Advertising Consumer Leases
If
you advertise consumer leases, the Federal Trade Commission has important information for
you: Your ads must comply with the streamlined rules for lease advertising found in the
Consumer Leasing Act (CLA) and Regulation M. These requirements focus on essential lease
information for consumers and are designed to help consumers shop and compare lease terms.
The current rules became effective January 1, 1998.
This brochure answers frequently asked questions about the
general advertising requirements of the CLA and Regulation M, the specific disclosure
requirements, and the liability for violations.
General Requirements
Q. What's a consumer lease?
A. A lease of personal property to an individual for more than four months for
personal, family or household use where the total contractual obligation is not more than
$25,000.
Q. Who's covered?
A. Lessors, automobile dealers, merchants - in short, anyone who advertises
consumer leases - must comply with the advertising disclosure requirements spelled out in
the CLA and Regulation M.
Q. Are the media covered?
A. No.
Q. What's a lease ad?
A. Any message that invites, offers or announces to the public the availability
of a consumer lease, whether in visual, oral or print (including electronic) media. That
includes:
- messages in newspapers, magazines, leaflets, catalogs, and
fliers;
- messages on radio, television and public address systems;
- direct mail;
- telephone solicitations;
- signs or displays; and
- online information, such as the Internet.
Q. What's clear and conspicuous disclosure?
A. The required disclosures in your ad must be reasonably understandable. That
is, consumers must be able to see and read or hear, and understand, the information. Many
factors, including the size, duration, and location of the required disclosures, and the
background or other information in the ad, can affect whether the information is clear and
conspicuous. This requirement applies to all mandatory disclosures, including those
offered through a toll-free (or collect or local) telephone number.
Q. What terms can the ad offer?
A. The terms offered must be usually and customarily available.
Specific Requirements
Q. What terms trigger disclosures in the revised
regulation?
A. If your ad includes any of these triggering terms:
- a statement of any capitalized cost reduction or other
payment required before or at lease consummation, or by delivery if delivery takes place
after con- summation, or that no payment is required - or
- the amount of any payment,
it must include these disclosures clearly and
conspicuously:
- that the transaction advertised is a lease,
- the total amount due before or at consummation, or by
delivery if delivery takes place after consummation,
- the number, amounts and due dates or periods of scheduled
payments under the lease,
- whether or not a security deposit is required, and
- in leases where the consumer's liability is based on the
difference between the property's residual value and its realized value at the end of the
lease term, that an extra charge may be imposed at the end of the lease term.
Q. What disclosure
rules apply to the total amount due at consummation or delivery?
A. Keep in mind the following:
- The total amount due at consummation or delivery must be stated. If you also choose to
itemize the total amount due at consummation or delivery, the total amount due at
consummation or delivery must still be clear and conspicuous, that is, readable and
understandable to consumers.
- Except for the periodic payment, any positive or negative reference to a charge that is
part of the total amount due at consummation or delivery cannot be more prominent than the
total amount due at consummation or delivery.
- If third-party fees that vary by state or locality - such as taxes, license or
registration - are involved, your ad may give a total amount due at consummation or
delivery including the fees based on a particular state or locality while explaining that
fact and the fact that such fees vary by state or locality or, exclude the fees from the
total amount due at consummation or delivery but disclose that fact. The disclosures about
third-party fees also must be clear and conspicuous.
Q. What if my ad promotes several leased items?
A. If a triggering term appears, you can use an example of one or more typical
leases - if you disclose the required terms that apply to each. The examples must be
labeled as such and must reflect representative lease terms made available to consumers.
Q. Is there a special option for radio and TV ads?
A. The triggering terms and required disclosures described above apply to all
lease ads. But, if your radio or TV ad refers clearly and conspicuously to a toll-free (or
collect or local) phone number through which consumers can obtain the required lease
information, and if you follow certain procedures, you can somewhat limit the information
provided in your radio or TV ad. To use this approach, your radio or TV ad still must
clearly and conspicuously state:
- that the transaction advertised is a lease,
- the total amount due before or at consummation, or by
delivery if delivery occurs after consummation, and
- the number, amounts, and due dates or periods of scheduled
payments under the lease.
Your radio or TV ad also must clearly and conspicuously
indicate that consumers can get all the required disclosures through the toll-free (or
collect or local) phone number or print ad. Your radio or TV ad also must include the
publication's name and date.
Q. Are there other special procedures for the
toll-free (or collect or local) phone number and print ads?
A. Yes, the toll-free (or collect or local) phone number described above - which
only applies to radio and TV ads - must be established no later than the ad's air date. It
also must continue for at least 10 days after the air date. Callers must be given all the
required disclosures early in the message. A clear and conspicuous written copy of the
disclosures also must be given to anyone who asks for it.
Print ads described above must appear in a general
circulation publication in the community served by the media station. A newspaper
circulated nationally, such as USA Today or the Wall Street Journal, could meet this
requirement. The print ad must appear at least three days before the radio or TV ad airs,
and continue for at least 10 days after the air date. The print ad must clearly and
conspicuously include all the required disclosures.
Q. Are there special rules for advertising a lease
rate?
A. Yes, your ad must include the following statement near the rate without any
intervening language or symbols: "This percentage may not measure the overall cost of
financing the lease." In addition, except for the notice, the rate cannot appear more
prominently than any terms in the ad that are required written disclosures under the
amended CLA and Regulation M, such as "gross capitalized cost," "residual
value" and others. You also cannot refer to the lease rate as an "annual
percentage rate," "annual lease rate," or other equivalent term.
Violations
If your ads don't comply with the law, you could face
enforcement actions or civil lawsuits. For advertisers under the FTC's jurisdiction, that
could mean:
- orders to cease and desist. If you violate an order, you
could be fined up to $11,000 per day per violation.
- injunctions by federal district courts. Violations of these
orders could result in civil or criminal contempt proceedings.
- refunds to consumers for actual damages in civil lawsuits.
For More Information
To learn more about advertising requirements for consumer
credit and lease offers, see How to Advertise Consumer Credit
and Keys to Vehicle Leasing.