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Truth in Lending: 13.3.6.10 Statement Referencing Nonsegregated Disclosures—§ 1013.4(j) [§ 213.4(j)]
The segregated disclosure must include a statement referencing the other disclosures found elsewhere on the disclosure form,355 indicating 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.
Truth in Lending: 13.3.6.11 Liability for Difference Between Residual and Realized Value
The lease must state, outside the segregated disclosures, that the consumer is liable, at early termination or at the end of the lease, for the difference between the property’s residual value and its realized value, if that is the case.356 The residual value is an expected value assigned at lease consummation and a realized value is an actual value at a particular point in time.357
Truth in Lending: 13.3.6.12 Right to an Appraisal
When liability at either early termination or at the end of the lease term is based on the realized value, the lease must disclose, outside the segregated disclosures, the consumer’s right to obtain a mutually binding appraisal of the car’s resale value.363 This right should apply whether early termination is voluntary or based upon the consumer’s default, but does not apply if the consumer is only liable for unreasonable wear or use.364
Truth in Lending: 13.3.6.14 Official Fees and Taxes
The total amount payable during the entire lease term for official fees, registration, certificate of title, and license fees or taxes must be disclosed outside the segregated disclosures.374 This includes amounts paid by the lessor and assessed to the lessee, and amounts the lessee pays directly to a government agency.375 Taxes payable by and absorbed as a cost of doing business by the lessor need not be disclosed.376 Fees should not be i
Truth in Lending: 13.3.6.15 Insurance
The lease must briefly identify, outside the segregated disclosures, any insurance in connection with the lease: the types and amount of coverage and the cost to the consumer if provided by the lessor, or the types and amounts of coverage that the consumer must purchase from a third party.384 The disclosure applies to both voluntary and involuntary purchases of insurance.385 If the lessor purchases insurance, but does not charge the consumer, this need not be disclosed.
Truth in Lending: 13.3.6.16.2 Insufficient to mention manufacturer warranties without confirming their existence
A statement that the lessor is disclaiming any manufacturer warranties is not sufficient disclosure of the manufacturer’s warranties. This only explains what warranties the lessor is offering, not those the manufacture is providing.
Truth in Lending: 13.3.6.16.3 Disclaimers of warranties
Disclosure that the lessor is disclaiming implied warranties is not required, but is permitted as additional information.398 There should be a CLA violation where a lease disclaims all warranties, but does not make clear that the disclaimer applies just to lessor warranties and not to the manufacturer warranties that have been disclosed elsewhere in the lease.399 Moreover, under state law a lessor can only disclaim implied warranties, not express warranties,
Truth in Lending: 13.3.6.17 Penalties and Other Charges for Delinquency
Penalties or other charges for delinquency, default, or late payment must be disclosed outside the area for segregated disclosures.403 The lessor must disclose two different charges—charges upon default pursuant to Reg. M § 1013.4(q) and upon voluntary early termination pursuant to Reg. M § 1013.4(g). When default is a condition for early termination of the lease, default charges must be disclosed under both requirements. The two required disclosures may, but need not be combined.
Truth in Lending: 13.3.6.18 Security Interest
The lessor must disclose, outside the segregated disclosures, any security interest in connection with the lease (other than the security deposit), clearly identifying the collateral.410 The lessor’s interest in the leased property has to be disclosed as a security interest if it is treated as such under state law.411
Truth in Lending: 13.3.6.19 Limits on Rate Information
Regulation M limits the rate information that a lessor can provide voluntarily. If a lessor provides a written percentage rate in a lease transaction, it must be outside the segregated disclosures and state “this percentage may not measure the overall cost of financing this lease.”415 Moreover, the lessor shall not use the term “annual percentage rate,” “annual lease rate,” or other equivalent term in connection with the rate.416
Truth in Lending: 13.3.6.20 Special Disclosures for Non-Motor Vehicle Open-End Leases
Non-motor vehicle open-end leases must disclose outside the segregated disclosures418 the property’s fair market value at lease inception, the aggregate cost of the lease on expiration, and the differential between them.419 Former Regulation M provides some guidance not found in current Regulation M.
Truth in Lending: 13.4.1 Private Remedies for Advertising Violations
Unlike the Truth in Lending Act, the Consumer Leasing Act (CLA) provides private remedies for advertising disclosure violations, but only where a person “suffers actual damages from the violation.”421 Unclear is whether a person has to have leased a vehicle to be able to bring an action after having suffered actual damages.
Truth in Lending: 13.4.2 What Is an Advertisement?
The CLA advertising requirements apply to any “commercial message in any medium that directly or indirectly promotes a consumer lease transaction.”425 The official interpretations to Regulation M state that 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.”426 The official interpretations provide six examples:
Truth in Lending: 13.4.3.1 Triggering Terms Requiring Additional Disclosure
Advertisements containing certain “triggering” terms must include specified additional terms.429 The triggering terms that require additional disclosures are the amount of any payment,430 or a statement of any capitalized cost reduction or other payment required prior to or at consummation or delivery.431 A lease advertisement need not make additional disclosures if no representations are made as to the amount of any payment or down payment (or the
Truth in Lending: 13.4.3.2 Alternative Disclosures for Merchandise Tags
When a merchandise tag (such as a car sticker) includes a triggering term, the additional required disclosures need not be on the tag itself. The tag can refer to a sign or display prominently posted at the lessor’s place of business that contains a table or schedule of the additional disclosures.443
Truth in Lending: 13.4.3.3 Alternative Disclosures for Television or Radio Advertising
A radio or television ad that contains a triggering term must contain most, but not all of the additional disclosures. Whether a security deposit is required and special disclosures relating to liability at the end of an open-end lease need not be included.444 Instead, the advertiser has two options.
Truth in Lending: 13.4.3.4 Multi-Page Advertisements, Catalogs, and Electronic Advertisements
Multi-page advertisements, catalogs, and electronic advertisements (such as those on a website) can contain a table or schedule of the required disclosures if the advertisement clearly refers to the page or pages on which the table or schedule appears.451 A multi-page advertisement includes a supplement to a newspaper, but a mailing comprised of several separate flyers or documents in a single envelope is not a single, multi-page advertisement.452 In an electronic advertisement, a triggering ter
Truth in Lending: 13.4.3.5 Bait-and-Switch Advertising
Lease advertising can 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.454 This provision 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.
Truth in Lending: 13.5.1 CLA Standards for Default and Early Termination Charges
The federal Consumer Leasing Act (CLA) states:
Penalties or other charges for delinquency, default, or early termination may be specified in the lease but only at an amount which is reasonable in the 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.456
Truth in Lending: 13.5.2.1 Relation of Federal and State Law Standards
The CLA states that it does “not annul, alter, or affect, or exempt any person…from complying with, the laws of any State with respect to consumer leases, except to the extent to which that those laws are inconsistent with any [CLA] provision.”460 State laws providing greater protection to consumers are not inconsistent with the CLA.461 Consequently state laws that provide for the same or a lower early termination charge than the CLA standard remain effective and are not preempted.
Truth in Lending: 13.5.2.2 UCC Article 2A on Leases
Every state but Louisiana has adopted UCC Article 2A on Leases.462 U.C.C.