[ Back | Next ]

CONSUMER
LEASE DISCLOSURES

Requirements for advertising consumer leases differ from those for advertising closed-end or open-end credit. This section of the manual explains the "triggering term" rule that applies to consumer lease advertising.

Triggering Terms

If an advertisement promoting a "consumer lease" contains any of the following triggering terms, then the ad also must include certain specific disclosures. This rule, like those applicable to closed-end and open-end credit, is intended to ensure that all major terms of the lease are included in the ad.

The triggering terms for consumer leases are:

(1) The amount of any payment.

Example:

"Pay a mere $128 per month"

(2) The number of required payments.

Examples:

$133 per month . . . 36 month lease"
"Low monthly payments on our four-year auto leases"

(3) A statement that any downpayment or no downpayment, or other payment, is required at the beginning of the lease.

Examples:

"Lease now and make no payments for three months"
"Only a small downpayment"
"Leave your pocketbook behind and return home in your leased '63 Chevy."

The following are examples of terms that do not trigger the required disclosures:

"Low Monthly Payments"
"Lease for Less than It Costs to Buy"
"We Lease to Anyone"

Required Disclosures

If an ad promoting a consumer lease uses any triggering term, then it also must include the following five disclosures:

(1) A statement that the transaction advertised is a lease;

(2) The total amount of any payment (such as a security deposit or capitalized cost reduction) required at the beginning of the lease, or a statement that no such payment is required;

(3) The number, amounts, due dates or periods of scheduled payments, and the total of these payments under the lease;

(4) A statement explaining whether the customer has the option to purchase the leased property and, if so, at what time and price. The method of determining the price may be substituted for disclosure of the price; and

(5) A statement of the amount (or method of determining the amount) of any liabilities the lease imposes upon the customer at the end of the term. If the customer has this liability, the ad also must include a statement that the customer is responsible for any difference between the estimated value of the leased property and its realized value at the end of the lease term.

Sample Disclosure The following is an example of the required disclosures for a consumer lease advertisement that would comply with the Truth in Lending Act: 36-month lease. No payments at the beginning of the lease, 36 monthly payments of $128 totaling $4,608. Customer has no option to purchase at the end of the lease. Customer will have no further liability unless auto has depreciated to less than 40% of its new car price. If so, customer is liable for that additional depreciation.

Other Considerations—Merchandise Tags and Multiple Item Leases

If a merchandise tag for an item normally included in a multiple item lease (such as a merchandise tag on furniture) contains any triggering term, it must either (a) include all required disclosures or (b) clearly and conspicuously refer to a sign or display prominently posted in the lessor's showroom that includes all required disclosures.

[Fig. 10]

[ Back | Next ]