Skip to main content

Search

Truth in Lending: 3(d) Use of Estimates

1. Time of estimated disclosure. The lessor may, after making a reasonable effort to obtain information, use estimates to make disclosures if necessary information is unknown or unavailable at the time the disclosures are made.

Truth in Lending: 3(e) Effect of Subsequent Occurrence

1. Subsequent occurrences. Examples of subsequent occurrences include:

i. An agreement between the lessee and lessor to change from a monthly to a weekly payment schedule.

ii. An increase in official fees or taxes.

iii. An increase in insurance premiums or coverage caused by a change in the law.

iv. Late delivery of an automobile caused by a strike.

Truth in Lending: 4(a) Description of Property

1. Placement of description. Although the description of leased property may not be included among the segregated disclosures, a lessor may choose to place the description directly above the segregated disclosures.

Truth in Lending: 4(b) Amount Due at Lease Signing or Delivery

1. Consummation. See commentary to § 1013.3(a)(3).

2. Capitalized cost reduction. A capitalized cost reduction is a payment in the nature of a downpayment on the leased property that reduces the amount to be capitalized over the term of the lease. This amount does not include any amounts included in a periodic payment paid at lease signing or delivery.

Truth in Lending: 4(c) Payment Schedule and Total Amount of Periodic Payments

1. Periodic payments. The phrase “number, amount, and due dates or periods of payments” requires the disclosure of all payments that are made at regular or irregular intervals and generally derived from rent, capitalized or amortized amounts such as depreciation, and other amounts that are collected by the lessor at the same interval(s), including, for example, taxes, maintenance, and insurance charges. Other periodic payments may, but need not, be disclosed under § 1013.4(c).

Truth in Lending: 4(d) Other Charges

1. Coverage. Section 1013.4(d) requires the disclosure of charges that are anticipated by the parties incident to the normal operation of the lease agreement. If a lessor is unsure whether a particular fee is an “other charge,” the lessor may disclose the fee as such without violating § 1013.4(d) or the segregation rule under § 1013.3(a)(2).

Truth in Lending: 4(e) Total of Payments

1. Open-end lease. The additional statement is required under § 1013.4(e) for open-end leases because, with some limitations, a lessee is liable at the end of the lease term for the difference between the residual and realized values of the leased property.

Truth in Lending: 4(f) Payment Calculation

1. Motor-vehicle lease. Whether leased property is a motor vehicle is determined by state or other applicable law.

2. Multiple-items. If a lease transaction involves multiple items of leased property, one of which is not a motor vehicle under state law, at their option, lessors may include all items in the disclosures required under § 1013.4(f). See comment 3(a)-4 regarding disclosure of multiple transactions.

Truth in Lending: 4(f)(1) Gross Capitalized Cost

1. Agreed upon value of the vehicle. The agreed upon value of a motor vehicle includes the amount of capitalized items such as charges for vehicle accessories and options, and delivery or destination charges. The lessor may also include taxes and fees for title, licenses, and registration that are capitalized. Charges for service or maintenance contracts, insurance products, guaranteed automobile protection, or an outstanding balance on a prior lease or credit transaction are not included in the agreed upon value.

Truth in Lending: 4(f)(7) Total of Base Periodic Payments

1. Accuracy of disclosure. If the periodic payment calculation under § 1013.4(f) has been calculated correctly, the amount disclosed under § 1013.4(f)(7)—the total of base periodic payments—is correct for disclosure purposes even if that amount differs from the base periodic payment disclosed under § 1013.4(f)(9) multiplied by the number of lease payments disclosed under § 1013.4(f)(8), when the difference is due to rounding.

Truth in Lending: 4(i) Purchase Option

1. Mandatory disclosure of no purchase option. Generally the lessor need only make the specific required disclosures that apply to a transaction. In the case of a purchase option disclosure, however, a lessor must disclose affirmatively that the lessee has no option to purchase the leased property if the purchase option is inapplicable.

Truth in Lending: 4(l) Right of Appraisal

1. Disclosure inapplicable. The lessee does not have the right to an independent appraisal merely because the lessee is liable at the end of the lease term or at early termination for unreasonable wear or use. Thus, the disclosure under § 1013.4(l) does not apply. For example:

Truth in Lending: 4(m)(1) Rent and Other Charges

1. General. This disclosure is intended to represent the cost of financing an open-end lease based on charges and fees that the lessor requires the lessee to pay. Examples of disclosable charges, in addition to the rent charge, include acquisition, disposition, or assignment fees. Charges imposed by a third party whose services are not required by the lessor (such as official fees and voluntary insurance) are not included in the § 1013.4(m)(1) disclosure.

Truth in Lending: 4(m)(2) Excess Liability

1. Coverage. The disclosure limiting the lessee’s liability for the value of the leased property does not apply in the case of early termination.

2. Leases with a minimum term. If a lease has an alternative minimum term, the disclosures governing the liability limitation are not applicable for the minimum term.

Truth in Lending: 4(n) Fees and Taxes

1. Treatment of certain taxes. Taxes paid in connection with the lease are generally disclosed under § 1013.4(n), but there are exceptions. To illustrate:

i. Taxes paid by lease signing or delivery are disclosed under § 1013.4(b) and § 1013.4(n).

ii. Taxes that are part of the scheduled payments are reflected in the disclosure under § 1013.4(c), (f), and (n).

Truth in Lending: 4(o) Insurance

1. Coverage. If insurance is obtained through the lessor, information on the type and amount of insurance coverage (whether voluntary or required) as well as the cost, must be disclosed.

2. Lessor’s insurance. Insurance purchased by the lessor primarily for its own benefit, and absorbed as a business expense and not separately charged to the lessee, need not be disclosed under § 1013.4(o) even if it provides an incidental benefit to the lessee.

Truth in Lending: 4(p) Warranties or Guarantees

1. Brief identification. The statement identifying warranties may be brief and need not describe or list all warranties applicable to specific parts such as for air conditioning, radio, or tires in an automobile. For example, manufacturer’s warranties may be identified simply by a reference to the standard manufacturer’s warranty. If a lessor provides a comprehensive list of warranties that may not all apply, to comply with § 1013.4(p) the lessor must indicate which warranties apply or, alternatively, which warranties do not apply.

Truth in Lending: 4(q) Penalties and Other Charges for Delinquency

1. Collection costs. The automatic imposition of collection costs or attorney fees upon default must be disclosed under § 1013.4(q). Collection costs or attorney fees that are not imposed automatically, but are contingent upon expenditures in conjunction with a collection proceeding or upon the employment of an attorney to effect collection, need not be disclosed.