Reg Z '09 SS fin_mtd

Supporting Statement for Information Collection
Provisions of Regulation Z
(Truth in Lending Act)
12 CFR 226
(OMB Control Number: 3084-0088)
1.

Necessity for Collecting and Retaining the Information

The Truth in Lending Act (“TILA”), 15 U.S.C. 1601 et seq., was enacted to foster
comparison credit shopping and informed credit decision making by requiring accurate
disclosure of the costs and terms of credit to consumers. Creditors are subject to calculation and
disclosure requirements that apply to open-end credit (e.g., revolving credit or credit lines) and
closed-end credit (e.g., installment financing). The TILA imposes disclosure requirements on all
types of creditors in connection with consumer credit, including mortgage companies, finance
companies, retailers, and credit card issuers, to ensure that consumers are fully apprised of the
terms of financing prior to consummation of the transaction and, in some instances, during the
loan term. It also imposes advertising disclosure requirements on advertisers of consumer credit.
The TILA also establishes billing error resolution procedures and limits consumer liability for
the unauthorized use of credit cards. An amendment to the TILA, the Home Ownership and
Equity Protection Act (“HOEPA”), imposes, among other things, various disclosure and other
requirements on certain creditors offering high-rate, high-fee mortgage loans to consumers.
The Federal Reserve Board (“FRB”) promulgated Regulation Z to implement the TILA,
as required by the statute. The Federal Trade Commission (“FTC” or “Commission”) enforces
the TILA as to all creditors and advertisers except those (such as federally chartered or insured
depository institutions) that are subject to the regulatory authority of another federal agency.
The TILA also contains a private right of action with a one-year statute of limitations for
consumers.
Recordkeeping
Section 226.25(a) of Regulation Z requires creditors to retain evidence of compliance
with the regulation (other than the advertising requirements) for two years after the date
disclosures are required to be made or other action is required to be taken. Regulation Z also
provides that the FTC (and other administrative agencies responsible for enforcing the TILA)
may require creditors under their jurisdictions to retain records for a longer period if necessary to
carry out their enforcement responsibilities under the TILA. The recordkeeping requirement
ensures that records that might contain evidence of violations of the TILA remain available to
the FTC and other agencies, as well as to private litigants.

Disclosure
The disclosures required by Regulation Z are derived from statutory provisions under the
TILA. See e.g., 12 CFR 226.5a, 15 U.S.C. 1637(c)-(g); 12 CFR 226.5b, 15 U.S.C. 1637a and
1647; 12 CFR 226.6, 15 U.S.C. 1637(a); 12 CFR 226.7, 15 U.S.C. 1637(b) (various open-end
disclosures); 12 CFR 226.18, 15 U.S.C. 1638; 12 CFR 226.33, 15 U.S.C. 1648 (various closedend credit and reverse mortgage disclosures); 12 CFR 226.32 and 226.34, 15 U.S.C. 1639
(various high-rate, high-fee closed-end credit disclosures).
The FRB has issued model forms and clauses that can be used to comply with the written
disclosure (non-advertising) requirements of the TILA and Regulation Z. See, e.g., Appendices
D-H and K-L to Regulation Z. Correct use of these model forms and clauses insulates creditors
from liability under the TILA and Regulation Z. See FRB Official Staff Commentary to
Regulation Z ("Commentary"), Appendixes G and H, Comment 1; 12 CFR 226, Appendixes G
and H, Supp. 1.
2.

Use of the Information

The FTC, other agencies, and private litigants use the records to ascertain whether
accurate and complete disclosures of the cost of credit have been provided to consumers prior to
consummation of the credit obligation and, in some instances, during the loan term. The
information is also used to determine whether other actions required under the TILA, including
complying with billing error resolution procedures and limitation of consumer liability for
unauthorized use of credit, have been met. The information retained provides the primary
evidence of law violations in TILA enforcement actions brought by the FTC. Without the
Regulation Z recordkeeping requirement, the FTC's ability to enforce the TILA would be
significantly impaired.
As noted above, consumers rely on the disclosures required by the TILA and Regulation
Z to comparison credit shop and to facilitate informed credit decision making. Without this
information, consumers would be severely hindered in their ability to assess the true costs and
terms of financing offered. Also, without the special billing error information and other credit
card provisions, such as limitation of consumer liability for unauthorized use of credit,
consumers would be unable to detect and correct errors on their credit card accounts and
fraudulent charges. The FTC and private litigants need the information in these disclosures and
other requirements to enforce the TILA and Regulation Z. See 15 U.S.C. 1607, 1640.
3.

Consideration of the Use of Improved Information Technology

The FRB has issued final rules to establish uniform standards for using electronic
communication to deliver disclosures required under Regulation Z, within the context of the
Electronic Signatures in Global and National Commerce Act (“ESIGN”), 15 U.S.C. 7001 et seq.
72 FR 63,462 (Nov. 9, 2007). These rules enable businesses to utilize electronic disclosures and
compliance, consistent with the requirements of ESIGN, which became effective on Oct. 1,
2000. Use of such electronic communications is also consistent with the Government Paperwork
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Elimination Act (“GPEA”), Title XVII of Pub. L. 105-277, codified at 44 U.S.C. 3504, note.
ESIGN and GPEA serve to reduce businesses’ compliance burden related to federal
requirements, including Regulation Z, by enabling businesses to utilize more efficient electronic
media for disclosures and compliance.
Regulation Z also permits creditors to retain records on microfilm or microfiche or any
other method that reproduces records accurately, including computer programs. Creditors need
only retain enough information to reconstruct the required disclosure or other records. Section
226.25(a)-2 of the Commentary, 12 CFR 226.25(a)-2.
4.

Efforts to Identify Duplication/Availability of Similar Information

The recordkeeping requirement of Regulation Z preserves the information utilized by the
creditor in making disclosures (and underlying calculations) of the terms of consumer credit and
other required actions. The creditor is the only source of this information. No other federal law
mandates these disclosures and other required actions. No state law known to staff imposes
these requirements, although some states may have other rules applicable to consumer credit
transactions.
Similarly, the disclosures required by the TILA and Regulation Z are not otherwise
available. Although some credit cost information is contained in contractual documents, the
information is not standardized. As a result, consumers cannot use it efficiently to comparison
shop or to fully appreciate the credit terms. The creditor (and/or advertiser) is the only source of
this information. No other federal law mandates these disclosures. State laws do not duplicate
these requirements, although some states may have other rules applicable to consumer credit
transactions.
5.

Efforts to Minimize Burdens on Small Businesses

The TILA and Regulation Z recordkeeping and disclosure requirements are imposed on
all creditors. The recordkeeping requirement is mandated by Regulation Z. The disclosure
requirements are mandated jointly by the TILA and Regulation Z. As previously noted, the
FTC’s role in this area is limited to enforcement, because the TILA vested rulemaking authority
in the FRB.
Most lenders today utilize some degree of computerization in their business, and
Regulation Z permits businesses to rely on computer support, among other alternatives, to meet
their recordkeeping and disclosure requirements. This flexibility presumably yields reduced
recordkeeping and disclosure costs. (See #3 above.) Moreover, as noted previously, Regulation
Z provides model forms and clauses that may be used in compliance with its requirements.
Correct use of these forms and clauses insulates a creditor from liability as to proper format.
6.

Consequences of Conducting Collection Less Frequently
The current record retention period of two years supports the one-year statute of
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limitations for private actions, and the FTC's (and other administrative agencies') need for
sufficient time to bring enforcement actions regarding credit transactions. If the retention period
were shortened, consumers who sue under the TILA, and the administrative agencies, might find
that creditor records needed to prove violations of the TILA no longer exist.
As noted, the disclosure requirements are needed to facilitate comparison cost shopping
and to spur informed credit decisionmaking. Without these requirements, consumers would not
have access to this critical information. Their right to sue under the TILA would be undermined,
and the FTC (and other administrative agencies) could not fulfill their mandate to enforce the
TILA.
7.

Circumstances Requiring Collection Inconsistent with Guidelines

The collections of information in Regulation Z are consistent with the applicable
guidelines contained in 5 CFR 1320.5(d)(2).
8.

Consultation Outside the Agency

The recordkeeping and disclosure requirements of Regulation Z were promulgated by the
FRB. Before the regulation was adopted and prior to each amendment, the FRB published the
regulation for public comment in the Federal Register.
More recently, the Commission sought public comment in connection with its latest PRA
clearance request for these regulations, in accordance with 5 CFR 1320.8(d). See 73 FR 70,347
(Nov. 20, 2008). No comments were received. Consistent with 5 CFR 1320.12(c), the FTC is
again seeking public comment contemporaneously with this submission.
9.

Payments or Gifts to Respondents
Not applicable.

10 & 11.

Assurances of Confidentiality/Matters of a Sensitive Nature

The required recordkeeping and disclosures also contain private financial information
about persons who use consumer credit that is protected by the Right to Financial Privacy Act,
12 U.S.C. 3401 et seq. Such records may also constitute confidential customer lists. Any of
these records provided to the FTC would be covered by the protections of Sections 6(f) and 21 of
the FTC Act, 15 U.S.C. 46(f) and 57b-2, by Section 4.10 of the Commission's Rules of Practice,
16 CFR 4.10, and by the exemptions of the Freedom of Information Act, 5 U.S.C. 552(b), as
applicable.

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12.

Estimated Hours Burden: 12,415,418
Recordkeeping

FTC staff estimates that Regulation Z’s recordkeeping requirements affect approximately
1,000,000 firms offering credit and subject to the Commission’s jurisdiction, at an average
annual burden of one hour per firm, for a total of 1,000,000 hours.
Disclosure
Regulation Z disclosure requirements pertain to open-end and closed-end credit. It
applies to various types of entities, including mortgage companies; finance companies; auto
dealerships; student loan companies; merchants who extend credit for goods or services, credit
advertisers; and others. Below is staff’s best estimate of burden applicable to this very spectrum
of covered entities.
Regulation Z: Disclosures – Burden Hours

Disclosures1

--------------- Setup/Monitoring --------------Average
Total Setup/
Burden per
Monitoring
Respondents Respondent
Burden
(hours)
(hours)

---------- Transaction-related ----------Average
Total
Number of Burden per Transaction
Transactions Transaction
Burden
(minutes)
(hours)

Total
Burden
(hours)

Open-end credit:
Initial terms
Rescission notices
Change in terms
Periodic statements
Error resolution
Credit and charge card accounts
Home equity lines of credit
Advertising

90,000
7,500
20,000
90,000
90,000
50,000
7,500
200,000

.5
.5
.5
.5
.5
.5
.5
.5

45,000
3,750
10,000
45,000
45,000
25,000
3,750
100,000

40,000,000
400,000
125,000,000
3,500,000,000
8,000,000
25,000,000
3,500,000
600,000

.25
.25
.125
.0625
5
.25
.25
.5

166,667
1,667
260,417
3,645,833
666,667
104,167
14,583
5,000

211,667
5,417
270,417
3,690,833
711,667
129,167
18,333
105,000

Closed-end credit:
Credit disclosures
Rescission notices
Variable rate mortgages
High rate/high-fee mortgages
Reverse mortgages
Advertising2

700,000
75,000
70,000
40,000
50,000
450,000

.5
.5
.5
.5
.5
.5

350,000
37,500
35,000
20,000
25,000
225,000

200,000,000
30,000,000
2,000,000
500,000
175,000
900,000

1.5
1
1.5
1.5
1
1

5,000,000
500,000
50,000
12,500
2,917
15,000

5,350,000
537,500
85,000
32,500
27,917
240,000

Total open-end credit
Total closed-end credit

5,142,501
6,272,917

Total credit

11,415,418

1
Generally, open-end and closed-end entities and transactions have decreased, but reverse mortgages have increased, compared to prior FTC
estimates.
2
Advertising time for setup for open-end and closed-end mortgage transactions is estimated to increase based on new rules effective October 1,
2009, but the number of transactions have decreased, compared to prior FTC estimates.

Associated labor costs: $ 372,419,363
Staff calculated labor costs by applying appropriate hourly cost figures to the burden

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hours described above. The hourly rates used below ($41 for managerial or professional time,
$30 for skilled technical time, and $16 for clerical time) are averages.
Recordkeeping
For the 1,000,000 recordkeeping hours, staff estimates that 10 percent of the burden
hours require skilled technical time and 90 percent require clerical time. As shown below, the
total recordkeeping cost is $17,400,000.
Disclosure
For each notice or information item listed, staff estimates that 10 percent of the burden
hours require managerial or professional time and 90 percent require skilled technical time. As
shown below, the total disclosure cost is $355,019,363.
Regulation Z: Recordkeeping and Disclosures – Cost

Required Task

------Managerial-----Time
Cost
(hours)
($41/hr.)

Recordkeeping

0

-----Skilled Technical----Time
Cost
(hours)
($30/hr.)

--------Clerical-------Time
Cost
(hours)
($16/hr.)
900,000 $14,400,000

Total
Cost
($)

$0

100,000

$3,000,000

$17,400,000

Open-end credit Disclosures:
Initial terms
Rescission notices
Change in terms
Periodic statements
Error resolution
Credit and charge card accounts
Home equity lines of credit
Advertising
Total open-end credit

21,167
$867,847
542
$22,222
27,042 $1,108,722
369,083 $15,132,403
71,167 $2,917,847
12,917
$529,597
1,833
$75,153
10,500
$430,500

190,499
4,874
243,374
3,321,750
640,499
116,249
16,500
94,500

$5,714,970
$146,220
$7,301,220
$99,652,500
$19,214,970
$3,487,470
$495,000
$2,835,000

0
0
0
0
0
0
0
0

$0
$0
$0
$0
$0
$0
$0
$0

$6,582,817
$168,442
$8,409,942
$114,784,903
$22,132,817
$4,017,067
$570,153
$3,265,500
$159,931,641

Closed-end credit Disclosures:
Credit disclosures
Rescission notices
Variable rate mortgages
High-rate/high-fee mortgages
Reverse mortgages
Advertising
Total closed-end credit

535,000 $21,935,000
53,750 $2,203,750
8,500
$348,500
3,250
$133,250
2,792
$114,472
24,000
$984,000

4,815,000 $144,450,000
483,750 $14,512,500
76,500
$2,295,000
29,250
$877,500
25,125
$753,750
216,000
$6,480,000

0
0
0
0
0
0

$0
$0
$0
$0
$0
$0

$166,385,000
$16,716,250
$2,643,500
$1,010,750
$868,222
$7,464,000
$195,087,722

Total Disclosures

$355,019,363

Total Recordkeeping and Disclosures

$372,419,363

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13.

Estimated Capital and Other Non-Labor Costs

The applicable requirements impose minimal start-up costs, as creditors and/or
advertisers generally have or obtain necessary equipment for other business purposes. For the
same reason, staff believes that the cost of printing and copying to comply with Regulation Z is
minimal. Staff anticipates that the above requirements necessitate ongoing, regular training so
that covered entities stay current and have a clear understanding of federal mandates. This
training, however, would be a small portion of and subsumed within the ordinary training that
employees receive apart from that associated with collecting information to comply with
Regulation Z.
14.

Estimated Cost to Federal Government

The FRB promulgates the recordkeeping requirement of Regulation Z, so there is no cost
to the FTC for that purpose. Enforcement of the recordkeeping requirement of Regulation Z is
incidental to overall enforcement of the TILA. In the course of our compliance investigations,
staff routinely requests records from creditors of credit disclosures and other required actions. If
the records are not available, that indicates the records are not being retained as required.
However, additional enforcement resources are being applied to unfair and deceptive lending
and servicing activity (including for enforcing the advertising and disclosure requirements under
the TILA). Staff estimates that enforcing the recordkeeping requirement will cost the FTC
Bureau of Consumer Protection approximately $157,184, which is a representative years’ cost of
enforcing Regulation Z’s requirements during the three-year clearance period sought. This
estimate is based on the assumption that one attorney work year will be expended. Clerical and
other support services are included in this estimate.
The FRB promulgates the disclosure requirements of Regulation Z, so there is no cost to
the FTC for that purpose. Regarding enforcement, additional resources are being applied to
unfair and deceptive lending and servicing activity (including for enforcing the advertising and
disclosure requirements of the TILA). Staff estimates that the cost to the FTC Bureau of
Consumer Protection of administering all TILA requirements will approximate $1.4 million.
This estimate is based on the assumption that eight full attorney work years and one other
professional work year will be expended to enforce various aspects of these rules. Clerical and
other support services are also included in this estimate.
15.

Program Changes or Adjustments

FTC staff have adjusted downward the prior overall burden estimate by 5,223,582 hours
(from 17,639,000 to 12,415,418). This reduction is due to several factors. Open-end and closedend entities and transactions have decreased (although reverse mortgages have increased,
relative to prior estimates). While estimated advertising time for setup for open-end and closedend mortgage transactions has increased, based on new rules effective October 1, 2009, the
number of transactions has decreased, relative to prior FTC estimates. Moreover, computer
technology use has expanded for closed-end transactions with lengthy disclosures; previously,
more manual efforts were used, e.g., mortgage disclosures for general credit terms, variable rate
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transactions, and high rate-high fee loans. These combined factors thus reduce overall estimated
burden.
16.

Publishing Results of the Collection of Information
Not applicable.

17.

Display of Expiration Date for OMB Approval
Not applicable.

18.

Exceptions to the Certifications for PRA Submissions
Not applicable.

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