CUNA Comment Letter
Proposed Amendments to Regulation M
May 15, 1998
Mr. William W. Wiles, Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue, NW
Washington, DC 20551
RE: Docket No. R-1004
Dear Secretary Wiles:
The Credit Union National Association (CUNA) appreciates the opportunity to comment on the proposed rule amending Regulation M, which implements the Consumer Leasing Act. The act requires lessors to provide consumers with uniform cost and other disclosures about consumer lease transactions. The proposal would allow lessors to deliver the disclosures required by the act and regulation by electronic communication. This proposed rule was published in the March 25, 1998 Federal Register. For background purposes, CUNA represents over 11,000 state and federally chartered credit unions through fifty state offices throughout the country.
Although few lessors currently consummate lease agreements electronically, CUNA supports the flexibility this proposal allows lessors as standards are developed for establishing legal agreements by electronic communications. In response to the agency's request for input on specific provisions of the proposed rule, CUNA offers the following comments:
The "Clear and Conspicuous" Standard
Regulation M requires lessors to present required information "clearly and conspicuously" in writing. The "clear and conspicuous" requirement also applies to electronic disclosures. CUNA supports the agency's interpretation of this provision that although a lessor must satisfy the "clear and conspicuous" requirement, the lessor is not required to ensure that the consumer has the equipment to read the disclosures.
Consumer Ability to Retain Disclosures
Regulation M requires that written disclosures be in a form the consumer may keep. This requirement also applies to electronic communication. CUNA supports the agency's interpretation of this provision that lessors would not be required to monitor a consumer's ability to retain the information, nor to take steps to find out whether the consumer has, in fact, retained it.
The proposal states that "electronic disclosures will remain subject to the format, timing and other applicable requirements under Regulation M." CUNA urges the Board to provide further guidance on how to comply with the timing requirements for electronic disclosures. For example, CUNA recommends that when delivering disclosures electronically, a lessor may presume that the consumer has been "presented" with the necessary disclosures once the lessor has sent the disclosures to a specific e-mail address or posted them on a designated Internet website.
CUNA supports the agency's clarifications of the commentary provisions:
For automobile leases, lessors are required to provide a mathematical progression of how scheduled lease payments are derived. However, if a lessor divides the total of the base periodic payments by the number of payments in the lease to come up with the base periodic payment and then multiplies the base periodic payment by the number of payments in the lease, the results will be different due to rounding. Lessors have expressed concern that the variation in these calculations could expose the lessor to civil liability.
CUNA supports the Board's clarification in the official commentary which allows the disclosed total of base periodic payments to vary slightly, due to rounding, from the base periodic payments multiplied by the number of payments in the lease. We agree that this clarification will address the problem lessors have experienced with the mathematical progression schedule.
Fees and Tax Disclosure
Clarifying that taxes that are part of the regularly scheduled payments are required to be disclosed under the Fees and Taxes provision will clear up much confusion lessors have expressed with this disclosure.
Thank you for the opportunity to comment on this proposal.
Regulatory Staff Attorney