction (in which
case Regulation M, not Regulation Z, disclosures are required) or as a lease transaction
and a credit transaction.
iii. When a lessor includes an outstanding
lease or credit balance in a lease transaction,
the lessor may disclose the outstanding balance as part of a single lease transaction (in
which case Regulation M, not Regulation Z,
disclosures are required) or as a lease transaction and a credit transaction.
3(a)(1) Form of Disclosures
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 crossreferences 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

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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.
3(a)(2) Segregation of Certain Disclosures
1. Location. The segregated disclosures referred to in § 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.
3(a)(3) Timing of Disclosures
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.
3(b) Additional Information; Nonsegregated
Disclosures
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
§ 1013.9 as long as, in accordance with the
standard set forth in § 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.
3(c) Multiple Lessors or Lessees
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.

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3(d) Use of Estimates
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 in-

formation. 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 § 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
§ 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:
i. An automobile lessor offering a threeyear open-end lease assigns a wholesale
value to the vehicle at the end of the lease
term. The lessor may disclose as an estimate
a wholesale value derived from a generally
accepted trade publication listing current
wholesale values.
ii. Same facts as above, except that the lessor discloses an estimated value derived by
adjusting the residual value quoted in the
trade publication because, in its experience,
the trade publication values either understate or overstate the prices actually received in local used vehicle markets. The lessor may adjust estimated values quoted in
trade publications if the lessor reasonably
believes based on its experience that the values are understated or overstated.
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.
3(e) Effect of Subsequent Occurrence
1. Subsequent occurrences. Examples of subsequent occurrences include:
i. An agreement between the lessee and lessor to change from a monthly to a weekly
payment schedule.
ii. An increase in official fees or taxes.

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iii. An increase in insurance premiums or
coverage caused by a change in the law.
iv. Late delivery of an automobile caused
by a strike.
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 § 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.
Section 1013.4—Content of Disclosures
4(a) Description of Property
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.

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4(b) Amount Due at Lease Signing or Delivery
1. Consummation. See commentary to
§ 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 § 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 § 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.

4(c) Payment Schedule and Total Amount of
Periodic Payments
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
§ 1013.4(c).
4(d) Other Charges
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 § 1013.4(d) or the segregation rule under § 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:
i. Late payment.
ii. Default.
iii. Early termination.
iv. Deferral of payments.
v. Extension of the lease.
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 § 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 § 1013.4. To illustrate:
i. The price of a mechanical breakdown
protection (MBP) contract is sometimes disclosed as an ‘‘other charge.’’ Nevertheless,
the price of MBP is sometimes reflected in
the periodic payment disclosure under
§ 1013.4(c) or in states where MBP is regarded
as insurance, the cost is be disclosed in accordance with § 1013.4(o).
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
§ 1013.4(d) include disposition and ‘‘pick-up’’
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 § 1013.4(d). If, under a lease
agreement, a lessee may return leased property to various locations, and the lessor
charges a disposition fee depending upon the
location chosen, under § 1013.4(d), the lessor

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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 § 1013.4(q).

1. Accuracy of disclosure. If the periodic
payment calculation under § 1013.4(f) has
been calculated correctly, the amount disclosed under § 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
§ 1013.4(f)(9) multiplied by the number of
lease payments disclosed under § 1013.4(f)(8),
when the difference is due to rounding.

4(e) Total of Payments

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

1. Open-end lease. The additional statement
is required under § 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.
4(f) Payment Calculation
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
§ 1013.4(f). See comment 3(a)–4 regarding disclosure of multiple transactions.

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4(f)(1) Gross Capitalized Cost
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 § 1013.4, but it may not be
included among the segregated disclosures.

4(f)(7) Total of Base Periodic Payments

4(f)(8) Lease Payments

4(g) Early Termination
4(g)(1) Conditions and Disclosure of Charges
1. Reasonableness of charges. See the commentary to § 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
§ 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 § 1013.4(g)(1). See the
commentary to § 1013.4(q).

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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 § 1013.4(g)(1).
4(h) Maintenance Responsibilities
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).
4(i) Purchase Option

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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 § 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 § 1013.4(i), not
§ 1013.4(d). The fee may be separately
itemized or disclosed as part of the purchaseoption 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
§ 1013.4(i) as part of the purchase-option price
(with or without a reference to their inclusion 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 § 1013.4(i).

terest, the reference to a security interest
may be omitted.
4(l) Right of Appraisal
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 § 1013.4(l) does not apply.
For example:
i. The automobile lessor might expect a
lessee to return an undented car with four
good tires at the end of the lease term. Even
though it may hold the lessee liable for the
difference between a dented car with bald
tires and the value of a car in reasonably
good repair, the disclosure under § 1013.4(l) is
not required.
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
§ 1013.4(l).
3. Retail or wholesale. In providing the disclosures in § 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.
4(m) Liability at End of Lease Term Based on
Residual Value
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 § 1013.4(m), whether successful or not.
4(m)(1) Rent and Other Charges
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 § 1013.4(m)(1)
disclosure.
4(m)(2) Excess Liability

4(j) Statement Referencing Nonsegregated
Disclosures
1. Content. A lessor may delete inapplicable
items from the disclosure. For example, if a
lease contract does not include a security in-

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.

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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:
i. Disposition charges.
ii. Excess mileage charges.
iii. Late payment and default charges.
iv. In simple-interest accounting leases,
amount by which the unamortized cost exceeds the residual value because the lessee
has not made timely payments.
4(n) Fees and Taxes
1. Treatment of certain taxes. Taxes paid in
connection with the lease are generally disclosed under § 1013.4(n), but there are exceptions. To illustrate:
i. Taxes paid by lease signing or delivery
are disclosed under § 1013.4(b) and § 1013.4(n).
ii. Taxes that are part of the scheduled
payments are reflected in the disclosure
under § 1013.4(c), (f), and (n).
iii. A tax payable by the lessor that is
passed on to the consumer and is reflected in
the lease documentation must be disclosed
under § 1013.4(n). A tax payable by the lessor
and absorbed as a cost of doing business need
not be disclosed.
iv. Taxes charged in connection with the
exercise of a purchase option are disclosed
under § 1013.4(i), not § 1013.4(n).
2. Estimates. In disclosing the total amount
of fees and taxes under § 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.

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4(o) Insurance
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 § 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, § 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 § 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.
4(p) Warranties or Guarantees
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 § 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
§ 1013.3(b).
3. State law. Whether an express warranty
or guaranty exists is determined by state or
other law.
4(q) Penalties and Other Charges for
Delinquency
1. Collection costs. The automatic imposition of collection costs or attorney fees upon
default must be disclosed under § 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 § 1013.4(g)(1). The § 1013.4(q) and
(g)(1) disclosures may, but need not, be combined. Examples of combined disclosures are

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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
§ 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 § 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.

i. If the renegotiated lease covers the 36month period beginning January 1, 1998, the
new disclosures would reflect all payments
made by the lessee on the initial lease and
all payments on the renegotiated lease. In
this example, since the renegotiated lease
covers a 36-month period beginning January
1, 1998, the disclosures must reflect payments
made since that date. On the model form, the
‘‘total of base periodic payments’’ disclosed
under § 1013.4(f)(7) should reflect periodic
payments to be made over the entire 36month term. Payments received since January 1, 1998, are added as a new line item disclosed as ‘‘total of payments received’’ and
are subtracted from the ‘‘total of base periodic payments’’ in calculating a new item
disclosed as the ‘‘total of base periodic payments remaining.’’ For example, if 6 monthly payments of $300 were received since January 1, 1998, the disclosure form should include a ‘‘total of base periodic payments’’
line from which $1,800 is subtracted to arrive
at the ‘‘total of base periodic payments remaining.’’ The remainder of the disclosures
would not change.
ii. If the renegotiated lease covers only the
remaining 30 months, from July 1, 1998, to
January 1, 2001, the disclosures would reflect
only the charges incurred in connection with
the renegotiation and the payments for the
remaining period.

4(r) Security Interest
1.
Disclosable
security
interests.
See
§ 1013.2(o) and accompanying commentary to
determine what security interests must be
disclosed.
4(s) Limitations on Rate Information
1. Segregated disclosures. A lease rate may
not be included among the segregated disclosures referenced in § 1013.3(a)(2).
Section 1013.5—Renegotiations, Extensions, and
Assumptions
1. Coverage. Section 1013.5 applies only to
existing leases that are covered by the regulation. It does not apply to the renegotiation
or extension of leases with an initial term of
four months or less, because such leases are
not covered by the definition of consumer
lease in § 1013.2(e). Whether and when a lease
is satisfied and replaced by a new lease is determined by state or other applicable law.

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5(a) Renegotiation
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 24month 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.

5(b) Extension
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-tomonth 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-tomonth 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

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the seven-month extension period beginning
in March.
Section 1013.6 [Reserved]
Section 1013.7—Advertising

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7(a) General Rule
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 § 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
§ 1013.2(e). Under § 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, § 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 § 1013.7 unless all of the
advertised leases are exempt under § 1013.2(e).
For example:
i. Assume that, in an advertisement, a lessor states that certain terms apply to a consumer lease for a specific automobile. The
total contractual obligation of the advertised lease exceeds the threshold amount in
effect when the advertisement is made. Although the advertisement does not refer to
any other lease, some or all of the advertised
terms for the exempt lease also apply to
other leases offered by the lessor with total
contractual obligations that do not exceed
the applicable threshold amount. The advertisement is not required to comply with
§ 1013.7 because it refers only to an exempt
lease.

ii. Assume that, in an advertisement, a lessor states certain terms (such as the amount
due at lease signing) that will apply to consumer leases for automobiles of a particular
brand. However, the advertisement does not
refer to a specific lease. The total contractual obligations of the leases for some of the
automobiles will exceed the threshold
amount in effect when the advertisement is
made, but the total contractual obligations
of the leases for other automobiles will not
exceed the threshold. The entire advertisement must comply with § 1013.7 because it refers to terms for consumer leases that are
not exempt.
iii. Assume that, in a single advertisement,
a lessor states that certain terms apply to
consumer leases for two different automobiles. The total contractual obligation of
the lease for the first automobile exceeds the
threshold amount in effect when the advertisement is made, but the total contractual
obligation of the lease for the second automobile does not exceed the threshold. The
entire advertisement must comply with
§ 1013.7 because it refers to a consumer lease
that is not exempt.
7(b) Clear and Conspicuous Standard
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.
7(b)(1) Amount Due at Lease Signing or
Delivery
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 § 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.
7(b)(2) Advertisement of a Lease Rate
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

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Bur. of Consumer Financial Protection

Pt. 1013, Supp. I

advertisement. In addition, with the exception of the notice required by § 1013.4(s), the
rate cannot be more prominent than any
other § 1013.4 disclosure stated in the advertisement.

tional disclosures may use the alternate disclosure rule.

7(c) Catalogs or Other Multi-Page
Advertisements; Electronic Advertisements

7(f)(1) Toll-Free Number or Print Advertisement

1. General rule. The multiple-page advertisements referred to in § 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 § 1013.7(d)(2)(i) through (v). If
one of the triggering terms listed in
§ 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.
7(d)(1) Triggering Terms
1. Typical example. When any triggering
term appears in a lease advertisement, the
additional
terms
enumerated
in
§ 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.
7(d)(2) Additional Terms

kpayne on DSK54DXVN1OFR with $$_JOB

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:
i. Exclude third-party fees, such as taxes,
licenses, and registration fees and disclose
that fact; or
ii. Provide a periodic payment or total
that includes third-party fees based on a particular state or locality as long as that fact
and the fact that fees may vary by state or
locality are disclosed.
7(e) Alternative Disclosures—Merchandise Tags
1. Multiple-item leases. Multiple-item leases
that utilize merchandise tags requiring addi-

7(f) Alternative Disclosures—Television or Radio
Advertisements

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 § 1013.7(f)(1)(ii).
2. Toll-free number, local or collect calls. In
complying with the disclosure requirements
of § 1013.7(f)(1)(i), a lessor must provide a tollfree 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.’’
Section 1013.8—Record Retention
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.
Section 1013.9—Relation to State Laws
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:

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kpayne on DSK54DXVN1OFR with $$_JOB

Pt. 1014

12 CFR Ch. X (1–1–18 Edition)

i. Maine. Lease transactions subject to the
Maine Consumer Credit Code and its implementing regulations are exempt from Chapters 2, 4, and 5 of the Federal act. (The exemption does not apply to transactions in
which a federally chartered institution is a
lessor.)
ii. Oklahoma. Lease transactions subject to
the Oklahoma Consumer Credit Code are exempt from Chapters 2 and 5 of the Federal
act. (The exemption does not apply to sections 132 through 135 of the Federal act, nor
does it apply to transactions in which a federally chartered institution is a lessor.)

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
§ 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.

Appendix A—Model Forms

[76 FR 78502, Dec. 19, 2011, as amended at 76
FR 81790, Dec. 29, 2011; 77 FR 69736, Nov. 21,
2012; 79 FR 70194, Nov. 25, 2013; 79 FR 56483,
Sept. 22, 2014; 80 FR 73947, Nov. 27, 2015, as
amended at 81 FR 86259, Nov. 30, 2016; 82 FR
51977, Nov. 9, 2017]

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.
i. Using the first person, instead of the second person, in referring to the lessee.
ii. Using ‘‘lessee,’’ ‘‘lessor,’’ or names instead of pronouns.
iii. Rearranging the sequence of the nonsegregated disclosures.
iv. Incorporating certain state ‘‘plain
English’’ requirements.
v. Deleting or blocking out inapplicable
disclosures, filling in ‘‘N/A’’ (not applicable)
or ‘‘0,’’ crossing out, leaving blanks, checking a box for applicable items, or circling applicable items (this should facilitate use of
multipurpose standard forms).
vi. Adding language or symbols to indicate
estimates.
vii. Adding numeric or alphabetic designations.
viii. Rearranging the disclosures into
vertical columns, except for § 1013.4(b)
through (e) disclosures.
ix. Using icons and other graphics.
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 § 1013.4(l)

PART
1014—MORTGAGE
ACTS
AND PRACTICES—ADVERTISING
(REGULATION N)
Sec.
1014.1 Scope of regulations in this part.
1014.2 Definitions.
1014.3 Prohibited representations.
1014.4 Waiver not permitted.
1014.5 Recordkeeping requirements.
1014.6 Actions by states.
1014.7 Severability.
AUTHORITY: 12 U.S.C. 5512, 5581; 15 U.S.C.
1638 note.
SOURCE: 76 FR 78133, Dec. 16, 2011, unless
otherwise noted.

§ 1014.1 Scope of regulations in this
part.
This part, known as Regulation N, is
issued by the Bureau of Consumer Financial Protection to implement the
2009 Omnibus Appropriations Act, Public L. 111–8, section 626, 123 Stat. 524
(Mar. 11, 2009), as amended by the Credit Card Accountability Responsibility
and Disclosure Act of 2009, Public Law
111–24, section 511, 123 Stat. 1734 (May
22, 2009), and as amended by the DoddFrank Wall Street Reform and Consumer Financial Protection Act of 2010,
Public Law 111–203, section 1097, 124
Stat. 1376 (July 21, 2010). This part applies to persons over which the Federal
Trade Commission has jurisdiction
under the Federal Trade Commission
Act.

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