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The Federal Reserve Board today delayed the date for mandatory compliance with revisions to Regulation M that apply to automobile leasing, from October 1, 1997, to
January 1, 1998.
The Board's revised regulation made a significant number of substantive changes to the regulation, establishing new disclosures to improve consumers' understanding of automobile and other lease transactions. The changes required the preparation of new leasing forms and the reprogramming of the computer software used to produce the consumer lease disclosures at automobile dealerships. Representatives of leasing companies, automobile dealerships, and vendor support services requested a delay in the date set by the Board for mandatory compliance. Installation of new leasing software is still under way at many of the 22,500 new-car dealerships that arrange leases through approximately 9,000 leasing companies. As a result, many of the dealerships are unable to produce computer-generated disclosures by October 1. The Board approved the delay to ensure that consumers receive accurate and meaningful disclosures through computer generated programs when they enter into lease transactions. A copy of the Board's notice is attached.
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FEDERAL RESERVE SYSTEM
12 CFR Part 213 [Regulation M; Docket No. R-0892] Consumer Leasing; Delay of Effective Date AGENCY: Board of Governors of the Federal Reserve System. ACTION: Final rule; delay of effective date. SUMMARY: Following a review under the Board's Regulatory Planning and Review Program, the Board published a revised Regulation M (which implements the Consumer Leasing Act) on October 7, 1996. The final rule contains a significant number of substantive revisions to the regulation. It essentially establishes a new disclosure scheme that should substantially improve consumer understanding of automobile transactions. The new disclosure scheme required the preparation of new forms and the reprogramming of computer software. Mandatory compliance with the revised rule was to take effect on October 1, 1997. The Board is delaying that effective date until January 1, 1998, to facilitate compliance with the regulation and to ensure that consumers receive accurate and meaningful disclosures. DATES: The effective date for the final rule published at 61 FR 52246 is delayed until January 1, 1998. FOR FURTHER INFORMATION CONTACT: Kyung H. Cho-Miller or Obrea O. Poindexter, Staff Attorneys, Division of Consumer and Community Affairs, Board of Governors of the Federal Reserve System, Washington, DC 20551, at (202) 452-2412 or 452-3667. For users of Telecommunications Device for the Deaf (TDD), please contact Diane Jenkins at (202) 452-3544. |
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SUPPLEMENTARY INFORMATION:
The Consumer Leasing Act (CLA), 15 U.S.C. 1667-1667e, was enacted into law in 1976 as an amendment to the Truth in Lending Act (TILA), 15 U.S.C. 1601 et seq. The Board was given rulewriting authority, and its Regulation M (12 CFR part 213) implements the CLA. The CLA generally governs consumer leases of personal property involving $25,000 or less and a term of more than four months. An automobile lease is the most common type of consumer lease covered by the CLA. Like the credit provisions of the TILA, the CLA requires lessors to provide uniform cost and other disclosures in consumer lease transactions and in lease advertising. Prior to entering into a lease agreement, lessors must give consumers fifteen to twenty disclosures, including the amount of initial charges to be paid, an identification of leased property, a payment schedule, the responsibilities for maintaining the leased property, and the liability for terminating a lease early. Following a review under the Board's Regulatory Planning and Review Program, the Board published a revised Regulation M on October 7, 1996 (61 FR 52246), and a new staff commentary on April 4, 1997 (62 FR 16053). The final rule made a significant number of substantive revisions to the regulation, and essentially established a new disclosure scheme that should substantially improve consumer understanding of automobile lease transactions. The new disclosure scheme required the preparation of new forms and the reprogramming of computer software. The Board has been asked by representatives of the automobile leasing industry--including leasing companies, automobile dealerships, and vendor support services--to delay the mandatory effective date of the new Regulation M rules beyond October 1, 1997. The request is based on the current state of implementation of the new leasing software at the 22,500 new-car dealerships that arrange for automobile leases provided through approximately 9,000 independent lessors. Less than half of the dealerships are said to have in place the necessary software programs that would enable them to produce computer-generated disclosure statements by October 1, 1997. In some cases, they would have in place only one of the five or six lessor programs that they typically make available to consumers. The alternative is for these dealerships to complete the leasing forms manually, with resultant delays and the potential for errors that would subsequently have to be corrected. The Board believes that consumers will not be well served by proceeding on the October 1 schedule. Accordingly, to facilitate compliance and better ensure that consumers receive accurate and meaningful lease disclosures, the Board has deferred the mandatory effective date to January 1, 1998. Board of Governors of the Federal Reserve System, September 25, 1997.
(signed) William W. Wiles
William W. Wiles |
1997 Banking and consumer regulatory policy
