Reminder on lease advertising requirements under federal Regulation M

Reminder on lease advertising requirements under federal Regulation M

WANADA dealers are reminded of the necessity to comply with federal regulation M on vehicle leasing. Now that leasing is once again becoming popular, it has resulted in complaints to the Federal Trade Commission (FTC) that dealers (and even some manufacturers) are failing to include proper lease disclosures in vehicle advertisements.

Lease advertising, like finance advertising, is all about trigger terms. If a dealer advertises price, either a monthly payment or anything about the drive-off price (e.g., cap. cost reduction, security deposit, “no down payment”, etc.), then this triggers the need for the following additional disclosures:

1. Clearly identify the transaction as a lease (e.g., “Lease for”);

2. State the number, amounts and period of scheduled payments (e.g., “$399 per month for 39 months.”);

3. State the total amount due on or before delivery (e.g., “$999 total amount due at lease signing”);

4. State whether or not a security deposit is required (e.g., “no security deposit required”).

All disclosures must be clear and conspicuous. Additionally, if the leasing dealer states anything at all about any component of the drive off, such as no down payment, then under the equal prominence rule, the dealer MUST disclose, in equal print size and immediately adjacent to the statement, all the amounts that are required at time of delivery, such as first payment, tags, security deposit, etc.

It is also recommended that dealers state explicitly in the ad if they are going to require that any factory rebate be applied to the amount due at lease signing.

Dealers should not use a toll-free number in radio and television commercials in lieu of making these disclosures. Indeed, a toll-free number can only be used to disclose the amount or nonexistence of a security deposit.

The Federal Reserve Board has published a consumer information brochure that may be helpful for dealers in addressing consumer concerns about leasing disclosures. The publication, “What You Need to Know: New Rules about Credit Decisions and Notices,” is available at www.federalreserve.gov under the top index tab, Consumer Information”, and then under the “What you Need to Know Series”.

The WANADA Bulletin credits the National Association of Dealer Counsel for the background on this important update.