(15) "Security interest" and "security" mean any interest in property which secures payment or performance of an obligation. The terms include, but are 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, any lien on property arising by operation of law, and any interest in a lease when used to secure payment or performance of an obligation.

(16) "State" means any state, the District of Columbia, the Commonwealth of Puerto Rico, and any territory or possession of the United States.

(17) "Total lease obligation" equals the total of (i) the scheduled periodic payments under the lease, (ii) any nonrefundable cash payment required of the lessee or agreed upon by the lessor and lessee or any trade-in allowance made at consummation, and (iii) the estimated value of the leased property at the end of the lease term.

(18) "Value at consummation" equals the cost to the lessor of the leased property including, if applicable, any increase or markup by the lessor prior to consummation.

(b) Rules of construction. For purposes of this regulation, the following rules of construction apply:

(1) Unless the context indicates otherwise, "lease" shall be construed to mean "consumer lease."

(2) A transaction shall be considered consummated at the time a contractual relationship is created between the lessor and lessee, irrespective of the time of the performance of either party.

(3) Captions and catchlines are intended solely as aids to convenient reference, and no inference as to the intent of any provisions may be drawn from them.

[46 FR 20951, Apr. 7, 1981; 46 FR 29245, June 1, 1981]

§ 213.3 Exempted transactions.

This regulation does not apply to lease transactions of personal property which are incident to the lease of real

(a) General requirements. (1) Any lessor shall, in accordance with this regulation and to the extent applicable, make the disclosures required by paragraph (g) of this section with respect to any consumer lease. Such disclosures shall be made clearly, conspicuously, in meaningful sequence, and in accordance with the further requirements of this section. All numerical amounts and percentages shall be stated in figures and shall be printed in not less than the equivalent of 10point type, .075 inch computer type, or elite size typewritten numerals, or shall be legibly handwritten.

(2) Disclosures shall be made prior to the consummation of the lease on a dated written statement which identifies the lessor and the lessee, and a copy of the statement shall be given to the lessee at the time. All of the disclosures shall be made together on either (i) the contract or other instrument evidencing the lease on the same page and above the place for the lessee's signature; or (ii) a separate statement which identifies the lease transaction.

(3) In any lease of multiple items, the description required by paragraph (g)(1) of this section may be provided on a separate statement or statements which are incorporated by reference in the disclosure statement required by paragraph (a) of this section.

(4) All disclosures required to be given by this regulation shall be made in the English language except in the Commonwealth of Puerto Rico, where disclosures may be made in the Spanish language with English language disclosures provided upon the customer's request, either in substitution for the Spanish disclosures or as additional information in accordance with paragraph (b) of this section.

(b) Additional information. At the lessor's option, additional information or explanations may be supplied with

any disclosure required by this regulation, but none shall be stated, utilized, or placed so as to mislead or confuse the lessee or contradict, obscure, or detract attention from the information required to be disclosed. Any lessor who elects to make disclosures specified in any provision of state law which, under § 213.7 of this regulation, is inconsistent with the requirements of the act and this regulation may

(1) Make such inconsistent disclosures on a separate paper apart from the disclosures made pursuant to this regulation; or

(2) Make such inconsistent disclosures on the same statement on which disclosures required by this regulation are made, provided:

(i) All disclosures required by this regulation appear separately and above any other disclosures,

(ii) Disclosures required by this regulation are identified by a clear and conspicuous heading indicating that they are made in compliance with federal law, and

(iii) All inconsistent disclosures appear separately and below a conspicuous demarcation line, and are identified by a clear and conspicuous heading indicating that the statements made thereafter are inconsistent with the disclosure requirements of the federal Consumer Leasing Act. (c) Multiple lessors; multiple lessees. When a transaction involves more than one lessor, only one lessor need make the disclosures required by this regulation, and the one that discloses shall be the one chosen by the lessors. When a lease involves more than one lessee, the disclosures may be made to any lessee who is primarily liable on the lease.

(d) Unknown information estimate. If, at the time disclosures must be made, an amount or other item of information required to be disclosed, or needed to determine a required disclosure, is unknown or not available to the lessor and the lessor has made a reasonable effort to ascertain it, the lessor may use an estimated amount or an approximation of the information, provided the estimate or approximation is clearly identified as such, is reasonable, is based on the best information available to the lessor, and is not

used for the purpose of circumventing or evading the disclosure requirements of this regulation. Notwithstanding the requirement of this paragraph that the estimate be based on the best information available, a lessor is not precluded in a purchase option lease from understating the estimated value of the leased property at the end of the term in computing the total lease obligation as required in paragraph (g)(15)(i) of this section.

(e) Effect of subsequent occurrence. If information required to be disclosed in accordance with this regulation is subsequently rendered inaccurate as a result of any act, occurrence, or agreement subsequent to the delivery of the required disclosures, the inaccuracy resulting therefrom does not constitute a violation of this regulation.1

(f) Leap year. Any variance in any term required under this regulation to be disclosed, or stated in any advertisement, which occurs by reason of the addition of February 29 in each leap year, may be disregarded, and such term may be disclosed or stated without regard to such variance.

(g) Specific disclosure requirements. In any lease subject to this section, the following items, as applicable, shall be disclosed:

(1) A brief description of the leased property, sufficient to identify the property to the lessee and lessor.

(2) The total amount of any payment, such as a refundable security deposit paid by cash, check or similar means, advance payment, capitalized cost reduction or any trade-in allowance, appropriately identified, to be paid by the lessee at consummation of the lease.

(3) The number, amount, and due dates or periods of payments sched

1Such acts, occurrences, or agreements include the failure of the lessee to perform his obligations under the contract and such actions by the lessor as may be proper to protect his interests in such circumstances. Such failure may result in the liability of the lessee to pay delinquency charges, collection costs, or expenses of the lessor for perfection or acquisition of any security interest or amounts advanced by the lessor on behalf of the lessee in connection with insurance, repairs to, or preservation of leased property.

uled under the lease and the total amount of such periodic payments.

(4) The total amount paid or payable by the lessee during the lease term for official fees, registration, certificate of title, license fees, or taxes.

(5) The total amount of all other charges, individually itemized, payable by the lessee to the lessor, which are not included in the periodic payments. This total includes the amount of any liabilities the lease imposes upon the lessee at the end of the term, but excludes the potential difference between the estimated and realized values, required to be disclosed under paragraph (g)(13) of this section.

(6) A brief identification of insurance in connection with the lease including (i) if provided or paid for by the lessor, the types and amounts of coverages and cost to the lessee, or (ii) if not provided or paid for by the lessor, the types and amounts of coverages required of the lessee.

(7) A statement identifying any express warranties or guarantees available to the lessee made by the lessor or manufacturer with respect to the leased property.

(8) An identification of the party responsible for maintaining or servicing the leased property together with a brief description of the responsibility, and a statement of reasonable standards for wear and use, if the lessor sets such standards.

(9) A description of any security interest, other than a security deposit disclosed under paragraph (g)(2) of this section, held or to be retained by the lessor in connection with the lease and a clear identification of the property to which the security interest relates.

(10) The amount or method of determining the amount of any penalty or other charge for delinquency, default, or late payments.

(11) A statement of whether or not the lessee has the option to purchase the leased property and, if at the end of the lease term, at what price, and, if prior to the end of the lease term, at what time, and the price or method of determining the price.

(12) 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 method of determining the amount of any penalty or other charge for early termination.

(13) A statement that the lessee shall be liable for the difference between the estimated value of the property and its realized value at early termination or the end of the lease term, if such liability exists.

(14) Where the lessee's liability at early termination or at the end of the lease term is based on the estimated value of the leased property, a statement that the lessee may obtain at the end of the lease term or at early termination, at the lessee's expense, a professional appraisal of the value which could be realized at sale of the leased property by an independent third party agreed to by the lessee and the lessor, which appraisal shall be final and binding on the parties.

(15) Where the lessee's liability at the end of the lease term is based upon the estimated value of the leased property:

(i) the value of the property at consummation of the lease, the itemized total lease obligation at the end of the lease term, and the difference between them.

(ii) That there is a rebuttable presumption that the estimated value of the leased property at the end of the lease term is unreasonable and not in good faith to the extent that it exceeds the realized value by more than three times the average payment allocable to a monthly period, and that the lessor cannot collect the amount of such excess liability unless the lessor brings a successful action in court in which the lessor pays the lessee's attorney's fees, and that this provision regarding the presumption and attorney's fees does not apply to the extent the excess of estimated value over realized value is due to unreasonable wear or use, or excessive use.

(iii) A statement that the requirements of paragraph (g)(15)(ii) of this section do not preclude the right of a willing lessee to make any mutually agreeable final adjustment regarding such excess liability.

(h) Renegotiations or extensions. If any existing lease is renegotiated or extended, such renegotiation or exten

sion shall be considered a new lease subject to the disclosure requirements of this regulation, except that the requirements of this paragraph shall not apply to (1) a lease of multiple items where a new item(s) is provided or a previously leased item(s) is returned, and the average payment allocable to a monthly period is not changed by more than 25 per cent, or (2) a lease which is extended for not more than 6 months on a month-to-month basis or otherwise.

§ 213.5 Advertising.

(a) General rule. No advertisement to aid, promote, or assist directly or indirectly any consumer lease may state that a specific lease of any property at specific amounts or terms is available unless the lessor usually and customarily leases or will lease such property at those amounts or terms.

(b) Catalogs and multi-page advertisements. If a catalog or other multiple-page advertisement sets forth or gives information in sufficient detail to permit determination of the disclosures required by this section in a table or schedule of lease terms, such catalog or multiple-page advertisement shall be considered a single advertisement provided

(1) The table or schedule and the disclosures made therein are set forth clearly and conspicuously; and

(2) Any statement of lease terms appearing in any place other than in that table or schedule of lease terms clearly and conspicuously refers to the page or pages on which that table or schedule appears, unless that statement discloses all of the lease terms required to be stated under this section.

(c) Terms that require additional information. No advertisement to aid, promote, or assist directly or indirectly any consumer lease shall state the amount of any payment, the number of required payments, or that any or no downpayment or other payment is required at consummation of the lease unless the advertisement also states clearly and conspicuously each of the following items of information as applicable.

(1) That the transaction advertised is a lease.

(2) The total amount of any payment such as a security deposit or capitalized cost reduction required at the consummation of the lease, or that no such payments are required.

(3) The number, amounts, due dates or periods of scheduled payments, and the total of such payments under the lease.

(4) A statement of whether or not the lessee has the option to purchase the leased property and at what price and time. The method of determining the price may be substituted for disclosure of the price.

(5) A statement of the amount or method of determining the amount of any liabilities the lease imposes upon the lessee at the end of the term and a statement that the lessee shall be liable for the difference, if any, between the estimated value of the leased property and its realized value at the end of the lease term, if the lessee has such liability.

(d) Multiple item leases; merchandise tags. If a merchandise tag for an item normally included in a multiple item lease sets forth information which would require additional disclosures under paragraph (c) of this section, such merchandise tag need not contain such additional disclosures, provided it clearly and conspicuously refers to a sign or display which is prominently posted in the lessor's showroom. Such sign or display shall contain a table or schedule of those items of information to be disclosed under paragraph (c) of this section.

[46 FR 20951, Apr. 7, 1981; 46 FR 29245, June 1, 1981]

§ 213.6 Preservation and inspection of evidence of compliance.

(a) Evidence of compliance with the requirements imposed under this regulation, other than advertising requirements under § 213.5, shall be preserved by the lessor for a period of not less than 2 years after the date such disclosure is required to be made.

(b) Each lessor shall, when directed by the appropriate administrative enforcement authority designated in section 108 of the act, permit that authority or its duly authorized representative to inspect its relevant rec

ords and evidence of compliance with this regulation.

§ 213.7 Inconsistent state requirements.

(a) Preemption. A state law which is similar in nature, purpose, scope, intent, effect, or requisites to a section of chapter 5 of the act is not inconsistent with the act or this regulation within the meaning of section 186(a) of the act if the lessor can comply with the state law without violating this regulation. If a lessor cannot comply with a state law without violating a provision of this regulation which implements a section of chapter 5 of the act, such state law is inconsistent with the requirements of the act and this regulation within the meaning of section 186(a) of the act and is preempted.

(b) Procedures. A state, through its governor, attorney general, or other appropriate official having primary enforcement or interpretative responsibilities for its consumer leasing law, may apply to the Board for a determination that the state law offers greater protection and benefit to lessees than a comparable provision(s) of chapter 5 of the act and its implementing provision(s) in this regulation, or is otherwise not inconsistent with chapter 5 of the act and this regulation, or for a determination with respect to any issues not clearly covered by paragraph (a) of this section as to the consistency or inconsistency of a state law with chapter 5 of the act or its implementing provisions in this regulation.

§ 213.8 Exemption of certain state regulated transactions.

(a) Exemption for state regulated transactions. In accordance with the provisions of Appendix A to Regulation M, Part 213, any state may make application to the Board for exemption of any class of transactions within the state from the requirements of chapter 5 of the act and the corresponding provisions of this regulation, provided that

(1) The Board determines that under the law of that state, that class of transactions is subject to requirements substantially similar to those imposed under chapter 5 of the act

and the corresponding provisions of this regulation; or the lessee is afforded greater protection and benefit than is afforded under chapter 5 of the act, and

(2) There is adequate provision for enforcement.

(b) Procedures and criteria. The procedures and criteria under which a state may apply for the determination provided for in paragraph (a) of this section are set forth in Appendix A to Regulation M.

(c) Civil liability. In order to assure that the concurrent jurisdiction of federal and state courts created in sections 130(e) and 185(c) of the act shall continue to have substantive provisions to which such jurisdiction shall apply, and generally to aid in implementing the act with respect to any class of transactions exempted pursuant to paragraph (a) of this section and Appendix A, the Board pursuant to sections 105 and 186(b) of the act hereby prescribes that

(1) No such exemptions shall be deemed to extend to the civil liability provisions of sections 130, 131, and 185 of the act; and

(2) After an exemption has been granted, the disclosure requirements of the applicable state law shall constitute the disclosure requirements of the act, except to the extent that such state law imposes disclosure requirements not imposed by the act. Information required under such state law with the exception of those provisions which impose disclosure requirements not imposed by the act shall, accordingly, constitute a "requirement imposed" under chapter 5 of the act for the purpose of section 130(a).

APPENDIX A-PROCEDURES AND CRITERIA FOR STATE EXEMPTIONS FROM THE CONSUMER LEASING ACT

(a) Application. Any state may make application to the Board, pursuant to the terms of this appendix and the Board's Rules of Procedure (12 CFR Part 262), for a determination that under the laws of the state,' "consumer lease" transactions as pro

'Any reference to state law in this appendix includes a reference to any regulations Continued