Reg M

Question 1

Why was Reg M enacted?

Answer 1

to ensure that consumers would receive meaningful, accurate, disclosures of the terms of leases for consumer goods

Question 2

Regulation M was enacted as part of the ___________ and enacted the _________.

Answer 2

Truth in Lending Act

Consumer Leasing Act

Question 3

Reg M requires disclosures to consumers before _________.

Answer 3

consummation of the lease agreement

Question 4

What are the requirements of a lease to be covered by Reg M?

Answer 4

* have a duration of more than four months

* are for an amount under the annually adjusted threshold

* are made by a natural person

* involve personal property used primarily for personal, family, or household purposes

Question 5

Are credit sales under Regulation Z covered by Reg M?

Answer 5

NO

Question 6

What are the 4 form requirements for Reg M disclosures?

Answer 6

* clear, conspicuous, and in a form the customer can keep

* dated

* identify the lessor and lessee

* if made in another language, must be provided in English upon request

Question 7

What are the 2 format options for Reg M disclosures?

Answer 7

* can be on the contract itself or in a separate statement that identifies the transaction (this includes certain required segregated disclosures)

* multiple items of property can be described in separate statements

Question 8

As one of the required Reg M segregated items, amount due at lease signing or delivery must be _____________.

Answer 8

itemized by type and amount, including

• refundable security deposit
• advance monthly or other periodic payment
• capitalized cost reduction
• an itemization of how the amount due will be paid, by type and amount, using model form (only required in motor vehicle leases)

Question 9

One of the required Reg M segregated items is: the total amount of other charges payable to the lessor that are not _____________.

Answer 9

included in the periodic payments (itemized by type and amount)

Question 10

Early termination notices must include:

Answer 10

* a warning to the customer that a substantial charge may result from early termination (required only for motor vehicle leases)

* the amount of any penalty or other charge for early termination (the penalty must be reasonable)

Question 11

If there is more than one lessee, Reg M requires that disclosures be given _______________.

Answer 11

to the lessee primarily liable on the lease

Question 12

Reg M allows lessors to use reasonable estimates for ______________________.

Answer 12

amounts unknown or unavailable

Question 13

With limited exceptions, any lease that is ______________ is considered to be a new lease.

Answer 13

renegotiated or extended by longer than 6 months

Question 14

What are the trigger terms for Reg M?

Answer 14

* the amount of any payment or

* any capitalized cost reduction or

* other payment

required before or at consummation or by delivery (or that no payment is required)

Question 15

If a percentage rate is used in a lease ad, it cannot be ____________________, except for _________________.

Answer 15

more prominent than any other disclosure

the warning regarding the limitation of the rate as a measure of cost

Question 16

What are the Reg M record retention requirements?

Answer 16

all records (evidence of compliance) must be kept for 2 years after the date of the required disclosures or a required action

Question 17

If the lessee decides to purchase the leased property and is unhappy with the lessor’s fair market value assessment at the end of the lease what can they do?

Answer 17

The lessee can hire an independent appraiser and both parties agree to be bound by the appraisal.

Question 18

Must the option to purchase the property and the purchase price be included in the initial disclosures?

Answer 18

YES

If the lessor allows the lessee to purchase the property.

Question 19

If a lease is extended to month-to-month, must the lessor provide new disclosures?

Answer 19

not at the time of the extension however, if the month-to-month lease goes past 6 month, new disclosures are required

Question 20

Must a bank disclose all specific information and amounts at the time of the lease consummation?

Answer 20

NO

if specific amounts are unknown, the bank may estimate the amounts if they note the information is estimated

Question 21

T or F

A lessor must develop and provide wear and use standards on leased property?

Answer 21

DEPENDS

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.

Question 22

T or F

A lessee’s option to extend the lease is not required to be included in the initial disclosures?

Answer 22

TRUE

Question 23

What are the required insurance disclosures for leased property?

Answer 23

If provided by the lessor, the disclosure must include the types, amounts, and cost to the lessee. If not provided by the lessor, the type and amount must be disclosed.