[Federal Register Volume 72, Number 217 (Friday, November 9, 2007)]
[Rules and Regulations]
[Pages 63462-63477]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-21700]


-----------------------------------------------------------------------

FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Regulation Z; Docket No. R-1284]


Truth in Lending

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule; official staff interpretation.

-----------------------------------------------------------------------

SUMMARY: The Board is amending Regulation Z, which implements the Truth 
in Lending Act, and the official staff commentary to the regulation, to 
withdraw portions of the interim final rules for the electronic 
delivery of disclosures issued March 30, 2001. The 2001 interim final 
rules addressed the timing and delivery of electronic disclosures, 
consistent with the requirements of the Electronic Signatures in Global 
and National Commerce Act (E-Sign Act). Because compliance with the 
2001 interim final rules has not been mandatory, withdrawal of these 
provisions from the Code of Federal Regulations reduces confusion about 
the status of the provisions and simplifies the regulation.
    In addition, the Board is adopting final amendments to Regulation Z 
to provide guidance on the electronic delivery of disclosures. For 
example, the final rules provide that when an application for a credit 
card is accessed by a consumer in electronic form, disclosures may be 
provided to the consumer in electronic form on or with the application 
without regard to the consumer consent and other provisions of the E-
Sign Act. Similar final rules are being adopted under other consumer 
fair lending and financial services regulations administered by the 
Board.

DATES: The final rule is effective December 10, 2007. The mandatory 
compliance date is October 1, 2008.

FOR FURTHER INFORMATION CONTACT: John C. Wood, Counsel, Division of 
Consumer and Community Affairs, at (202) 452-2412 or (202) 452-3667. 
For users of Telecommunications Device for the Deaf (TDD) only, contact 
(202) 263-4869.

SUPPLEMENTARY INFORMATION: 

I. Statutory Background

    The purpose of the Truth in Lending Act (TILA), 15 U.S.C. 1601 et 
seq., is to promote the informed use of consumer credit by requiring 
disclosures about its terms and cost. The Board's Regulation Z (12 CFR 
part 226) implements the act. The act requires creditors to disclose 
the cost of credit as a dollar amount (the finance charge) and as an 
annual percentage rate (the APR). Uniformity in creditors' disclosures 
is intended to promote the informed use of credit and assist in 
shopping for credit. TILA requires additional disclosures for loans 
secured by consumers' homes and permits consumers to rescind certain 
transactions that involve their principal dwellings. TILA and 
Regulation Z require a number of disclosures to be provided in writing.
    The Electronic Signatures in Global and National Commerce Act (the 
E-Sign Act), 15 U.S.C. 7001 et seq., was enacted in 2000. The E-Sign 
Act provides that electronic documents and electronic signatures have 
the same validity as paper documents and handwritten signatures. The E-
Sign Act contains special rules for the use of electronic disclosures 
in consumer transactions. Under the E-Sign Act, consumer disclosures 
required by other laws or regulations to be provided or made available 
in writing may be provided or made available, as applicable, in 
electronic form if the consumer affirmatively consents after receiving 
a notice that contains certain information specified in the statute, 
and if certain other conditions are met.
    The E-Sign Act, including the special consumer notice and consent 
provisions, became effective October 1, 2000, and did not require 
implementing regulations. Thus, creditors are currently permitted to 
provide in electronic form any disclosures that are required to be 
provided or made available to the consumer in writing under Regulation 
Z if the consumer affirmatively consents to receipt of electronic 
disclosures in the manner required by section 101(c) of the E-Sign Act.

II. Board Proposals and Interim Rules Regarding Electronic Disclosures

    On March 30, 2001, the Board published for comment interim final 
rules to establish uniform standards for the electronic delivery of 
disclosures required under Regulation Z (66 FR 17,329). Similar interim 
final rules for Regulations B, E, M, and DD (implementing the Equal 
Credit Opportunity Act, the Electronic Fund Transfer Act, the Consumer 
Leasing Act, and the Truth in Savings Act, respectively) were published 
on March 30, 2001 (66 FR 17,322) (Regulation M) and April 4, 2001 (66 
FR 17,779, 66 FR 17,786, and 66 FR 17,795) (Regulations B, E, and DD, 
respectively). Each of the interim final rules incorporated, but did 
not interpret, the requirements of the E-Sign Act. Creditors and other 
persons, as applicable, generally were required to obtain consumers' 
affirmative consent to provide disclosures electronically, consistent 
with the requirements of the E-Sign Act. The interim final rules also 
incorporated many of the provisions that were part of earlier 
regulatory proposals issued by the Board regarding electronic 
disclosures.\1\
---------------------------------------------------------------------------

    \1\ On May 2, 1996, the Board proposed to amend Regulation E to 
permit financial institutions to provide disclosures by sending them 
electronically (61 FR 19696). Based on comments received, in 1998 
the Board published an interim rule permitting the electronic 
delivery of disclosures under Regulation E (63 FR 14,528, March 25, 
1998) and similar proposals under Regulations B, M, Z, and DD (63 FR 
14,552, 14,538, 14,548, and 14,533, respectively, March 25, 1998). 
Based on comments received on the 1998 proposals, in 1999 the Board 
published revised proposals under Regulations B, E, M, Z, and DD (64 
FR 49688, 49699, 49713, 49722 and 49740, respectively, September 14, 
1999).

---------------------------------------------------------------------------

[[Page 63463]]

    Under the 2001 interim final rules, disclosures could be sent to an 
e-mail address designated by the consumer, or could be made available 
at another location, such as an Internet Web site. If the disclosures 
were not sent by e-mail, creditors would have to provide a notice to 
consumers (typically by e-mail) alerting them to the availability of 
the disclosures. Disclosures posted on a Web site would have to be 
available for at least 90 days to allow consumers adequate time to 
access and retain the information. Creditors also would be required to 
make a good faith attempt to redeliver electronic disclosures that were 
returned undelivered, using the address information available in their 
files.
    Commenters on the interim final rules identified significant 
operational and information security concerns with respect to the 
requirement to send the disclosure or an alert notice to an e-mail 
address designated by the consumer. For example, commenters stated that 
some consumers who choose to receive electronic disclosures do not have 
e-mail addresses or may not want personal financial information sent to 
them by e-mail. Commenters also noted that e-mail is not a secure 
medium for delivering confidential information and that consumers' e-
mail addresses frequently change. The commenters also opposed the 
requirement for redelivery in the event a disclosure was returned 
undelivered. In addition, many commenters asserted that making the 
disclosures available for at least 90 days, as required by the interim 
final rule, would increase costs and would not be necessary for 
consumer protection.
    In August 2001, in response to comments received, the Board lifted 
the previously established October 1, 2001 mandatory compliance date 
for all of the interim final rules. (66 FR 41439, August 8, 2001.) 
Thus, creditors are not required to comply with the interim final 
rules. Since that time, the Board had not taken further action with 
respect to the interim final rules on electronic disclosures in order 
to allow electronic commerce, including electronic disclosure 
practices, to continue to develop without regulatory intervention and 
to allow the Board to gather further information about such practices.
    In April 2007, the Board proposed to amend Regulation Z and the 
official staff commentary by (1) withdrawing portions of the 2001 
interim final rule that restate or cross-reference provisions of the E-
Sign Act and accordingly are unnecessary; (2) withdrawing other 
portions of the interim final rule that the Board now believes may 
impose undue burdens on electronic banking and commerce and may be 
unnecessary for consumer protection; and (3) retaining the substance of 
certain provisions of the interim final rule that provide regulatory 
relief or guidance regarding electronic disclosures. (72 FR 21141, 
April 30, 2007.) Similar amendments were also proposed by the Board 
under Regulations B, E, M, and DD (72 FR 21125, 72 FR 21131, 72 FR 
21135, and 72 FR 21155, respectively). In addition, the Board proposed 
to amend Regulation Z to implement certain provisions of the Bankruptcy 
Abuse Prevention and Consumer Protection Act of 2005, Public Law 109-8, 
119 Stat. 23 (the ``Bankruptcy Act''), that amend TILA and relate to 
electronic credit card disclosures.

III. Summary of the Final Rule

    The Board received about 25 comments on the April 2007 proposal, 
primarily from creditors and their representatives. Most of the 
financial industry commenters generally supported the proposal, 
although some provided suggestions for clarifications or changes to 
particular elements of the proposal. A comment letter was also 
submitted on behalf of four consumer groups. The consumer group 
commenters suggested a number of changes to strengthen consumer 
protections. The comments are discussed in more detail in the Section-
by-Section Analysis below.
    For the reasons discussed below, the Board is now adopting 
amendments to Regulation Z in final form, largely as proposed in April 
2007. As stated in the proposal, because compliance with the 2001 
interim final rules has not been mandatory, the final rule will reduce 
confusion about the status of the electronic disclosure provisions and 
simplify the regulation. (Certain provisions in the 2001 interim rules, 
including provisions addressing foreign language disclosures, were not 
affected by the lifting of the mandatory compliance date and became 
final in 2001; thus, those provisions are not dealt with in this 
rulemaking.) The Board is also adopting certain provisions that are 
identical or similar to provisions in the 2001 interim rules in order 
to enhance the ability of consumers to shop for credit online, minimize 
the information-gathering burdens on consumers, and provide guidance or 
eliminate a substantial burden on the use of electronic disclosures, as 
discussed further below.
    As stated above, the Board also proposed to implement certain 
provisions of the Bankruptcy Act that amended TILA and relate to 
electronic disclosures. Action on the proposed provisions to implement 
the Bankruptcy Act is being deferred. The same revisions are contained 
in the Board's proposed amendments to the Regulation Z rules for open-
end credit, which were published for comment in June 2007 (72 FR 
32,948, June 14, 2007). The Board will consider the provisions relating 
to the Bankruptcy Act in connection with its final action on the rules 
for open-end credit after considering the comments submitted on the 
June 2007 proposal.
    Since 2001, industry and consumers have gained considerable 
experience with electronic disclosures. During that period, the Board 
has received no indication that consumers have been harmed by the fact 
that compliance with the interim final rules is not mandatory. The 
Board also has reconsidered certain aspects of the interim final rules, 
such as sending disclosures by e-mail, in light of concerns about data 
security, identity theft, and ``phishing'' (i.e., prompting consumers 
to reveal confidential personal or financial information through 
fraudulent e-mail requests that appear to originate from a creditor, 
government agency, or other trusted entity) that have become more 
pronounced since 2001. Finally, the Board is eliminating certain 
aspects of the 2001 interim final rule, such as provisions regarding 
the availability and retention of electronic disclosures, as 
unnecessary in light of current industry practices.
    With regard to disclosures required to be provided on or with a 
credit application or solicitation (the ``shopping disclosures'') or in 
an advertisement, the 2001 interim final rule allowed creditors to 
provide these disclosures electronically without regard to the consumer 
consent or other provisions of the E-Sign Act. The Board reasoned that 
these disclosures, which would be available to the general public while 
shopping for credit, did not necessarily ``relate to a transaction,'' 
which is a prerequisite for triggering the E-Sign consumer consent 
provisions, and thus were not subject to the consent provisions. Some 
commenters on the interim final rules agreed with the result but did 
not agree with the Board's rationale.
    In the April 2007 proposal, the Board stated that, upon further 
consideration, it did not believe it was necessary to determine whether 
or not these disclosures are related to a transaction. Instead, 
pursuant to the Board's authority under section 105(a) of TILA, as well 
as under section 104(d) of the

[[Page 63464]]

E-Sign Act,\2\ the Board proposed to specify the circumstances under 
which certain disclosures may be provided to a consumer in electronic 
form, rather than in writing as generally required by Regulation Z, 
without obtaining the consumer's consent under section 101(c) of the E-
Sign Act.
---------------------------------------------------------------------------

    \2\ Section 105(a) of TILA provides that regulations prescribed 
by the Board under TILA ``may provide for such adjustments and 
exceptions * * * as in the judgment of the Board, are necessary or 
proper to effectuate the purposes of [TILA], * * * or to facilitate 
compliance [with the requirements of TILA].'' Section 104(d) of the 
E-Sign Act authorizes federal agencies to adopt exemptions for 
specified categories of disclosures from the E-Sign notice and 
consent requirements, ``if such exemption is necessary to eliminate 
a substantial burden on electronic commerce and will not increase 
the material risk of harm to consumers.'' For the reasons stated in 
this Federal Register notice, the Board believes that these criteria 
are met in the case of the application, solicitation, and 
advertising disclosures. In addition, the Board believes TILA 
section 105(a) authorizes the Board to permit institutions to 
provide disclosures electronically, rather than in paper form, 
independent of the E-Sign Act.
---------------------------------------------------------------------------

    Commenters supported the Board's approach with regard to this 
issue. This final rule adopts the approach in the April 2007 proposal. 
The Board continues to believe that creditors should not be required to 
obtain the consumer's consent in order to provide shopping or 
advertising disclosures to the consumer in electronic form if the 
consumer accesses an application, solicitation, or advertisement 
containing those disclosures in electronic form, such as at an Internet 
Web site. The Board believes that when shopping for credit or viewing 
credit advertising online, consumers would not be harmed if the E-Sign 
consent procedures do not apply and would obtain significant benefits 
by having timely access to shopping and advertising disclosures in 
electronic form. Conversely, consumers who choose to apply for credit 
online would be unduly burdened if they had to consent in accordance 
with the E-Sign Act in order to access application forms that must be 
accompanied by disclosures. The Board also believes that consumers' 
ability to shop for credit online and compare the terms of various 
credit offers could be substantially diminished if consumers had to 
consent in accordance with the E-Sign Act in order to access 
solicitations and advertisements that must be accompanied by 
disclosures. Applying the consumer consent provisions of the E-Sign Act 
to these disclosures could impose substantial burdens on electronic 
commerce and make it more difficult for consumers to gather information 
and shop for credit.
    At the same time, the Board recognizes that consumers who shop or 
apply for credit online may not want to receive other disclosures 
electronically. Therefore, with respect to account-opening disclosures, 
periodic statements, and change-in-terms notices, creditors are 
required to obtain the consumer's consent, in accordance with the E-
Sign Act, to provide such disclosures in electronic form, or else 
provide written disclosures.
    Finally, as proposed, certain provisions that restate or cross-
reference the E-Sign Act's general rules regarding electronic 
disclosures (including the consumer consent provisions) and electronic 
signatures are being deleted as unnecessary, because the E-Sign Act is 
a self-effectuating statute. The revisions to Regulation Z and the 
official staff commentary are described more fully below in the 
Section-by-Section Analysis.

IV. Section-by-Section Analysis

12 CFR Part 226 (Regulation Z)

Subpart B--Open-end Credit

Section 226.5 General Disclosure Requirements

    Section 226.5(a) prescribes the form of disclosures required for 
open-end credit plans. Section 226.5(a)(1) generally requires creditors 
to provide open-end credit disclosures in writing and in a form that 
the consumer may keep. As proposed, the Board is revising Sec.  
226.5(a)(1) to clarify that creditors may provide open-end credit 
disclosures to consumers in electronic form, subject to compliance with 
the consumer consent and other applicable provisions of the E-Sign Act. 
Some creditors may provide open-end credit disclosures to consumers 
both in paper and electronic form and rely on the paper form of the 
disclosures to satisfy their compliance obligations. For those 
creditors, the duplicate electronic form of the open-end credit 
disclosures may be provided to consumers without regard to the consumer 
consent or other provisions of the E-Sign Act because the electronic 
form of the disclosure is not used to satisfy the regulation's open-end 
credit disclosure requirements.
    Section 226.5(a)(1) is also revised, as proposed, to provide that 
the open-end credit disclosures required by Sec. Sec.  226.5a (credit 
card applications and solicitations), 226.5b (home equity credit line 
applications), and 226.16 (open-end credit advertising) may be provided 
to the consumer in electronic form, under the circumstances set forth 
in those sections, without regard to the consumer consent or other 
provisions of the E-Sign Act. Commenters supported this aspect of the 
proposal. The Board believes that this will eliminate a potential 
significant burden on electronic commerce without increasing the risk 
of harm to consumers. This approach will facilitate shopping for credit 
by enabling consumers to receive important disclosures online at the 
same time they access an electronic application, solicitation, or 
advertisement without first having to provide consent in accordance 
with the requirements of the E-Sign Act. Requiring consumers to follow 
the consent procedures set forth in the E-Sign Act in order to access 
an online application, solicitation, or advertisement is potentially 
burdensome and could discourage consumers from shopping for credit 
online. Moreover, because these consumers are viewing the application, 
solicitation, or advertisement online, there appears to be little, if 
any, risk that the consumer will be unable to view the disclosures 
online as well.
    Section 226.5(a)(5) in the 2001 interim final rule refers to Sec.  
226.36, the section of the interim final rule setting forth general 
rules for electronic disclosures. Because the Board is deleting Sec.  
226.36, as discussed below, Sec.  226.5(a)(5) is also deleted, as 
proposed.
    The 2001 interim final rule revised comment 5(b)(2)(ii)-3 to 
reference the E-Sign Act's consumer consent requirements. As proposed, 
this language is being deleted as unnecessary because the E-Sign Act is 
a self-effectuating statute.

Section 226.5a Credit and Charge Card Applications and Solicitations

5a(a) General Rules
    Section 226.5a(a)(2) prescribes the form of disclosures required 
with credit and charge card applications and solicitations. The Board 
proposed to amend Sec.  226.5a(a)(2) by adding a new paragraph (v) to 
provide that if a consumer accesses an application or solicitation for 
a credit or charge card in electronic form, such as on a home computer, 
the disclosures required on or with the application or solicitation 
must also be provided to the consumer in electronic form. The Board 
proposed to add comment 5a(a)(2)-9 to clarify this point and also to 
make clear that if a consumer is provided with a paper application or 
solicitation, the required disclosures must be provided in paper form 
on or with the application or solicitation (and not, for example, by 
including a reference in the paper application or solicitation to the 
Web site where the disclosures are located).

[[Page 63465]]

    Many creditor commenters urged the Board to revise the regulation 
and commentary to permit disclosures to be given in paper form in 
appropriate cases, even where an application or solicitation is in 
electronic form. In particular, commenters noted that requiring 
electronic disclosures could present problems for applications taken in 
person using electronic means. Commenters stated, for example, that a 
consumer or creditor employee might complete an electronic application 
by entering information at a terminal or kiosk in the creditor's 
office. These commenters noted that paper disclosures would be more 
appropriate in such cases, because the applicant would be able to 
retain them. For example, a loan officer could give the disclosures to 
the consumer, or in the case of an unattended kiosk, the kiosk could 
have a printer to provide paper disclosures. (Although the credit card 
application and solicitation disclosures are not required to be given 
in retainable form, application-related disclosures for other types of 
accounts raise the same issue and are required to be in retainable 
form.)
    Some creditor commenters argued that the proposed requirement would 
contravene the E-Sign Act, based on the provisions in E-Sign that state 
(1) that the statute does not require any person to accept or use 
electronic records in place of paper, and (2) that any regulations 
interpreting E-Sign may not add to its requirements. Creditor 
commenters suggested that, at a minimum, the regulation should provide 
an exception to allow paper disclosures for in-person electronic 
applications. Consumer group commenters stated that the regulation 
should not only permit, but should require, paper disclosures in the 
case of in-person electronic applications. For example, the commenters 
noted, a door-to-door solicitor could otherwise simply display certain 
disclosures to a consumer on the screen of a laptop computer, even 
though the consumer would have no way to later access the disclosures.
    One creditor commenter suggested that, in addition to permitting 
paper disclosures for electronic applications, the regulation should 
also permit electronic disclosures for paper applications without 
consumers' consent in certain cases. For example, the commenter 
suggested, a basic or short-form disclosure could be provided in paper 
form along with the paper application, together with a Web site where a 
more complete disclosure could be obtained.
    In the final regulation, new Sec.  226.5a(a)(2)(v) is revised to 
state that if an application or solicitation is accessed by the 
consumer in electronic form, the required application- or solicitation-
related disclosures may (rather than must) be provided in electronic 
form. The proposal to require electronic disclosures for credit card 
applications and solicitations that are accessed electronically was 
intended to ensure that the disclosures are provided ``on or with'' the 
application or solicitation in compliance with the timing and delivery 
requirements of Regulation Z. Section 226.5a(a)(2) already requires 
that the credit card application and solicitation disclosures be 
provided on or with an application or solicitation, and this 
requirement applies to electronic as well as paper applications; the 
only added requirement under the proposal would have been to require 
that, in the case of an electronic application, the disclosures be in 
electronic form.
    Where a consumer accesses and submits an application form using a 
home computer via a card issuer's Web site, the card issuer must 
provide the disclosures in electronic form with the application form on 
the Web site in order to meet the requirement to provide disclosures in 
a timely manner on or with the application. If the issuer instead 
mailed paper disclosures to the consumer, this requirement would not be 
met. This guidance is stated in new comment 5a(a)(2)-9.
    In contrast, if a consumer is physically present in the card 
issuer's office, and accesses and submits an electronic application--
such as via a terminal or kiosk--the Board believes the issuer could 
provide disclosures in paper form and comply with the timing and 
delivery (``on or with'') requirements of the regulation. In addition, 
as discussed by the commenters, paper disclosures may be preferable in 
this situation because they can be retained by the consumer. Therefore, 
paper disclosures are permissible in the case of in-person electronic 
applications in a card issuer's office, when the timing and delivery 
requirements are met. This guidance is also stated in new comment 
5a(a)(2)-9.
    The final regulation, however, does not require paper disclosures 
for such in-person electronic applications, as suggested by the 
consumer group commenters. Electronic disclosures would comply with the 
regulation for these applications in some cases. For example, for an 
electronic in-person credit card application in a card issuer's office, 
the issuer could display the required disclosures to the consumer on a 
terminal or kiosk screen. The requirement to provide disclosures in a 
form the consumer may retain does not apply to the credit card 
application disclosures, so this procedure would comply with the 
regulation. However, the Board anticipates that card issuers will 
provide disclosures in a retainable form in this situation and would 
consider further revisions to the regulation to address this issue if 
necessary. (In other cases--for example, for some of the home equity 
line of credit application disclosures, and all of the adjustable-rate 
mortgage (ARM) application disclosures, discussed below--the 
retainability requirement does apply, and therefore creditors would 
likely have to provide paper disclosures for in-person applications in 
a creditor's office for these types of credit.)
    New comment 5a(a)(2)-9 is modified from the proposal to provide the 
guidance discussed above. In addition, the portion of the proposed 
comment stating that paper applications must be accompanied by paper 
disclosures has been deleted as unnecessary. For example, if a credit 
card application in paper form did not contain all of the required 
Sec.  226.5a disclosures, but instead referred the consumer to a Web 
site where some or all of the disclosures could be found, the 
application would not be in compliance with the Regulation Z 
requirement that the disclosures be provided in a timely manner on or 
with the application. In addition, the provisions that state that 
electronic disclosures may be provided without regard to the consumer 
consent or other provisions of the E-Sign Act are limited to situations 
where the application or solicitation itself is in electronic form. 
Thus, if a card issuer wanted to provide electronic disclosures for a 
paper application or solicitation (for example, where a paper 
application is submitted in person at the issuer's office), the issuer 
would first have to comply with the E-Sign notice and consent 
requirements.
    Comment 5a(a)(2)-8 of the 2001 interim final rule states that a 
consumer must be able to access the electronic disclosures at the time 
the application form or solicitation reply form is made available by 
electronic communication, and lists a number of alternative methods by 
which card issuers may satisfy this requirement. The Board proposed to 
revise this comment to clarify that the listed methods are intended to 
be examples, not an exhaustive list. Proposed revised comment 5a(a)(2)-
8 also cross-references comment 5a(a)(2)-2.ii., which was added in 2000 
and specifies

[[Page 63466]]

how the tabular disclosures required by Sec.  226.5a can be 
``prominently located'' if provided on or with electronic applications 
and solicitations.
    Creditor commenters generally urged that the ``non-bypassable 
link'' example in the comment be deleted, or at least that the final 
comment make clear that the various methods of presenting disclosures 
electronically are only examples and not requirements. (In the ``non-
bypassable link'' method, a card issuer would provide, on the 
application or solicitation web page, a link to the required 
disclosures that would require the consumer to access the disclosures 
before submitting the application or solicitation reply form.)
    Comment 5a(a)(2)-8 has been modified to clarify that the various 
methods of presenting disclosures electronically are not the exclusive 
means of satisfying the disclosure requirements, but examples. In 
addition, another example has been added, and other modifications have 
been made for clarity. Of course, any method used would have to ensure 
that the disclosures are provided (not merely made available) to the 
consumer, clearly and conspicuously, in a timely manner on or with the 
application or solicitation.
    The Bankruptcy Act amends Section 127(c) of TILA to require that 
credit card application and solicitation disclosures provided ``using 
the Internet or other interactive computer service'' must be ``readily 
accessible to consumers in close proximity'' to the solicitation. 15 
U.S.C. 1637(c)(7). The April 2007 proposal contained a discussion of 
whether the Board should retain the existing guidance in comment 
5a(a)(2)-2.ii on ``prominent location'' to interpret the ``close 
proximity'' standard of the Bankruptcy Act. The same issue is raised in 
the Board's proposed amendments to the Regulation Z rules for open-end 
credit, which were published for comment in June 2007 (72 FR 32,948, 
June 14, 2007). The Board will consider this issue in connection with 
its final action on the rules for open-end credit after considering the 
comments submitted on the June 2007 proposal.
    5a(b) Required disclosures and 5a(c) Direct-mail and electronic 
applications and solicitations
    The Bankruptcy Act provides that the disclosures for electronic 
credit card offers must be ``updated regularly to reflect the current 
policies, terms, and fee amounts.'' The April 2007 proposal contained 
proposed amendments to Sec. Sec.  226.5a(b)(1), 226.5a(c), and 
226.5a(e), as well as the staff commentary, to implement this 
requirement, particularly with regard to the accuracy of variable-rate 
APR disclosures in credit card applications and solicitations. The same 
proposals are also contained in the June 2007 proposal to revise the 
rules for open-end credit under Regulation Z. As stated above, the 
Board will consider revisions related to the Bankruptcy Act in 
connection with its final action on the June 2007 proposal.

Section 226.5b Requirements for Home-Equity Plans

    Section 226.5b(a) sets forth requirements for the form of 
disclosures required to be made on or with applications for home equity 
lines of credit (HELOCs). The Board proposed to amend Sec.  226.5b(a) 
by adding a new paragraph (3) to provide that if a consumer accesses a 
HELOC application in electronic form, such as on a home computer, the 
disclosures required on or with the application must also be provided 
to the consumer in electronic form. The Board proposed to add comment 
5b(a)(3)-1 to clarify this point and also to make clear that if a 
consumer is provided with a paper application, the required disclosures 
must be provided in paper form on or with the application (and not, for 
example, by including a reference in the paper application to the Web 
site where the disclosures are located).
    As in the case of the credit card application and solicitation 
disclosures required under Sec.  226.5a, discussed above, many creditor 
commenters urged the Board to revise the regulation and commentary to 
permit disclosures to be given in paper form in appropriate cases, even 
where a HELOC application is in electronic form. Commenters mentioned 
the same reasons as for the credit card disclosures, focusing in 
particular on problems that might arise in the context of in-person 
electronic applications (involving, for example, a consumer completing 
the application in a creditor's office by entering information into a 
terminal or kiosk). Consumer group commenters suggested that the 
regulation not only should permit, but should require, paper 
disclosures in the case of in-person electronic HELOC applications.
    For the same reasons as discussed above in connection with credit 
card application and solicitation disclosures, in the final regulation, 
new Sec.  226.5b(a)(3) is revised to state that if an application is 
accessed by the consumer in electronic form, the required disclosures 
may (rather than must) be provided in electronic form. New comment 
5b(a)(3)-1 has been modified from the proposal to provide guidance 
parallel to that in new comment 5a(a)(2)-9 for credit card applications 
and solicitations. Where a consumer accesses an electronic HELOC 
application in person in a creditor's office, the creditor could 
provide disclosures in paper form and comply with the timing and 
delivery requirements of the regulation. In addition, as discussed by 
the commenters, paper disclosures may be preferable in this situation 
because they can be retained by the consumer. Indeed, paper disclosures 
would likely be necessary to comply with the timing requirements and 
the requirement to provide the home-equity brochure in a form the 
consumer may retain under Sec.  226.5b(e) in the case of an in-person 
electronic application in the creditor's office. (The Board anticipates 
that creditors will provide the other HELOC application disclosures, 
under Sec.  226.5b(d), in retainable form even though not technically 
required, and would consider further revisions to the regulation to 
address this issue if necessary.) In addition, the portion of the 
proposed comment stating that paper applications must be accompanied by 
paper disclosures has been deleted as unnecessary, parallel to comment 
5a(a)(2)-9.
    Section 226.5b(c) states that persons, other than the creditor, 
that provide HELOC applications to consumers must provide the required 
home equity disclosures in certain cases. The 2001 interim final rule 
added a new Sec.  226.5b(c)(2) to clarify that such third parties may 
use electronic disclosures. As proposed, this provision is being 
deleted as unnecessary, because the E-Sign Act is a self-effectuating 
statute and permits any person to use electronic records subject to the 
conditions set forth in the Act.
    Comment 5b(b)-7 of the 2001 interim final rule states that a 
consumer must be able to access the electronic disclosures at the time 
the application form is made available by electronic communication. 
This comment is substantially similar to comment 5a(a)(2)-8 of the 2001 
interim final rule, discussed above.
    The Board proposed to delete comment 5b(b)-7 and substitute a new 
comment 5b(a)(1)-5 in its place, which generally would parallel the 
content of proposed revised comment 5a(a)(2)-8. The new comment would 
describe alternative methods for presenting electronic disclosures, 
which are examples rather than an exhaustive list.
    As in the case of proposed revised comment 5a(a)(2)-8, discussed 
above, creditor commenters addressing the proposed comment generally 
urged that the ``non-bypassable link'' example in

[[Page 63467]]

the comment be deleted, or at least that the final comment make clear 
that the various methods of presenting disclosures electronically are 
only examples and not requirements. The comment has been modified to 
clarify that the methods are not the exclusive means of satisfying the 
disclosure requirements, but examples. In addition, another example has 
been added, and other modifications have been made for clarity. Of 
course, similarly to electronic credit card applications, any method 
used for providing disclosures for electronic HELOC applications would 
have to ensure that the disclosures are provided (not merely made 
available) to the consumer, clearly and conspicuously, in a timely 
manner on or with the application.

Section 226.15 Right of Rescission

    Section 226.15 gives consumers the right to rescind certain open-
end credit plans secured by their principal dwelling. Under Sec.  
226.15(b), creditors must provide two copies of a notice of this right 
to each consumer entitled to rescind. For written (paper) disclosures, 
this allows consumers to return one copy to the creditor if they 
exercise the right of rescission and retain the second copy. The 2001 
interim final rule added language permitting creditors to provide only 
one copy of the rescission notice to each consumer when the notice is 
provided in electronic form in accordance with the consumer consent and 
other applicable provisions of the E-Sign Act. The April 2007 proposal 
retained this provision from the 2001 interim final rule. The few 
commenters that addressed this proposal supported it. The final rule 
adopts this provision as proposed with minor wording changes for 
clarification. It does not appear that consumers would benefit by 
receiving two electronic copies of rescission notices.
    In the 2001 interim final rule, comment 15(b)-1 was revised to 
state that if there is more than one property owner, a single 
rescission notice may be sent to each property owner if electronic 
communication is used, that each co-owner must consent to electronic 
disclosures, and that each must designate an electronic (e-mail) 
address to be used for this purpose. In the April 2007 proposal, the 
Board proposed to modify comment 15(b)-1 by deleting the requirement to 
use e-mail. The statement that each co-owner must consent to electronic 
disclosures was also proposed to be deleted.
    A few commenters expressed concern about the proposed deletion of 
the statement that each co-owner must consent to electronic 
disclosures, and suggested that the Board clarify this issue. The E-
Sign Act clearly states that any consumer to whom written disclosures 
are required to be given must affirmatively consent to the use of 
electronic disclosures before such disclosures may be used in place of 
paper disclosures; accordingly, the Board believes that it is 
unnecessary to address this issue in Regulation Z. In addition, a 
commenter suggested that creditors should be able to provide a single 
electronic rescission notice to co-owners who have the same e-mail 
address or other electronic point of contact, and also that a creditor 
may require that consumers who wish to receive disclosures 
electronically provide such a single contact point. The Board believes 
that these suggestions might not be consistent with the Truth in 
Lending Act, which requires delivery of the rescission notice and 
disclosures to each consumer entitled to rescind. Accordingly, the 
revisions to comment 15(b)-1 are adopted as proposed.

Section 226.16 Advertising

    Section 226.16 contains requirements for advertisements for open-
end credit, and in particular requires that if an advertisement 
includes certain ``trigger terms'' (such as an APR), the advertisement 
must also include certain required disclosures (such as the minimum 
finance charge and transaction charges and annual fees).
    Section 226.16(c) relates to catalogs and other multiple-page 
advertisements and to electronic advertisements. The Board proposed to 
add a new paragraph (3) to Sec.  226.16(c) to provide that if a 
consumer accesses an advertisement for open-end credit in electronic 
form, such as on a home computer, the disclosures required on or with 
the advertisement must also be provided to the consumer in electronic 
form on or with the advertisement. The Board proposed to add comment 
16(c)(3)-1 to clarify this point and also to make clear that if a 
consumer accesses a paper advertisement, the required disclosures must 
be provided in paper form on or with the advertisement (and not, for 
example, by including a reference in the paper advertisement to the Web 
site where the disclosures are located). Commenters did not address 
this aspect of the proposal.
    In the final regulation, new Sec.  226.16(c)(3) and comment 
16(c)(3)-1 are not being adopted. Section 226.16(b) requires that if an 
advertisement includes trigger terms, the advertisement itself must 
``clearly and conspicuously set forth'' the required disclosures. 
Therefore, under the existing regulation, providing paper disclosures 
for an advertisement in electronic form, or vice versa, would not 
comply because the disclosures would not be set forth in the 
advertisement itself.
    Section 226.16(c) provides that in a catalog or other multiple-page 
advertisement, the required disclosures need not be shown on each page 
where a ``trigger term'' appears, as long as each such page includes a 
cross-reference to the page where the required disclosures appear. The 
2001 interim final rule (in Sec.  226.16(c)(1) and (2), and comments 
16(c)(1)-1 and -2) clarified that this multiple-page rule also applies 
to credit advertisements in electronic form. For example, if a 
``trigger term'' appears on a particular web page, the additional 
disclosures may appear in a table or schedule on another web page and 
still be considered part of a single advertisement if there is a clear 
reference to the page or location where the table or schedule begins 
(which may be accomplished, for example, by including a link). In April 
2007, the Board proposed to retain this provision. Only one commenter 
addressed the provision and expressed concern that consumers may not 
receive clear product information from online advertisements (noting, 
for example, that in one online advertisement the commenter was aware 
of, details were disclosed several linked pages away from the initial 
credit advertisement). The final rule retains this provision as 
proposed.

Subpart C--Closed-end Credit

Section 226.17 General Disclosure Requirements

    Section 226.17(a) prescribes the form of disclosures required for 
closed-end credit. Section 226.17(a)(1) requires creditors to provide 
closed-end credit disclosures in writing and in a form that the 
consumer may keep. As proposed, Sec.  226.17(a)(1) is revised to 
clarify that creditors may provide the closed-end credit disclosures to 
consumers in electronic form, subject to compliance with the consumer 
consent and other applicable provisions of the E-Sign Act. Some 
creditors may provide closed-end credit disclosures to consumers both 
in paper and electronic form and rely on the paper form of the 
disclosures to satisfy their compliance obligations. For those 
creditors, the duplicate electronic form of the closed-end credit 
disclosures may be provided to consumers without regard to the consumer 
consent and other provisions of the E-Sign Act because the electronic 
form of the disclosure is not used to

[[Page 63468]]

satisfy the regulation's closed-end credit disclosure requirements.
    Section 226.17(a)(1) is also revised, as proposed, to provide that 
the closed-end credit disclosures required by Sec. Sec.  226.19(b) 
(adjustable-rate mortgage loan applications) and 226.24 (closed-end 
credit advertising) may be provided to the consumer in electronic form, 
and that the disclosures required by Sec.  226.17(g) (delay in 
disclosures for mail or telephone transactions) may be made available 
to the consumer or to the public in electronic form, under the 
circumstances set forth in those sections, without regard to the 
consumer consent or other provisions of the E-Sign Act. Commenters 
supported this provision. The Board believes that this will eliminate a 
potential significant burden on electronic commerce without increasing 
the risk of harm to consumers. This approach will assist consumers in 
shopping for credit by enabling them to receive important disclosures 
online at the same time they access an application or advertisement 
without first having to provide consent in accordance with the 
requirements of the E-Sign Act. Requiring consumers to follow the 
consent procedures set forth in the E-Sign Act in order to access an 
online application or advertisement is potentially burdensome and could 
discourage consumers from shopping for credit online. Moreover, because 
these consumers are viewing the application or advertisement online, 
there appears to be little, if any, risk that the consumer will be 
unable to view the disclosures online as well.
    Section 226.17(a)(3) in the interim final rule cross-references 
Sec.  226.36, the section of the interim final rule setting forth 
general rules for electronic disclosures. Because the Board is deleting 
Sec.  226.36, as discussed below, Sec.  226.17(a)(3) is also being 
deleted.
    Section 227.17(g) applies where a creditor receives a request for 
credit by mail, telephone, or electronic communication without face-to-
face or direct telephone solicitation. In these circumstances, the 
creditor may delay making the TILA disclosures for the credit 
transaction until the due date of the first payment, provided certain 
disclosures (specified in Sec.  226.17(g)(1)-(5)) have been made 
available to the consumer or to the public generally (such as in a 
catalog or advertisement). For example, a retailer may mail catalogs to 
consumers, or provide advertising inserts in newspapers, containing 
information for ordering merchandise by telephone or mail. If a 
consumer calls the retailer, orders an item, and agrees to pay for the 
item by obtaining a closed-end extension of credit from the retailer, 
the TILA closed-end disclosures would normally be required to be 
provided to the consumer before the consummation of the transaction. 
Since this is impracticable where the transaction is consummated by 
telephone, however, Sec.  226.17(g) permits the retailer to delay 
providing the specific disclosures for the transaction, as long as the 
disclosures in Sec.  226.17(g)(1)-(5), for representative amounts or 
ranges of credit, are included in the catalog or newspaper insert.
    In the 2001 interim final rule, the Board replaced the term 
``electronic communication'' in Sec.  226.17(g) with ``facsimile 
machine.'' The Board explained that the rule in Sec.  226.17(g) 
predated Internet commerce, and the term ``electronic communication'' 
was intended to cover credit requests by facsimile or telegram. The 
rationale underlying the rule was that creditors are unable to provide 
written transaction-specific disclosures at the time of the consumer's 
credit request where the request is made by facsimile or telegram, no 
less than in the case of requests made by telephone or mail. That 
practical problem does not exist, however, where a consumer requests 
credit at a Web site. Therefore, the Board believes it would be 
inappropriate to extend the application of Sec.  226.17(g) to 
electronic requests for credit made at an Internet Web site. In the 
April 2007 proposal, the Board proposed to retain the amendment to 
Sec.  226.17(g) from the 2001 interim final rule.
    A few commenters discussed this provision, as well as other 
provisions of Regulation Z permitting delayed disclosures where an 
application is submitted by telephone. These commenters contended that 
the same reasons permitting disclosures to be delayed in the case of a 
telephone application might also apply in other situations, such as 
where applications are conducted through mobile hand-held electronic 
devices, ATMs, or computers not owned by the consumer (such as an 
employer's computer). The Board has determined not to extend the 
telephone provisions to additional situations; refer to the discussion 
below under ``Delayed Disclosures.'' Accordingly, Sec.  226.17(g) 
remains unchanged in this regard.
    Where Sec.  226.17(g) does apply, i.e., where the consumer requests 
credit by telephone, mail, or facsimile machine, the regulation 
requires the creditor (as a condition of delaying the transaction-
specific TILA disclosures) to make available in written form to the 
consumer or the public the disclosures set forth in Sec.  226.17(g)(1)-
(5) before the actual purchase order or request. The Board believes 
that these disclosures can appropriately be made available to the 
consumer or to the public either in electronic form (for example, on 
the creditor's Web site) or in paper form. In the April 2007 proposal, 
the Board proposed to amend Sec.  226.17(g) to provide that the 
requirement to make available the Sec.  226.17(g)(1)-(5) disclosures in 
written form to the consumer or to the public may be satisfied by 
making the disclosures available in electronic form, such as at a 
creditor's Web site. Thus, for example, a consumer might see 
information about a product on a retailer's Web site and order the 
product by telephone using closed-end credit; the transaction-specific 
disclosures could be delayed, provided the Sec.  226.17(g)(1)-(5) 
disclosures are set forth on the Web site. In this situation, the E-
Sign consent procedures would not have to be followed in order for the 
Sec.  226.17(g)(1)-(5) disclosures to be provided in electronic form. 
On the other hand, if the consumer ordered the product via the Web site 
itself, the transaction-specific disclosures could not be delayed and 
would be required to be provided before consummation of the 
transaction. For the disclosures to be provided in electronic form in 
this situation, the E-Sign consent procedures would have to be 
followed. The amendment to Sec.  226.17(g) is adopted as proposed.

Section 226.19 Certain Residential Mortgage and Variable-Rate 
Transactions

    Section 226.19(b) requires creditors to provide certain disclosures 
relating to adjustable-rate mortgage (ARM) loans secured by the 
consumer's principal dwelling. These disclosures must be provided when 
an application form is provided to the consumer or before the consumer 
pays a nonrefundable fee, whichever is earlier. The Board proposed to 
amend Sec.  226.19 by adding a new paragraph (c) to provide that if a 
consumer accesses an ARM application in electronic form, the 
disclosures required on or with an application for an ARM must be 
provided to the consumer in electronic form. The Board also proposed to 
add comment 19(c)-1 to clarify this point, and to make clear that if a 
consumer is provided with a paper ARM application, the required 
disclosures must be provided in paper form on or with the application 
(and not, for example, by including a reference in the application to 
the Web site where the disclosures are located).

[[Page 63469]]

    As in the case of the credit card application and solicitation 
disclosures required under Sec.  226.5a and the HELOC application 
disclosures under Sec.  226.5b, discussed above, many creditor 
commenters urged the Board to revise Sec.  226.19(c) in the final 
regulation and the accompanying commentary provisions to permit 
disclosures to be given in paper form even where an ARM application is 
provided in electronic form. These commenters focused in particular on 
problems that might arise in the context of in-person electronic 
applications (involving, for example, a consumer in a creditor's office 
entering information at an electronic terminal to complete an 
application). Consumer group commenters suggested that the regulation 
should not only permit, but should require, paper disclosures in the 
case of in-person ARM applications made electronically.
    For the same reasons as discussed above in connection with credit 
card application and solicitation disclosures and HELOC application 
disclosures, new Sec.  226.19(c) is revised to state that if an 
application is accessed by the consumer in electronic form, the 
required disclosures may (rather than must) be provided in electronic 
form. New comment 19(c)-1 has been modified from the proposal to 
provide guidance parallel to that in new comments 5a(a)(2)-9 and 
5b(a)(3)-1 for credit card applications and solicitations and for HELOC 
applications, respectively. Where a consumer accesses an electronic ARM 
application in person in a creditor's office, the creditor could 
provide disclosures in paper form and comply with the timing and 
delivery requirements of the regulation. Indeed, in the case of an in-
person electronic application in a creditor's office, paper disclosures 
would likely be necessary to comply with the timing requirements and 
the requirement to provide the ARM disclosures in a form the consumer 
may retain. The portion of the proposed comment stating that paper 
applications must be accompanied by paper disclosures has been deleted 
as unnecessary, to parallel new comments 5a(a)(2)-9 and 5b(a)(3)-1.
    Comment 19(b)-2 of the 2001 interim final rule states that a 
consumer must be able to access the electronic disclosures at the time 
the blank application form for ARMs is made available by electronic 
communication. The Board proposed to revise comment 19(b)-2 in a manner 
substantially similar to proposed comments 5b(a)(1)-5 and 5a(a)(2)-8, 
discussed above. The proposed revised comment described alternative 
methods for presenting electronic disclosures, which are examples 
rather than an exhaustive list.
    As in the case of proposed revised comments 5b(a)(1)-5 and 
5a(a)(2)-8, discussed above, creditor commenters addressing the 
proposed comment generally urged that the ``non-bypassable link'' 
example in the comment be deleted, or at least that the final comment 
make clear that the various methods of presenting disclosures 
electronically are only examples and not requirements. The comment has 
been modified to clarify that the methods are not the exclusive means 
of satisfying the disclosure requirements, but rather examples. In 
addition, another example has been added, and other modifications have 
been made for clarity. Of course, any method used for providing 
disclosures for electronic ARM applications would have to ensure that 
the disclosures are provided (not merely made available) to the 
consumer, clearly and conspicuously, in a timely manner.

Section 226.23 Right of Rescission

    Section 226.23 gives consumers the right to rescind certain closed-
end mortgage loans secured by their principal dwelling. Under Sec.  
226.23(b), creditors must provide two copies of a notice of this right 
to each consumer entitled to rescind. For written (paper) disclosures, 
this allows consumers to return one copy to the creditor if they 
exercise the right of rescission and retain the second copy. The 2001 
interim final rule added language permitting creditors to provide only 
one copy of the rescission notice to each consumer when the notice is 
provided in electronic form in accordance with the consumer consent and 
other applicable provisions of the E-Sign Act. The April 2007 proposal 
retained this provision from the 2001 interim final rule. The few 
commenters that addressed this proposal supported it. The final rule 
adopts this provision as proposed with minor wording changes. It does 
not appear that consumers would benefit by receiving two electronic 
copies of rescission notices.
    In the 2001 interim final rule, comment 23(b)-1 was revised to 
state that if there is more than one property owner, a single 
rescission notice may be sent to each property owner if electronic 
communication is used, that each co-owner must consent to electronic 
disclosures, and that each must designate an electronic (e-mail) 
address to be used for this purpose. In the April 2007 proposal, the 
Board proposed to modify comment 23(b)-1 by deleting the requirement to 
use e-mail. The statement that each co-owner must consent to electronic 
disclosures was also proposed to be deleted, as consent requirements 
are already set forth in the E-Sign Act.
    The comments received by the Board on the proposed revisions to 
comment 15(b)-1 relating to rescission in the open-end context, 
discussed above, apply to closed-end rescission as well. See the 
discussion under Sec.  226.15 above. Accordingly, the revisions to 
comment 23(b)-1 are adopted as proposed.

Section 226.24 Advertising

    Section 226.24 contains requirements for advertisements for closed-
end credit and requires that if an advertisement includes certain 
``trigger terms'' (such as the payment amount), the advertisement must 
also include certain required disclosures (such as the APR, the amount 
or percentage of any downpayment, and the terms of repayment, as 
applicable).
    Section 226.24(d) relates to catalogs and other multiple-page 
advertisements and to electronic advertisements. The Board proposed to 
add a new paragraph (3) to Sec.  226.24(d) (comparable to proposed new 
paragraph (3) to Sec.  226.16(c) for open-end credit advertising) to 
clarify that if a consumer accesses an advertisement for closed-end 
credit in electronic form, the disclosures required on or with the 
closed-end credit advertisement must be provided to the consumer in 
electronic form on or with the advertisement. The Board proposed to add 
comment 24(d)-5 to clarify this point, and also to make clear that if a 
consumer accesses a paper advertisement, the required disclosures must 
be provided in paper form on or with the advertisement (and not, for 
example, by including a reference in the advertisement to the Web site 
where the disclosures are located). Commenters did not address this 
provision.
    In the final regulation, new Sec.  226.24(d)(3) and comment 24(d)-5 
are not being adopted. Section 226.24(c) requires that if an 
advertisement includes trigger terms, the advertisement itself must 
``state'' the required disclosures. Therefore, under the existing 
regulation, providing paper disclosures for an advertisement in 
electronic form, or vice versa, would not comply because the 
disclosures would not be stated in the advertisement itself.
    Section 226.24(d) provides that in a catalog or other multiple-page 
advertisement, the required disclosures need not be shown on each page 
where a ``trigger term'' appears, as long as each such page includes a 
cross-reference to the page where the required disclosures appear. The 
2001 interim final rule

[[Page 63470]]

clarified (in Sec.  226.24(d)(1) and (2), and comments 24(d)-2 and 
24(d)-4), as in the case of open-end credit advertising, that the 
multiple-page rule for closed-end credit advertising also applies to 
credit advertisements in electronic form. For example, if a ``trigger 
term'' appears on a particular web page, the additional disclosures may 
appear in a table or schedule on another web page and still be 
considered part of a single advertisement if there is a clear reference 
to the page or location where the table or schedule begins (which may 
be accomplished, for example, by including a link). In April 2007, the 
Board proposed to retain this provision. Only one commenter addressed 
this provision and expressed concern that consumers may not receive 
clear product information (see discussion under open-end advertising 
above). The final rule retains this provision as proposed.
    Section 226.24(b) permits creditors to state a simple annual rate 
of interest or periodic rate in addition to the APR, as long as the 
rate is stated in conjunction with, but not more conspicuously than, 
the APR. In the 2001 interim final rule, comment 24(b)-6 was added to 
state that in an advertisement using electronic communication, the 
consumer must be able to view both rates simultaneously, and that this 
requirement is not satisfied if the consumer can view the APR only by 
use of a link that takes the consumer to another web location. In the 
April 2007 proposal, the Board proposed to delete comment 24(b)-6 as 
unnecessary, because the requirement to state the simple annual rate or 
periodic rate in conjunction with, and not more conspicuously than, the 
APR, applies to electronic advertisements no less than to 
advertisements in other media. In the supplementary information, the 
Board stated that requiring the consumer to scroll to another part of 
the page, or access a link, in order to view the APR would likely not 
satisfy this requirement.
    Some commenters were concerned by the foregoing discussion in the 
April 2007 proposal, and contended that in the case of small hand-held 
electronic devices (such as Internet-enabled cellphones or personal 
digital assistants) that a consumer might use to view a credit 
advertisement, the small size of the screen might necessitate scrolling 
or the use of links for viewing the APR. Commenters also said the 
proposal was confusing in that comment 24(b)-6, stating that the use of 
links would not comply, was proposed to be deleted, yet the 
supplementary information appeared to impose the same restriction.
    Comment 24(b)-6 is being deleted as proposed. As stated in the 
proposal, the existing regulatory requirement is to state the APR no 
less conspicuously than the simple rate of interest, and this rule 
applies in the electronic context. However, the Board believes that the 
rule can be applied with some degree of flexibility, to account for 
variations in devices consumers may use to view electronic 
advertisements. Therefore, the use of scrolling or links would not 
necessarily fail to comply with the regulation in all cases; however, 
creditors should ensure that electronic advertisements comply with the 
equal conspicuousness requirement.

Subpart E--Special Rules for Certain Home Mortgage Transactions

Section 226.31 General Rules

    Subpart E implements the Home Ownership and Equity Protection Act 
(HOEPA) and sets forth special rules, including disclosure 
requirements, for certain mortgage loans with rates or fees above 
specified thresholds (HOEPA loans) and for reverse mortgage loans. 
Section 226.31(b) prescribes the form of disclosures required under 
Subpart E. Section 226.31(b)(1) requires creditors to provide the HOEPA 
and reverse mortgage disclosures in writing and in a form that the 
consumer may keep. As proposed, Sec.  226.31(b)(1) is renumbered as 
Sec.  226.31(b) and revised to clarify that the HOEPA and reverse 
mortgage disclosures may be provided to the consumer in electronic 
form, subject to compliance with the consumer consent and other 
applicable provisions of the E-Sign Act. Some creditors may provide the 
HOEPA and reverse mortgage disclosures to consumers both in paper and 
electronic form and rely on the paper form of the disclosures to 
satisfy their compliance obligations. For those creditors, the 
duplicate electronic form of the HOEPA and reverse mortgage disclosures 
may be provided to consumers without regard to the consumer consent and 
other provisions of the E-Sign Act because the electronic form of the 
disclosure is not used to satisfy the regulation's HOEPA and reverse 
mortgage disclosure requirements.
    Section 226.31(b)(2) in the interim final rule cross-references 
Sec.  226.36, the section of the interim final rule setting forth 
general rules for electronic disclosures. Because the Board is deleting 
Sec.  226.36, as discussed below, Sec.  226.31(b)(2) is also being 
deleted in the final rule.

Subpart F--Electronic Communication

Section 226.36 Requirements for Electronic Communication

    Section 226.36 was added by the 2001 interim final rule to address 
the general requirements for electronic communications. In the April 
2007 proposal, the Board proposed to delete Sec.  226.36 (which 
constitutes all of Subpart F) from Regulation Z and the accompanying 
sections of the staff commentary. Creditor commenters largely supported 
the proposed deletion, and Sec.  226.36 and the accompanying commentary 
are deleted in the final rule.
    In the interim rule, Sec.  226.36(a) defined the term ``electronic 
communication'' to mean a message transmitted electronically that can 
be displayed on equipment as visual text, such as a message displayed 
on a personal computer monitor screen. The deletion of Sec.  226.36(a) 
does not change applicable legal requirements under the E-Sign Act.
    Sections 226.36(b), (c) and (f) incorporated by reference 
provisions of the E-Sign Act, such as the provision allowing 
disclosures to be provided in electronic form, the requirement to 
obtain the consumer's affirmative consent before providing such 
disclosures, and the provision allowing electronic signatures. The 
deletion of these provisions has no impact on the general applicability 
of the E-Sign Act to Regulation Z disclosures.
    Sections 226.36(d) and (e) addressed specific timing and delivery 
requirements for electronic disclosures under Regulation Z, such as the 
requirement to send disclosures to a consumer's e-mail address (or post 
the disclosures on a Web site and send a notice alerting the consumer 
to the disclosures). The Board stated in the proposal that it no longer 
believed that these additional provisions were necessary or 
appropriate. The Board noted that electronic disclosures have evolved 
since 2001, as industry and consumers have gained experience with them, 
and also noted concerns about e-mail related to data security, identity 
theft, and phishing.
    The consumer group commenters urged the Board to require the use of 
e-mail to provide required disclosures in electronic form, arguing that 
e-mail is the only reliable way to ensure that consumers are able to 
actually access, receive, and retain disclosures. The consumer groups 
also disagreed with the statement that concerns relating to phishing, 
identity theft, and data security are a valid reason for not requiring 
the use of e-mail, noting that

[[Page 63471]]

phishing involves gathering information from the consumer, while 
disclosures would be provided to the consumer, and need not include 
sensitive information.
    While the consumer's receipt of an e-mail message that is actually 
from the consumer's creditor would not in general pose a security risk, 
consumers might ignore or delete e-mails from creditors (real or 
purported), in order to avoid falling victim to fraud schemes. Thus, 
disclosures sent by consumers' creditors may not receive the attention 
they should. Consequently, some creditors may be reluctant to 
communicate by e-mail. To the extent consumers are instructed not to 
ignore electronic mail messages from their creditors, the risk of 
consumers being victimized by fraudulent e-mail might be increased. In 
any event, the Board believes it is preferable not to mandate the use 
of any particular means of electronic delivery of disclosures, but 
instead to allow flexibility for creditors to use whatever method may 
be best suited to particular types of disclosure (for example, account-
opening, periodic statements, or change in terms).
    With regard to the requirement to attempt to redeliver returned 
electronic disclosures, creditors would be required to search their 
files for an additional e-mail address to use, and might be required to 
use a postal mail address for redelivery if no additional e-mail 
address was available. As stated in the April 2007 proposal, the Board 
continues to believe that both requirements would likely be unduly 
burdensome.
    Under the April 2007 proposed rule, the requirement in the 2001 
interim final rule for creditors to maintain disclosures posted on a 
Web site for at least 90 days would be deleted. Creditor commenters 
supported the proposed deletion; consumer group commenters expressed 
concern about its impact on consumers. As stated in the proposal, based 
on a review of industry practices, it appears that many creditors 
maintain disclosures posted on an Internet Web site for several months, 
and, in a number of cases, for more than a year. For example, it 
appears that credit card issuers that offer online periodic statements 
to consumers typically make those statements available without charge 
for six months or longer in electronic form. This practice has 
developed even though Regulation Z does not currently require creditors 
to maintain disclosures for any specific period of time. In addition, 
the Board continues to believe that an appropriate time period 
consumers may want electronic disclosures to be available may vary 
depending upon the type of disclosure, and is reluctant to establish 
specific time periods that would vary depending on the disclosures, 
which would increase the compliance burden. Therefore, the 90-day 
retention provision is deleted as proposed.
    Nevertheless, while the Board is not requiring disclosures to be 
maintained on an Internet Web site for any specific time period, the 
general requirements of Regulation Z continue to apply to electronic 
disclosures, such as the requirement to provide disclosures to 
consumers at certain specified times and in a form that the consumer 
may keep. The Board expects creditors to maintain disclosures on Web 
sites for a reasonable period of time (which may vary depending upon 
the particular disclosure) so that consumers have an opportunity to 
access, view, and retain the disclosures. As stated in the April 2007 
proposal, the Board will monitor creditors' electronic disclosure 
practices with regard to the ability of consumers to retain Regulation 
Z disclosures and would consider further revisions to the regulation to 
address this issue if necessary.

V. Other Issues Raised by Commenters

Clear and Conspicuous Disclosures

    An issue raised in the comments on the April 2007 proposal related 
to small hand-held electronic devices through which consumers may 
conduct financial transactions using the Internet or other electronic 
means (for example, personal digital assistants, Internet-enabled 
cellphones, and similar devices). One commenter requested clarification 
on whether creditors would be deemed to comply with the requirement to 
provide disclosures in a clear and conspicuous form, even when the 
consumer views them on a small screen of a hand-held electronic device. 
The commenter noted that the creditor has no control over what devices 
consumers choose to use, for example, to view disclosures on a web 
page. The Board believes that disclosures comply with the ``clear and 
conspicuous'' requirement as long as they are provided in a manner such 
that they would be clear and conspicuous when viewed on a typical home 
personal computer monitor. In addition, with regard to disclosures 
subject to specific font size requirements, the disclosures must be 
provided such that the required size requirement would be met when 
viewed on a typical home personal computer monitor.

Retainable Form

    Several industry commenters requested guidance on how creditors can 
be sure of meeting the requirement to provide disclosures in a form 
that the consumer can keep. Commenters noted that some of the 
disclosures that are exempted from the E-Sign requirements regarding 
notice and consent are nevertheless required to be given in retainable 
form (for example, the HELOC brochure under Sec.  226.5b(e) and the ARM 
application disclosures under Sec.  226.19(b)). Commenters pointed out 
that the E-Sign Act requires, with regard to consumer disclosures 
generally, that a creditor disclose ``the hardware and software 
requirements for access to and retention of the electronic records'' 
and that the consumer consent to electronic disclosures ``in a manner 
that reasonably demonstrates that the consumer can access'' the 
disclosures electronically. A commenter noted that if the E-Sign 
procedures are followed, a creditor has some degree of comfort that the 
retainability requirement has been met; however, with regard to 
disclosures that are exempted from the E-Sign notice and consent 
provisions (such as those under Sec. Sec.  226.5b(e) and 226.19(b)), it 
is not clear how the creditor can demonstrate compliance with the 
retainability requirement.
    The consumer group commenters were concerned about retainability of 
disclosures in light of the deletion of the requirement to maintain 
disclosures on a Web site for at least 90 days. They urged that the 
final regulations require that disclosures be delivered in a format 
that is both downloadable and printable.
    The Board believes that creditors satisfy the requirement for 
providing electronic disclosures in a form the consumer can retain if 
they are provided in a standard electronic format that can be 
downloaded and saved or printed on a typical home personal computer. 
Typically, any document that can be downloaded by the consumer can also 
be printed. The Board will, however, monitor creditors' practices to 
evaluate whether further guidance is needed on this issue. In a 
situation where the consumer is provided electronic disclosures through 
equipment under the creditor's control--such as a terminal or kiosk in 
the creditor's offices--the creditor could, for example, provide a 
printer that automatically prints the disclosures.

Delayed Disclosures

    A number of creditor commenters suggested that, in the case of 
transactions involving small hand-held electronic devices, creditors 
should be permitted to treat the transactions as though they were 
conducted by telephone and thus delay disclosures. For example, for 
telephone credit card applications and solicitations, Sec.  226.5a

[[Page 63472]]

permits the disclosures to be provided within 30 days after the 
consumer requests the credit card (but no later than the delivery of 
the card). For telephone HELOC applications and ARM loan applications, 
Sec. Sec.  226.5b and 226.19(b), respectively, permit the disclosures 
to be provided within three business days after the creditor receives 
the application. For telephone applications for closed-end credit in 
general, Sec.  226.17(g) allows the Sec.  226.18 loan (or retail sale) 
disclosures to be provided no later than the due date of the first 
payment, if certain generic disclosures have been made available to the 
consumer or to the public generally (for example, in a catalog). Since 
small hand-held electronic devices may not be well suited to displaying 
or retaining disclosures, commenters argued that creditors should be 
permitted to mail paper disclosures to consumers within the timeframes 
specified in the regulations applicable to telephone transactions, 
instead of providing electronic disclosures that consumers might view 
using a small hand-held device. Commenters contended that such devices 
are more like telephones than home computers. Some commenters suggested 
that such a delayed disclosure provision should apply to other 
situations as well, such as ``enhanced ATMs'' and computers not owned 
by the consumer (e.g., a computer in an employer's office or a public 
library). However, it does not appear that at present, use of such 
devices for financial transactions has advanced to the point where the 
relief suggested by the commenters is necessary to avoid burdens on 
electronic commerce.

Expansion of Exception From E-Sign Notice and Consent Requirements

    One commenter suggested that the Board adopt additional exemptions 
from the E-Sign notice and consent requirements. For example, if a 
consumer applied for a credit card or mortgage online, the commenter 
suggested that the creditor should be able to provide the account-
opening disclosures under Sec.  226.6, or loan closing disclosures 
under Sec.  226.18 (in addition to the application-related disclosures 
already permitted under this final rule) online, without notice and 
consent under the E-Sign Act. The commenter argued that, since Internet 
commerce has expanded greatly over the past few years, when consumers 
choose to conduct financial transactions online, they presume that they 
will receive related disclosures online as well. The Board believes 
that, at this time, there is insufficient evidence that the consent 
requirements are a burden on electronic commerce in this situation; and 
that consumers who shop for credit online may not necessarily want to 
receive account-opening or loan closing disclosures online.

VI. Use of ``Plain Language''

    Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the 
Board to use ``plain language'' in all proposed and final rules 
published after January 1, 2000. In the proposed rule, the Board 
invited comments on whether the proposed rules are clearly stated and 
effectively organized, and how the Board might make the proposed text 
easier to understand. A few commenters made suggestions for clarifying 
the regulatory language. These comments are discussed above, under 
``IV. Section-by-Section Analysis.'' The Board has attempted to clarify 
the language in the final rule as suggested by commenters.

VII. Final Regulatory Flexibility Analysis

    The Board prepared an initial regulatory flexibility analysis as 
required by the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
in connection with the April 2007 proposal. The Board received no 
comments on its initial regulatory flexibility analysis.
    The RFA generally requires an agency to perform an assessment of 
the impact a rule is expected to have on small entities. However, under 
section 605(b) of the RFA, 5 U.S.C. 605(b), the regulatory flexibility 
analysis otherwise required under section 604 of the RFA is not 
required if an agency certifies, along with a statement providing the 
factual basis for such certification, that the rule will not have a 
significant economic impact on a substantial number of small entities. 
Based on its analysis and for the reasons stated below, the Board 
certifies that the rule will not have a significant economic impact on 
a substantial number of small entities.
    1. Statement of the need for, and objectives of, the final rule. 
The Board is adopting revisions to Regulation Z to withdraw the 2001 
interim final rule on electronic communication and to allow creditors 
to provide certain disclosures to consumers in electronic form on or 
with an application, solicitation, or advertisement that is accessed by 
the consumer in electronic form without regard to the consumer consent 
and other provisions of the E-Sign Act. The Board is also clarifying 
that other Regulation Z disclosures may be provided to consumers in 
electronic form in accordance with the consumer consent and other 
applicable provisions of the E-Sign Act.
    TILA was enacted to enhance economic stabilization and competition 
for credit by strengthening the informed use of credit, including an 
awareness of the cost of credit by consumers. The purpose of TILA is to 
assure a meaningful disclosure of credit terms so that the consumer can 
compare the various credit terms available and avoid the uninformed use 
of credit, and to protect the consumer against inaccurate and unfair 
credit billing and credit card practices. 15 U.S.C. 1601. TILA 
authorizes the Board to prescribe regulations to carry out the purposes 
of the statute. 15 U.S.C. 1604(a). The Act expressly states that the 
Board's regulations may contain ``such classifications, 
differentiations, or other provisions, * * * , as in the judgment of 
the Board are necessary or proper to effectuate the purposes of [the 
Act], to prevent circumvention or evasion of [the Act], or to 
facilitate compliance with [the Act].'' 15 U.S.C. 1604(a). The Board 
believes that the revisions to Regulation Z discussed above are within 
Congress's broad grant of authority to the Board to adopt provisions 
that carry out the purposes of the statute. These revisions facilitate 
the informed use of credit by consumers in circumstances where a 
consumer accesses a credit application, solicitation, or advertisement 
in electronic form.
    2. Issues raised by comments in response to the initial regulatory 
flexibility analysis. In accordance with section 603(a) of the RFA, the 
Board conducted an initial regulatory flexibility analysis in 
connection with the proposed rule. The Board did not receive any 
comments on its initial regulatory flexibility analysis.
    3. Small entities affected by the final rule. The ability to 
provide shopping and advertising disclosures in electronic form on or 
with an application, solicitation, or advertisement that is accessed by 
the consumer in electronic form applies to all creditors, regardless of 
their size. Accordingly, the final rule would reduce burden and 
compliance costs for small entities by providing relief, to the extent 
the E-Sign Act applies in these circumstances. The number of small 
entities affected by this final rule is unknown.
    4. Other federal rules. The Board believes no federal rules 
duplicate, overlap, or conflict with the final revisions to Regulation 
Z.
    5. Significant alternatives to the proposed revisions. The Board 
solicited comment on any significant alternatives that could provide 
additional ways to reduce regulatory burden associated

[[Page 63473]]

with the proposed rule. Commenters suggested that in certain 
circumstances where a consumer accesses a credit application or 
solicitation in electronic form, creditors should be permitted to 
provide the required disclosures in paper form (rather than electronic 
form as would be required under the proposed rule). The final rule 
permits paper disclosures in certain circumstances as suggested by the 
commenters. A commenter also suggested that in certain cases where a 
consumer receives a credit application or solicitation in paper form, 
creditors should be permitted to provide the required disclosures in 
electronic form without the consumer's consent. The final rule allows 
electronic disclosures in the case of applications or solicitations in 
paper form, but only if the consumer consents in accordance with the E-
Sign Act.

VIII. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (PRA) (44 
U.S.C. 3506; 5 CFR 1320 Appendix A.1), the Board reviewed the rule 
under the authority delegated to the Board by the Office of Management 
and Budget (OMB). The collection of information that is subject to the 
PRA by this final rulemaking is found in 12 CFR 226. The Federal 
Reserve may not conduct or sponsor, and an organization is not required 
to respond to, this information collection unless it displays a 
currently valid OMB control number. The OMB control number is 7100-
0199.
    Title I of the Consumer Credit Protection Act authorizes the 
Federal Reserve to issue regulations to carry out the provisions of 
that Act. 15 U.S.C. 1601, 1604(a). This information collection is 
mandatory. Since the Federal Reserve does not collect any information, 
no issue of confidentiality normally arises. However, in the event the 
Board were to retain records during the course of an examination, the 
information may be protected from disclosure under the exemptions 
(b)(4), (6), and (8) of the Freedom of Information Act (5 U.S.C. 522 
(b)). Transaction- or account-specific disclosures and billing error 
allegations are not publicly available and are confidential between the 
creditor and the consumer. General disclosures of credit terms that 
appear in advertisements or take-one applications are available to the 
public.
    TILA and Regulation Z ensure adequate disclosure of the costs and 
terms of credit to consumers. For open-end credit, creditors are 
required to disclose information about the initial costs and terms and 
to provide periodic statements of account activity, notices of changes 
in terms, and statements of rights concerning billing error procedures. 
The regulation also requires specific types of disclosures for credit 
and charge card accounts and home-equity plans. For closed-end loans, 
such as mortgage and installment loans, cost disclosures are required 
to be provided prior to consummation. Special disclosures are required 
of certain products, such as reverse mortgages, certain variable-rate 
loans, and certain mortgages with rates and fees above specified 
thresholds. TILA and Regulation Z also contain rules concerning credit 
advertising. To ease the burden and cost of complying with Regulation Z 
(particularly for small entities), the Federal Reserve provides model 
forms, which are appended to the regulation. Creditors are required to 
retain evidence of compliance for twenty-four months (subpart D, 
section 226.25), but the regulation does not specify the types of 
records that must be retained.
    Under the PRA, the Federal Reserve accounts for the paperwork 
burden associated with Regulation Z for the state member banks and 
other creditors supervised by the Federal Reserve that engage in 
lending covered by Regulation Z and, therefore, are respondents under 
the PRA. Appendix I of Regulation Z defines the Federal Reserve-
supervised institutions as: State member banks, branches and agencies 
of foreign banks (other than federal branches, federal agencies, and 
insured state branches of foreign banks), commercial lending companies 
owned or controlled by foreign banks, and organizations operating under 
section 25 or 25A of the Federal Reserve Act. Other federal agencies 
account for the paperwork burden on other creditors. The annual burden 
is estimated to be 552,398 hours for the 1,172 Federal Reserve-
supervised institutions that are deemed to be respondents for the 
purposes of the PRA.
    As mentioned in the Preamble, on April 30, 2007, a notice of 
proposed rulemaking was published in the Federal Register (72 FR 
21141). No comments specifically addressing the burden estimate were 
received.
    The Federal Reserve has a continuing interest in the public's 
opinions of our collections of information. At any time, comments 
regarding the burden estimate, or any other aspect of this collection 
of information, including suggestions for reducing the burden, may be 
sent to: Secretary, Board of Governors of the Federal Reserve System, 
20th and C Streets, NW., Washington, DC 20551; and to the Office of 
Management and Budget, Paperwork Reduction Project (7100-0199), 
Washington, DC 20503.

List of Subjects in 12 CFR Part 226

    Advertising, Federal Reserve System, Mortgages, Reporting and 
recordkeeping requirements, Truth in Lending.


0
For the reasons set forth in the preamble, the Board amends 12 CFR part 
226 as set forth below:

PART 226--TRUTH IN LENDING (REGULATION Z)

0
1. The authority citation for part 226 continues to read as follows:

    Authority: 12 U.S.C. 3806; 15 U.S.C. 1604 and 1637(c)(5).

Subpart B--Open-end Credit


0
2. Section 226.5 is amended by revising paragraph (a)(1), to read as 
follows, and removing paragraph (a)(5):


Sec.  226.5  General disclosure requirements.

    (a) Form of disclosures. (1) The creditor shall make the 
disclosures required by this subpart clearly and conspicuously in 
writing,\7\ in a form that the consumer may keep.\8\ The disclosures 
required by this subpart may be provided to the consumer in electronic 
form, subject to compliance with the consumer consent and other 
applicable provisions of the Electronic Signatures in Global and 
National Commerce Act (E-Sign Act) (15 U.S.C. Sec.  7001 et seq.). The 
disclosures required by Sec. Sec.  226.5a, 226.5b, and 226.16 may be 
provided to the consumer in electronic form without regard to the 
consumer consent or other provisions of the E-Sign Act in the 
circumstances set forth in those sections.
---------------------------------------------------------------------------

    \7\ The disclosure required by section 226.9(d) when a finance 
charge is imposed at the time of a transaction need not be written.
---------------------------------------------------------------------------

* * * * *
---------------------------------------------------------------------------

    \8\ The disclosures required under Sec.  226.5a for credit and 
charge card applications and solicitations, the home equity 
disclosures required under Sec.  226.5b(d), the alternative summary 
billing rights statement provided for in Sec.  226.9(a)(2s), the 
credit and charge card renewal disclosures required under Sec.  
226.9(e), and the disclosures made under Sec.  226.10(b) about 
payment requirements need not be in a form that the consumer can 
keep.

0
3. Section 226.5a is amended by adding a new paragraph (a)(2)(v), to 
read as follows:


Sec.  226.5a  Credit and charge card applications and solicitations.

    (a) * * *
    (2) * * *
    (v) For an application or a solicitation that is accessed by the 
consumer in electronic form, the disclosures required under this 
section may be provided to the consumer in electronic form on or with 
the application or solicitation.
* * * * *

[[Page 63474]]


0
4. Section 226.5b is amended by adding a new paragraph (a)(3), to read 
as follows, removing the heading for paragraph (c)(1), redesignating 
paragraph (c)(1) as paragraph (c), and removing paragraph (c)(2):


Sec.  226.5b  Requirements for home equity plans.

* * * * *
    (a) * * *
    (3) For an application that is accessed by the consumer in 
electronic form, the disclosures required under this section may be 
provided to the consumer in electronic form on or with the application.
* * * * *

0
5. Section 226.15 is amended by revising the first sentence of the 
introductory text of paragraph (b), to read as follows:


Sec.  226.15  Right of rescission.

* * * * *
    (b) Notice of right to rescind. In any transaction or occurrence 
subject to rescission, a creditor shall deliver two copies of the 
notice of the right to rescind to each consumer entitled to rescind 
(one copy to each if the notice is delivered in electronic form in 
accordance with the consumer consent and other applicable provisions of 
the E-Sign Act). * * *
* * * * *

0
6. Section 226.16 is amended by revising paragraph (c) to read as 
follows:


Sec.  226.16  Advertising.

* * * * *
    (c) Catalogs or other multiple-page advertisements; electronic 
advertisements. (1) If a catalog or other multiple-page advertisement, 
or an electronic advertisement (such as an advertisement appearing on 
an Internet Web site), gives information in a table or schedule in 
sufficient detail to permit determination of the disclosures required 
by paragraph (b) of this section, it shall be considered a single 
advertisement if:
    (i) The table or schedule is clearly and conspicuously set forth; 
and
    (ii) Any statement of terms set forth in Sec.  226.6 appearing 
anywhere else in the catalog or advertisement clearly refers to the 
page or location where the table or schedule begins.
    (2) A catalog or other multiple-page advertisement or an electronic 
advertisement (such as an advertisement appearing on an Internet Web 
site) complies with this paragraph if the table or schedule of terms 
includes all appropriate disclosures for a representative scale of 
amounts up to the level of the more commonly sold higher-priced 
property or services offered.
* * * * *

Subpart C--Closed-end Credit

0
7. Section 226.17 is amended by revising paragraph (a)(1), removing 
paragraph (a)(3), and revising paragraph (g), to read as follows:


Sec.  226.17  General disclosure requirements.

    (a) Form of disclosures. (1) The creditor shall make the 
disclosures required by this subpart clearly and conspicuously in 
writing, in a form that the consumer may keep. The disclosures required 
by this subpart may be provided to the consumer in electronic form, 
subject to compliance with the consumer consent and other applicable 
provisions of the Electronic Signatures in Global and National Commerce 
Act (E-Sign Act) (15 U.S.C. 7001 et seq.). The disclosures required by 
Sec. Sec.  226.17(g), 226.19(b), and 226.24 may be provided to the 
consumer in electronic form without regard to the consumer consent or 
other provisions of the E-Sign Act in the circumstances set forth in 
those sections. The disclosures shall be grouped together, shall be 
segregated from everything else, and shall not contain any information 
not directly related \37\ to the disclosures required under Sec.  
226.18.\38\ The itemization of the amount financed under Sec.  
226.18(c)(1) must be separate from the other disclosures under that 
section.
---------------------------------------------------------------------------

    \37\ The disclosures may include an acknowledgment of receipt, 
the date of the transaction, and the consumer's name, address, and 
account number.
    \38\ The following disclosures may be made together with or 
separately from other required disclosures: the creditor's identity 
under Sec.  226.18(a), the variable rate example under Sec.  
226.18(f)(1)(iv), insurance or debt cancellation under Sec.  
226.18(n), and certain security interest charges under Sec.  
226.18(o).
---------------------------------------------------------------------------

* * * * *
    (g) Mail or telephone orders--delay in disclosures. If a creditor 
receives a purchase order or a request for an extension of credit by 
mail, telephone, or facsimile machine without face-to-face or direct 
telephone solicitation, the creditor may delay the disclosures until 
the due date of the first payment, if the following information for 
representative amounts or ranges of credit is made available in written 
form or in electronic form to the consumer or to the public before the 
actual purchase order or request:
    (1) The cash price or the principal loan amount.
    (2) The total sale price.
    (3) The finance charge.
    (4) The annual percentage rate, and if the rate may increase after 
consummation, the following disclosures:
    (i) The circumstances under which the rate may increase.
    (ii) Any limitations on the increase.
    (iii) The effect of an increase.
    (5) The terms of repayment.
* * * * *

0
8. Section 226.19 is amended by adding a new paragraph (c), to read as 
follows:


Sec.  226.19  Certain residential mortgage and variable-rate 
transactions.

* * * * *
    (c) Electronic disclosures. For an application that is accessed by 
the consumer in electronic form, the disclosures required by paragraph 
(b) of this section may be provided to the consumer in electronic form 
on or with the application.

0
9. Section 226.23 is amended by revising the first sentence of 
paragraph (b)(1), to read as follows:


Sec.  226.23  Right of rescission.

* * * * *
    (b)(1) Notice of right to rescind. In a transaction subject to 
rescission, a creditor shall deliver two copies of the notice of the 
right to rescind to each consumer entitled to rescind (one copy to each 
if the notice is delivered in electronic form in accordance with the 
consumer consent and other applicable provisions of the E-Sign Act). * 
* *
* * * * *

0
10. Section 226.24 is amended by revising paragraph (d) to read as 
follows:


Sec.  226.24  Advertising.

* * * * *
    (d) Catalogs or other multiple-page advertisements; electronic 
advertisements. (1) If a catalog or other multiple-page advertisement, 
or an electronic advertisement (such as an advertisement appearing on 
an Internet Web site), gives information in a table or schedule in 
sufficient detail to permit determination of the disclosures required 
by paragraph (c)(2) of this section, it shall be considered a single 
advertisement if:
    (i) The table or schedule is clearly and conspicuously set forth; 
and
    (ii) Any statement of terms of the credit terms in paragraph (c)(1) 
of this section appearing anywhere else in the catalog or advertisement 
clearly refers to the page or location where the table or schedule 
begins.
    (2) A catalog or other multiple-page advertisement or an electronic

[[Page 63475]]

advertisement (such as an advertisement appearing on an Internet Web 
site) complies with paragraph (c)(2) of this section if the table or 
schedule of terms includes all appropriate disclosures for a 
representative scale of amounts up to the level of the more commonly 
sold higher-priced property or services offered.

Subpart E--Special Rules for Certain Home Mortgage Transactions

0
11. Section 226.31 is amended by revising paragraph (b) to read as 
follows:


Sec.  226.31  General rules.

* * * * *
    (b) Form of disclosures. The creditor shall make the disclosures 
required by this subpart clearly and conspicuously in writing, in a 
form that the consumer may keep. The disclosures required by this 
subpart may be provided to the consumer in electronic form, subject to 
compliance with the consumer consent and other applicable provisions of 
the Electronic Signatures in Global and National Commerce Act (E-Sign 
Act) (15 U.S.C. Sec.  7001 et seq.).
* * * * *

Subpart F--[Removed]

0
12. Subpart F, consisting of Sec.  226.36, is removed.

0
13. In Supplement I to Part 226, the following amendments are made:
0
a. In Section 226.5--General Disclosure Requirements, under Paragraph 
5(b)(2)(ii), paragraph 3. is revised.
0
b. In Section 226.5a--Credit and Charge Card Applications and 
Solicitations, under 5a(a)(2) Form of Disclosures, paragraph 8. is 
revised and new paragraph 9. is added.
0
c. In Section 226.5b--Requirements for Home Equity Plans, under 5b(a) 
Form of Disclosures, under 5b(a)(1) General, new paragraph 5. is added.
0
d. In Section 226.5b--Requirements for Home Equity Plans, under 5b(a) 
Form of Disclosures, new heading Paragraph 5b(a)(3) is added, and under 
the new heading new paragraph 1. is added.
0
e. In Section 226.5b--Requirements for Home Equity Plans, under 5b(b) 
Time of Disclosures, paragraph 7. is removed.
0
f. In Section 226.15--Right of Rescission, under 15(b) Notice of Right 
to Rescind., paragraph 1. is revised.
0
g. In Section 226.16--Advertising, under Paragraph 16(c)(1), paragraphs 
1. and 2. are revised.
0
h. In Section 226.19--Certain Residential Mortgage and Variable-Rate 
Transactions, under 19(b) Certain variable-rate transactions, paragraph 
2.v. is revised.
0
i. In Section 226.19--Certain Residential Mortgage and Variable-Rate 
Transactions, new heading 19(c) Electronic disclosures is added, and 
under the new heading new paragraph 1. is added.
0
j. In Section 226.23--Right of Rescission, under 23(b) Notice of Right 
to Rescind., paragraph 1. is revised.
0
k. In Section 226.24--Advertising, under 24(b) Advertisement of Rate of 
Finance Charge, paragraph 6. is removed.
0
l. In Section 226.24--Advertising, under 24(d) Catalogs or other 
multiple-page advertisements; electronic advertisements, paragraphs 2. 
and 4. are revised.
0
m. Subpart F, section 226.36--Requirements for Electronic 
Communications, is removed.
    The amendments read as follows:

SUPPLEMENT I TO PART 226--OFFICIAL STAFF INTERPRETATIONS

* * * * *

Subpart B--Open-End Credit

Section 226.5--General Disclosure Requirements

* * * * *
    5(b)(2) Periodic statements.
* * * * *
    Paragraph 5(b)(2)(ii).
* * * * *
    3. Calling for periodic statements. When the consumer initiates 
a request, the creditor may permit, but may not require, consumers 
to pick up their periodic statements. If the consumer wishes to pick 
up the statement and the plan has a free-ride period, the statement 
must be made available in accordance with the 14-day rule.
* * * * *

Section 226.5a--Credit and Charge Card Applications and 
Solicitations

* * * * *
    5a(a) General rules.
    5a(a)(2) Form of disclosures.
* * * * *
    8. Form of electronic disclosures provided on or with electronic 
applications or solicitations. Card issuers must provide the 
disclosures required by this section on or with a blank application 
or reply form that is made available to the consumer in electronic 
form, such as on a card issuer's Internet Web site. Card issuers 
have flexibility in satisfying this requirement. Methods card 
issuers could use to satisfy the requirement include, but are not 
limited to, the following examples:
    i. The disclosures could automatically appear on the screen when 
the application or reply form appears;
    ii. The disclosures could be located on the same Web page as the 
application or reply form (whether or not they appear on the initial 
screen), if the application or reply form contains a clear and 
conspicuous reference to the location of the disclosures and 
indicates that the disclosures contain rate, fee, and other cost 
information, as applicable;
    iii. Card issuers could provide a link to the electronic 
disclosures on or with the application (or reply form) as long as 
consumers cannot bypass the disclosures before submitting the 
application or reply form. The link would take the consumer to the 
disclosures, but the consumer need not be required to scroll 
completely through the disclosures; or
    iv. The disclosures could be located on the same web page as the 
application or reply form without necessarily appearing on the 
initial screen, immediately preceding the button that the consumer 
will click to submit the application or reply.
    Whatever method is used, a card issuer need not confirm that the 
consumer has read the disclosures. For disclosures required to be 
provided in tabular form, card issuers must satisfy the requirements 
with respect to electronic disclosures set forth in comment 
5a(a)(2)-2(ii).
    9. Form of disclosures. Whether disclosures must be in 
electronic form depends upon the following:
    i. If a consumer accesses a credit card application or 
solicitation electronically other than in-person in a card issuer's 
office (covered under ii. below), such as online at a home computer, 
the card issuer must provide the disclosures in electronic form 
(such as with the application or solicitation on its Web site) in 
order to meet the requirement to provide disclosures in a timely 
manner on or with the application or solicitation. If the issuer 
instead mailed paper disclosures to the consumer, this requirement 
would not be met.
    ii. In contrast, if a consumer is physically present in the card 
issuer's office, and accesses a credit card application or 
solicitation electronically, such as via a terminal or kiosk, the 
issuer may provide disclosures in either electronic or paper form, 
provided the issuer complies with the timing and delivery (``on or 
with'') requirements of the regulation.
* * * * *

Section 226.5b--Requirements for Home Equity Plans

* * * * *
    5b(a) Form of disclosures.

5b(a)(1) General

* * * * *
    5. Form of electronic disclosures provided on or with electronic 
applications. Creditors must provide the disclosures required by 
this section (including the brochure) on or with a blank application 
that is made available to the consumer in electronic form, such as 
on a creditor's Internet Web site. Creditors have flexibility in 
satisfying this requirement. Methods creditors could use to satisfy 
the requirement include, but are not limited to, the following 
examples:
    i. The disclosures could automatically appear on the screen when 
the application appears;

[[Page 63476]]

    ii. The disclosures could be located on the same web page as the 
application (whether or not they appear on the initial screen), if 
the application contains a clear and conspicuous reference to the 
location of the disclosures and indicates that the disclosures 
contain rate, fee, and other cost information, as applicable;
    iii. Creditors could provide a link to the electronic 
disclosures on or with the application as long as consumers cannot 
bypass the disclosures before submitting the application. The link 
would take the consumer to the disclosures, but the consumer need 
not be required to scroll completely through the disclosures; or
    iv. The disclosures could be located on the same web page as the 
application without necessarily appearing on the initial screen, 
immediately preceding the button that the consumer will click to 
submit the application.
    Whatever method is used, a creditor need not confirm that the 
consumer has read the disclosures.
* * * * *

Paragraph 5b(a)(3)

    1. Form of disclosures. Whether disclosures must be in 
electronic form depends upon the following:
    i. If a consumer accesses a home equity credit line application 
electronically other than in-person in a creditor's office (covered 
under ii. below), such as online at a home computer, the creditor 
must provide the disclosures in electronic form (such as with the 
application form on its Web site) in order to meet the requirement 
to provide disclosures in a timely manner on or with the 
application. If the creditor instead mailed paper disclosures to the 
consumer, this requirement would not be met.
    ii. In contrast, if a consumer is physically present in the 
creditor's office, and accesses a home equity credit line 
application electronically, such as via a terminal or kiosk, the 
creditor may provide disclosures in either electronic or paper form, 
provided the creditor complies with the timing, delivery, and 
retainability requirements of the regulation.
* * * * *

Section 226.15--Right of Rescission

* * * * *
    15(b) Notice of right to rescind.
    1. Who receives notice. Each consumer entitled to rescind must 
be given:
     Two copies of the rescission notice.
     The material disclosures.
    In a transaction involving joint owners, both of whom are 
entitled to rescind, both must receive the notice of the right to 
rescind and disclosures. For example, if both spouses are entitled 
to rescind a transaction, each must receive two copies of the 
rescission notice (one copy to each if the notice is provided in 
electronic form in accordance with the consumer consent and other 
applicable provisions of the E-Sign Act) and one copy of the 
disclosures.
* * * * *

Section 226.16--Advertising

* * * * *
    16(c) Catalogs or other multiple-page advertisements; electronic 
advertisements.
* * * * *
    Paragraph 16(c)(1).
    1. General. Section 226.16(c)(1) permits creditors to put credit 
information together in one place in a catalog or other multiple-
page advertisement or an electronic advertisement (such as an 
advertisement appearing on an Internet Web site). The rule applies 
only if the advertisement contains one or more of the triggering 
terms from Sec.  226.16(b).
    2. Electronic advertisement. If an electronic advertisement 
(such as an advertisement appearing on an Internet Web site) 
contains the table or schedule permitted under Sec.  226.16(c)(1), 
any statement of terms set forth in Sec.  226.6 appearing anywhere 
else in the advertisement must clearly direct the consumer to the 
location where the table or schedule begins. For example, a term 
triggering additional disclosures may be accompanied by a link that 
directly takes the consumer to the additional information.
* * * * *

Subpart C--Closed-End Credit

Section 226.19--Certain Residential Mortgage and Variable-Rate 
Transactions

* * * * *
    19(b) Certain variable-rate transactions.
* * * * *
    2. * * *
    v. Form of electronic disclosures provided on or with electronic 
applications. Creditors must provide the disclosures required by 
this section (including the brochure) on or with a blank application 
that is made available to the consumer in electronic form, such as 
on a creditor's Internet Web site. Creditors have flexibility in 
satisfying this requirement. Methods creditors could use to satisfy 
the requirement include, but are not limited to, the following 
examples:
    A. The disclosures could automatically appear on the screen when 
the application appears;
    B. The disclosures could be located on the same web page as the 
application (whether or not they appear on the initial screen), if 
the application contains a clear and conspicuous reference to the 
location of the disclosures and indicates that the disclosures 
contain rate, fee, and other cost information, as applicable;
    C. Creditors could provide a link to the electronic disclosures 
on or with the application as long as consumers cannot bypass the 
disclosures before submitting the application. The link would take 
the consumer to the disclosures, but the consumer need not be 
required to scroll completely through the disclosures; or
    D. The disclosures could be located on the same web page as the 
application without necessarily appearing on the initial screen, 
immediately preceding the button that the consumer will click to 
submit the application.
    Whatever method is used, a creditor need not confirm that the 
consumer has read the disclosures.
* * * * *
    19(c) Electronic disclosures.
    1. Form of disclosures. Whether disclosures must be in 
electronic form depends upon the following:
    i. If a consumer accesses an ARM loan application electronically 
other than in-person in a creditor's office (covered under ii. 
below), such as online at a home computer, the creditor must provide 
the disclosures in electronic form (such as with the application 
form on its Web site) in order to meet the requirement to provide 
disclosures in a timely manner on or with the application. If the 
creditor instead mailed paper disclosures to the consumer, this 
requirement would not be met.
    ii. In contrast, if a consumer is physically present in the 
creditor's office, and accesses an ARM loan application 
electronically, such as via a terminal or kiosk, the creditor may 
provide disclosures in either electronic or paper form, provided the 
issuer complies with the timing, delivery, and retainability 
requirements of the regulation.
* * * * *

Section 226.23--Right of Rescission

* * * * *
    23(b) Notice of right to rescind.
    1. Who receives notice. Each consumer entitled to rescind must 
be given:
     Two copies of the rescission notice.
     The material disclosures.
    In a transaction involving joint owners, both of whom are 
entitled to rescind, both must receive the notice of the right to 
rescind and disclosures. For example, if both spouses are entitled 
to rescind a transaction, each must receive two copies of the 
rescission notice (one copy to each if the notice is provided in 
electronic form in accordance with the consumer consent and other 
applicable provisions of the E-Sign Act) and one copy of the 
disclosures.
* * * * *

Section 226.24--Advertising

* * * * *
    24(d) Catalogs or other multiple-page advertisements; electronic 
advertisements.
* * * * *
    2. General. Section 226.24(d) permits creditors to put credit 
information together in one place in a catalog or other multiple-
page advertisement, or in an electronic advertisement (such as an 
advertisement appearing on an Internet Web site). The rule applies 
only if the advertisement contains one or more of the triggering 
terms from Sec.  226.24(c)(1). A list of different annual percentage 
rates applicable to different balances, for example, does not 
trigger further disclosures under Sec.  226.24(c)(2) and so is not 
covered by Sec.  226.24(d).
* * * * *
    4. Electronic advertisement. If an electronic advertisement 
(such as an advertisement appearing on an Internet Web site) 
contains the table or schedule permitted under Sec.  226.24(d)(1), 
any statement of terms set forth in Sec.  226.24(c)(1) appearing 
anywhere else in the advertisement must clearly direct the consumer 
to the location where the table or schedule begins. For example, a 
term triggering additional disclosures may be accompanied by a link 
that directly takes the consumer to the additional information.


[[Page 63477]]


    By order of the Board of Governors of the Federal Reserve 
System, October 31, 2007.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E7-21700 Filed 11-8-07; 8:45 am]
BILLING CODE 6210-01-P