Consumer Leasing (Reg M) Flashcards
Regulation M covers leases that meet the following criteria:
A. Used in connection with a home-based business
B. In excess of the current applicable threshold amount ($69,500), except for airplane leases
C. For personal, family, or household purposes for a period of time exceeding four months, for a total contractual amount not exceeding the current applicable threshold amount ($69,500)
D. Used for personal, family or agricultural purposes for a total contractual amount not to exceed the current applicable threshold amount ($69,500)
C. For personal, family, or household purposes for a period of time exceeding four months, for a total contractual amount not exceeding the current applicable threshold amount ($69,500)
Regulation M, covering consumer leases, comes from the Truth in Lending Act, and thus has very similar coverage requirements as does Regulation Z, which covers consumer loans. Leases, to be covered by Regulation M, must be for a consumer, family, or household purpose, and be for a period of time exceeding four months, and below a certain threshold contractual amount. Leases used in a home-based business would not have a primarily personal, family, or household purpose, and would not be covered by Regulation M. The provision on airplane leases is a red herring.
With regard to standards for wear and use of leased property, which of the following statements is true?
A. A lessor must adhere to the manufacturer’s standards for wear and use of the leased property.
B. A lessor must develop and disclose its own standards for wear and use of leased property.
C. A lessor must provide a notice of wear and use standards on motor vehicle leases.
D. A lessor need not provide a notice of wear and use standards on motor vehicle leases if the lessor imposes an automatic, standardized charge.
C. A lessor must provide a notice of wear and use standards on motor vehicle leases.
For most leased property, a lessor is not required to set wear and use standards. If it does set such standards, however, they must be disclosed and be reasonable. A statement regarding wear and use standards is required on motor vehicle leases.
Under Regulation M, what is a consumer lease?
A. Any lease of an amount greater than the threshold ($69,500) as annually adjusted
B. A consumer lease for the annually adjusted threshold amount ($69,500) or less with an option to own the property after the lease expires
C. A consumer lease for the annually adjusted threshold amount ($69,500) or less for the use of personal property
D. Any consumer or agricultural lease for the annually adjusted threshold amount ($69,500) or less
C. A consumer lease for the annually adjusted threshold amount ($69,500) or less for the use of personal property
The definition of consumer lease includes leases of the annually adjusted threshold amount or less for the use of personal property by a natural person for a time period of more than four months, whether or not the person is obligated to purchase the property at the expiration of the lease.
Milton Edwards leased an auto from First National Bank. The lease contained a provision whereby Milton would be liable for the auto at the end of the lease based on its fair market value. At the end of the lease, the bank notified Milton that the value of the auto, based on industry publications, was $10,500 and required him to pay that amount to obtain ownership of the property. Milton objected and requested that the car be individually appraised. What must the bank do?
A. Nothing; an estimate of the value based on industry standards is sufficient.
B. Hire an independent appraiser to appraise the auto (both parties agree to be bound by the appraisal)
C. Allow Milton to hire an independent appraiser to appraise the auto (both parties agree to be bound by the appraisal)
D. Use the average of the car value as determined by a third party appraiser Milton hires and the original bank appraisal.
C. Allow Milton to hire an independent appraiser to appraise the auto (both parties agree to be bound by the appraisal)
The bank must allow the lessee to hire an independent third-party appraiser to appraise the property and be bound by the appraisal.
When must disclosures on consumer leasing transactions subject to Regulation M be made?
A. At the time of the application.
B. Before the consummation of the lease.
C. Before the first payment due under the lease.
D. Within 10 days after consummation of the lease.
B. Before consummation of the lease.
A bank does not know all of the specific information to be disclosed on the lease at the time of the consummation. What may the bank do after attempting to obtain the information?
A. Omit the unknown disclosures.
B. Estimate the amounts and note that the information is estimated.
C. Delay consummation on the transaction until the information is ascertained.
D. Estimate the information based on averages of all other leasing transactions the bank has made within the last six months.
B. Estimate the amounts and note that the information is estimated.
What insurance disclosures are required in the lease disclosure statement?
A. The types and amounts of coverage provided by the lessor and the cost to the lessee.
B. The types, amounts, and estimated costs of recommended coverage even if not provided or paid by the lessor.
C. The cost to the lessee.
D. No insurance disclosures are required.
A. The types and amounts of coverage provided by the lessor and the cost to the lessee.
If provided by the lessor, the disclosures must include the types, amounts and cost to the lessee. if not provided by the lessor, the type and amount must be disclosed.
The initial disclosure requires that certain disclosures relating to the termination of a lease be given to the consumer. Which of these disclosures is NOT required?
A. The conditions under which the lease may be terminated before the end of its term.
B. Whether or not the lessee has the option to purchase the property and at what price.
C. Whether the lease may be extended at the option of the lessee.
D. Whether the lessee will be liable for the difference between the estimated value of the property and its realized value at the termination or end of the lease.
C. Whether the lease may be extended at the option of the lessee.
Roberta Milton’s car lease with First National Bank reached its termination on August 1. Roberta and the bank agreed to extend the lease on a month-to-month basis without charging her her a fee for doing so. What disclosure responsibilities does the bank have now?
A. None are needed now.
B. None, until after six months of the month-to-month lease.
C. The bank must make an entirely new initial disclosure.
D. The bank must disclose the estimated residual value at the end of six months.
B. None, until after six months of the month-to-month lease.
New disclosures are not required unless an extension on a month-to-month basis extends for longer than six months.
First National’s consumer leasing department placed an ad in the local paper that pictured a car with the caption, “Sign a lease with us and pay only $275 per month.” What other information must this ad have?
A. A statement that the transaction is not a loan
B. The total amount due at consummation or delivery, the number of payments required, the frequency or due dates of payments, and any required security deposit
C. The bank’s policy regarding the purchase of the property by the lessee
D. Disclosures regarding required insurance.
B. The total amount due at consummation or delivery, the number of payments required, the frequency or due dates of payments, and any required security deposit
Any of the following trigger terms will require full disclosures in the ad: the amount of any payment, the number of required payments, or a statement that no down payment or other payment is required at consummation.
For open-ended leases, the bank must also disclose any extra charges required at the end of the lease term if the lessee’s liability is based on the difference between the residual value and the realized value of the leased property.
Records regarding compliance with Regulation M must be kept for how long?
A. Five years following consummation of the lease.
B. Two years after the disclosures are made.
C. Twenty-five months from consummation.
D. One year from the time the disclosures are made.
D. Two years after the disclosures are made.
Which of the following statements is true regarding the lessee’s ability to purchase the leased property?
A. The lessor must allow the lessee to purchase the leased property either during the lease term or at the end of the term.
B. If the lessor allows the lessee to purchase the property at the end of the lease term, the lessor may not charge more than the equivalent of 12 monthly payments for the property.
C. If the lessor allows the lessee to purchase the property at the end of the lease term, the purchase price must be disclosed in the initial disclosure statement.
D. The purchase price of the leased property must be mutually agreed upon by the lessor and the lessee.
C. If the lessor allows the lessee to purchase the property at the end of the lease term, the purchase price must be disclosed in the initial disclosure statement.
The lessor must disclose the purchase price of the leased property and whether the lessee is able to purchase the property during the term or at the end of the lease term. The lessor is not required to allow the lessee to purchase the leased property, nor must the lessor bargain with the lessee over the price of the property.
Are week-to-week or month-to-month leases subject to Reg E?
A. Yes
B. No
C. Only if they extend beyond 4 months
B. No
