Consumer Leasing_Part2.pdf

V. Lending — Consumer Leasing 4. To ensure that the financial institution provides accurate disclosures of its leasing terms in all advertising. 9. Are disclosures given to lessees when they “renegotiate” or “extend” their leases? (§1013.5) Examination Procedures 2 Lessee Liability General Discl...

V. Lending — Consumer Leasing 4. To ensure that the financial institution provides accurate disclosures of its leasing terms in all advertising. 9. Are disclosures given to lessees when they “renegotiate” or “extend” their leases? (§1013.5) Examination Procedures 2 Lessee Liability General Disclosure Requirements A. Review the lease estimates and calculations to ensure that there is not any unreasonable balloon payment expected of the lessee in the following circumstances: A. Review the institution’s procedures for providing disclosures to ensure that there are adequate controls and procedures to effect compliance. • at early termination, 1. Does the lessor disclose the conditions under which the lease may be terminated early and the amount and method of determining the amount of any early termination charges? (§1013.4(g)(1)) B. Review the disclosures provided by the institution. 1. Are the disclosures clear and conspicuous and provided in writing in a form the consumer may keep? 2. Are any early termination charges reasonable? (§1013.4(g)(1), 4(q)) a. For disclosures provided electronically, (other than for advertising requirements) are the disclosures in electronic form provided in compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act)? 3 • at end of lease term, for wear and use, 1. If the lessor sets standards for wear and use of the leased vehicle are the amounts or method of determining any charge for excess mileage disclosed? (§1013.4(h)(3)) b. For an advertisement accessed by the consumer in electronic form, are the disclosures required by 12 CFR 1013.7 provided to the consumer in electronic form in the advertisement? (§1013.3(a)) 2. Are standards for wear and use reasonable? (§1013. 4(h)(2)) 2. Are the disclosures given in a dated statement and in the prescribed are in the format prescribed? (§1013.3(a)(1)) • at end of lease term (for open-end leases), and 1. Does the lessor disclose the limitations on the lessee’s liabilities at the end of the lease term? (§1013.4(m)(2)) 3. Is the information required by §1013.4(b) through (f), (g)(2), (h)(3), (i)(1), (j), and (m)(1) segregated and in a form substantially similar to the model in Appendix A? (§1013.3(a)(2)) 2. Are the lessee and lessor permitted to make a mutually agreeable final adjustment regarding excess liability? (§1013.4(m)(3)) 4. Are the disclosures timely? (§1013.3(a)(3)) 5. If the lease involves more than one lessee, are the disclosures provided to any lessee who is primarily liable? (§1013.3 (c)) • in delinquency, default or late payment. 1. Does the lessor disclose penalties or other charges for delinquency, default or late payments? (§1013. 4(q)) 6. If additional information is provided, is it provided in a manner such that it does not mislead or confuse the lessee? (§1013.3(b)) 2. Are the penalties or other charges reasonable? (§1013.4(q)) 7. Are all estimates clearly identified and reasonable? (§1013.3(d)) 8. Are the disclosures accurate and do the disclosures contain the information required by §1013.4 (a) through (t)? (§1013.4) Advertising A. Review advertising policies and procedures used by the institution to ensure that there are adequate controls and procedures to effect compliance. ____________________ 2 These reflect the interagency examination procedures in their entirety. V–10.4 3 The final amendments to Regulation M on the electronic delivery of disclosures, consistent with the requirements of the E-Sign Act, became effective December 10, 2007 and require mandatory compliance by October 1, 2008. FDIC Consumer Compliance Examination Manual — March 2022 V. Lending — Consumer Leasing B. Review a sample of the institution’s advertisements. 1. Do the advertisements advertise terms that are usually and customarily available? (§1013.7(a)) 2. Are the disclosures contained in the advertisements clear and conspicuous? (§1013.7(b)) 3. Do catalog/multiple page advertisements comply with the page reference requirements? (§1013.7(c)) 4. When triggering terms are used, do the advertisements contain the additional required information? (§1013.7(d)) 5. Do merchandise tags which use triggering terms refer to a sign or display that contains the additional required disclosures? (§1013.7(e)) 6. If television or radio advertisements use triggering terms, if they do not contain the additional terms do not include the additional terms required by §7(d)(2) when triggering terms are used, do they use alternative disclosure methods (direct consumers to a toll free number or written advertisement)? (§1013.7(f)) Miscellaneous A. Are records and other evidence of compliance (other than for advertising requirements under §1013.7) retained for a period of no less than two years? (§1013.8) References 12 CFR 1013 - Regulation M—Consumer Leasing (CFPB’s regulation and official staff interpretation (commentary)) Consumer Credit Protection Act: Title 1, Chapter 5—Consumer Leases 15 USC 1667 et seq: Consumer Leasing Act 15 USC 7001 et seq: Electronic Signatures in Global and National Commerce Act FDIC Consumer Compliance Examination Manual — March 2022 V–10.5 V. Lending — Consumer Leasing Examination Checklist – Consumer Leasing Yes 1. Does the Bank engage in consumer leasing or purchase consumer leases from lessors? (§1013.2(h)) (If no, there is no need to do further work on Consumer Leasing. If yes, complete the following checklist, answering yes (Y) or no (N) for each item.) 2. Are the disclosures made prior to consummation of the lease, that is, at the time a binding order is made or the lease is signed? (§1013.3(a)(3)) 3. Are the disclosures clear and conspicuous and provided in writing in a form the consumer may keep? (§1013.3(a)) 4. Are disclosures in electronic form provided in compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act)? (§1013.3(a)) 5. For an advertisement accessed by the consumer in electronic form, are the disclosures required by 12 CFR 1013.7 provided to the consumer in electronic form in the advertisement? (§1013.3(a)) 6. Are the disclosures given in a dated statement and (i) made either in a separate statement that identifies the consumer lease transaction, (ii) in the contract or (iii) other document evidencing the lease? (§1013.3(a)(1)) 7. Is the information required by §1013.4(b) through (f), (g)(2), (h)(3), (i)(1), (j), and (m)(1) segregated and in a form substantially similar to the model in Appendix A? (§1013.3(a)(2)) 8. If the lease involves more than one lessee, are the disclosures provided to any lessee who is primarily liable? (§1013.3(c)) 9. If additional information is provided, is it provided in a manner such that it does not mislead or confuse the lessee? (§1013.3(b)) No 10. Are disclosures provided to at least one lessee where there are multiple lessees and by at least one lessor when there are multiple lessors? (§1013.3(c)) 11. Are all estimates clearly identified and reasonable? (§1013.3(d)) 12. Are the following disclosures made in the lease? A. Description of property (§1013.4(a)) B. Amount due at lease signing or delivery (§1013.4(b)) C. Payment schedule and total amount of periodic payments (§1013.4(c)) D. Other charges(§1013.4(d)) E. Total of payments(§1013.4(e)) F. Regarding payment calculations: i. Gross capitalized cost (§1013.4(f)(1))) ii. Capitalized cost reduction (§1013.4(f)(2) iii. Adjusted capitalized cost (§1013.4(f)(3)) V–10.6 FDIC Consumer Compliance Examination Manual — March 2022