Skip to main content

Search

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.

Truth in Lending: 5(a) Renegotiation

1. Basis of disclosures. Lessors have flexibility in making disclosures so long as they reflect the legal obligation under the renegotiated lease. For example, assume that a 24-month lease is replaced by a 36-month lease. The initial lease began on January 1, 1998, and was renegotiated and replaced on July 1, 1998, so that the new lease term ends on January 1, 2001.

Truth in Lending: 5(b) Extension

1. Time of extension disclosures. If a consumer lease is extended for a specified term greater than six months, new disclosures are required at the time the extension is agreed upon. If the lease is extended on a month-to-month basis and the cumulative extensions exceed six months, new disclosures are required at the commencement of the seventh month and at the commencement of each seventh month thereafter for as long as the extensions continue.

Truth in Lending: 1013.6 [Reserved] [213.6]

[66 Fed. Reg. 17,338 (Mar. 30, 2001) COMPLIANCE DATE NOTE: At 66 Fed. Reg. 41,440 (Aug. 8, 2001) the Oct. 1, 2001, mandatory compliance date for the interim final rules published at 66 Fed. Reg. 17,311 (Mar. 30, 2001) was lifted; 72 Fed. Reg. 63,461 (Nov. 9, 2007).]

Truth in Lending: 7(a) General Rule

1. Persons covered. All “persons” must comply with the advertising provisions in this section, not just those that meet the definition of a lessor in § 1013.2(h). Thus, automobile dealers (to the extent they are not excluded from the Bureau’s rulemaking authority by section 1029 of the Dodd-Frank Act), merchants, and others who are not themselves lessors must comply with the advertising provisions of the regulation if they advertise consumer lease transactions.

Truth in Lending: 7(b) Clear and Conspicuous Standard

1. Standard. The disclosures in an advertisement in any media must be reasonably understandable. For example, very fine print in a television advertisement or detailed and very rapidly stated information in a radio advertisement does not meet the clear and conspicuous standard if consumers cannot see and read or hear, and cannot comprehend, the information required to be disclosed.

Truth in Lending: 7(b)(2) Advertisement of a Lease Rate

1. Location of statement. The notice required to accompany a percentage rate stated in an advertisement must be placed in close proximity to the rate without any other intervening language or symbols. For example, a lessor may not place an asterisk next to the rate and place the notice elsewhere in the advertisement. In addition, with the exception of the notice required by § 1013.4(s), the rate cannot be more prominent than any other § 1013.4 disclosure stated in the advertisement.