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Truth in Lending: 13.3.2.2 Type of Document Containing the Disclosures
The disclosures must be dated112 and in writing in a form the consumer may keep.113 The copy of the disclosure document the consumer receives must have all disclosures included—the consumer’s copy should be identical to the original.114 The lessor has a choice of incorporating the disclosures in a separate written statement that identifies the consumer lease transaction or in the contract or other document evidencing the lease.
Truth in Lending: 13.3.2.3 Disclosures Not Made in English
The disclosures may be made in a language other than English, provided that they are made available in English upon the consumer’s request.117 Regulation M does not mandate Spanish disclosures in a transaction conducted solely in Spanish, but permits the lessor to do so. State leasing statutes or other state law may provide additional rights. For example, Hawaii law requires the lease to be in the language used in the negotiation.118
Truth in Lending: 13.3.2.4 Electronic Disclosures
Regulation M119 allows disclosures to be provided in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce (E-Sign) Act,120 which validates electronic signatures, electronic documents, and electronic disclosures.121 As long as the lessor meets E-Sign requirements, including the consumer consent and confirmation-of-consent requirements, E-Sign all
Truth in Lending: 13.3.2.5 Disclosure of Multiple Leased Items
The official interpretations state that when a lessor leases two items to the same lessee on the same day, the lessor may disclose the transaction as either one multi-item lease or as two lease transactions.129
Truth in Lending: 13.3.2.6 Whether Renegotiations, Extensions, or Assumptions Require New Disclosures
An assumption of a lease by another lessee does not require new disclosures, whether or not the lessor charges an assumption fee.130 Neither does an extension of a lease for not more than six months, whether month-to-month or otherwise.131 If a lease is extended for four months, with an option for a second three month extension, no disclosure is necessary; but when the lease is in fact extended that second time for another three months (for a total of seven months), disclosures are required at t
Truth in Lending: 13.3.2.7 Should Disclosures Include Prior Outstanding Lease or Credit Balances?
Where the outstanding lien on a trade-in is greater than the vehicle’s value or where trading in a leased vehicle results in a balance owed to the original lessor, the new lessor will often pay off the balance, adding this to the amount owed on the new lease.
Truth in Lending: 13.3.2.8 Should Disclosures Include Insurance, Other Incidental Services, Other Products Obtained in Conjunction with the Lease?
Leases may involve the sale of other goods or services, such as service contracts and insurance, where payment for these items are deferred. These are sales, not leases, and the question comes whether the deferment of these obligations should be disclosed as a credit sale under TILA or as part of the lease under Regulation M.
Truth in Lending: 13.3.3 Who Makes and Receives Disclosures; Identification of the Parties
Some leases involve only one lessor and one lessee. Then the lessor must make the disclosures to the lessee, and the disclosures must identify both lessor and lessee.147 While this disclosure must be clear and conspicuous, the words “lessor” and “lessee” need not be used when identifying the parties.148
Truth in Lending: 13.3.4.1 Segregated Disclosures
Certain disclosures must be segregated from other required disclosures and lease information. The segregated disclosure (commonly called the federal box) must contain only the following information:
Truth in Lending: 13.3.4.2 Form of Non-Segregated Disclosures
While additional information may not be included with the segregated disclosures,157 additional information may be provided with other required CLA disclosures. But this additional information may not mislead or confuse the lessee or contradict, obscure, or detract attention from a required disclosure.158
Truth in Lending: 13.3.5.1 General
Regulation M and its official interpretations enumerate three disclosure inaccuracies that do not violate Regulation M: the effect of rounding numbers, unknown information, and the effect of subsequent occurrences. Because these are the only enumerated exceptions, and because any disclosure violation leads to statutory damages,173 any other lessor error should result in statutory damages, no matter how minor.
Truth in Lending: 13.3.5.2 Unknown Information and Estimates
Where information to be disclosed is unknown, the lessor can label the information as an estimate or approximation and provide an estimate or approximation.
Truth in Lending: 13.3.5.3 Subsequent Occurrences
Subsequent occurrences may render disclosed information inaccurate, but such inaccuracy is not an Act violation.175 No new disclosures need be made if the lessor adds insurance after lease consummation because of the lessee’s failure to do so, official fees or taxes change, or an automobile is delivered late because of a strike.176 Nevertheless, new disclosures must be made for certain lease renegotiations and extensions.177
Truth in Lending: 13.3.5.4 Minor Variations
Lessors can disregard the effect of four factors in making disclosures: that payments must be collected in whole cents, that weekends or holidays affect when payments are due, that months have different numbers of days, and that February 29 occurs in a leap year.180 The implication is that other variations lead to disclosure violations if not properly accounted for by the lessor.181
Truth in Lending: 13.3.6.1 Description of Property
The lessor must provide a brief description of the leased property sufficient to identify the property to both the lessor and lessee.182 The model forms for vehicle leases disclose the vehicle’s year, make, model, body style, and vehicle identification number.183 The form for furniture leases lists the item’s name, color, stock number, manufacturer and quantity.184 A lease that misidentifies the property should violate the description requirement.
Truth in Lending: 13.3.6.2.2 Itemization of how the consumer pays the amounts due at lease signing
For motor vehicle leases, the lessor must also itemize by type and amount how the consumer will pay this amount due prior to or at lease signing or delivery, such as through a net trade-in, cash payment,194 manufacturer or dealer rebate, or a non-cash credit.
Truth in Lending: 13.3.6.2.3 Disclosure of trade-in’s positive or negative equity
A trade-in value must be included in the total due at lease singing.198 Regulation M specifies that this is a “net” trade-in, thus requiring the lessor to verify the pay-off figure on the trade-in before making the lease disclosure. The lessor subtracts the pay-off figure from the trade-in’s value to produce the “net” trade-in.
Truth in Lending: 13.3.6.2.4 Disclosure of rebates
A manufacturer or dealer rebate must be disclosed when it is “applied against the amount due at lease signing or delivery”206 but apparently does not have to be separately disclosed in the amount due at lease signing where the lessor opts instead to apply it to reduce the vehicle’s overall cost.
Truth in Lending: 13.3.6.2.5 Practice tips
In reviewing an automobile lease, compare the consumer’s understanding of rebates, trade-ins, and down payments with what is disclosed in the lease. If the consumer paid cash at lease signing, and this does not appear on the itemization of amount paid at lease signing, the dealer may have “swallowed” or stolen the down payment. Similarly, unless a trade-in has a negative or zero value, its failure to be itemized as an amount paid at lease signing is an indication the dealer swallowed its value.207
Truth in Lending: 13.3.6.3 Payment Schedule and Total Amount of Periodic Payments
The lessor must disclose the number, amount, and due dates or periods of payments scheduled under the lease, and the total amount of periodic payments.208 Disclosure that payments are monthly, with the first payment due January 1, 2019 and the last on December 1, 2023, is not sufficient. The lessor also must disclose that there are forty-eight payments.
Truth in Lending: 13.3.6.4 Other Charges
Charges that are not included in periodic payments or disclosed elsewhere must be disclosed as “other charges.”216 Lessors must disclose both a total and an individual itemization.217 If there is both a processing and a disposition fee not disclosed elsewhere, disclosure of each of these fees separately is not sufficient. There must also be a total of “other” charges.
Truth in Lending: 13.3.6.5 Total of Payments
The lessor must disclose, among the segregated disclosures, the total of payments, with a description such as “the amount you will have paid by the end of the lease.”234
Truth in Lending: 13.3.6.6.1 General
Special disclosures apply only to motor vehicle leases.238 The requirements do not apply to other forms of consumer leases. For example, the requirements do not apply to equipment to generate solar energy.