[Federal Register Volume 66, Number 62 (Friday, March 30, 2001)]
[Rules and Regulations]
[Pages 17329-17341]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-7727]


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FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Regulation Z; Docket No. R-1043]


Truth in Lending

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Interim rule; request for comments.

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SUMMARY: The Board is adopting an interim final rule amending 
Regulation Z, which implements the Truth in Lending Act, to establish 
uniform standards for the electronic delivery of disclosures required 
by the act and regulation. The rule provides guidance on the timing and 
delivery of electronic disclosures to ensure consumers have adequate 
opportunity to access and retain cost information when shopping for 
credit or before becoming obligated for an extension of credit. 
(Similar rules are being adopted under other consumer financial 
services and fair lending regulations administered by the Board.) Under 
the rule, creditors may deliver disclosures electronically if they 
obtain consumers' affirmative consent in accordance with the Electronic 
Signatures in Global and National Commerce Act. In addition, the 
regulation is revised to allow creditors to provide disclosures in 
foreign languages. The rule is being adopted as an interim rule to 
allow for additional public comment.

DATES: The interim rule is effective March 30, 2001; however, to allow 
time for any necessary operational changes, the mandatory compliance 
date is October 1, 2001. Comments must be received by June 1, 2001.

ADDRESSES: Comments, which should refer to Docket No. R-1043, may be 
mailed to Ms. Jennifer J. Johnson, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue, NW., 
Washington, DC 20551 or mailed electronically to 
[email protected]. Comments addressed to Ms. Johnson may 
also be delivered to the Board's mail room between 8:45 a.m. and 5:15 
p.m. weekdays, and to the security control room at all other times. The 
mail room and the security control room, both in the Board's Eccles 
Building, are accessible from the courtyard entrance on 20th Street 
between Constitution Avenue and C Street, NW. Comments may be inspected 
in room MP-500 in the Board's Martin Building between 9:00 a.m. and 
5:00 p.m., pursuant to the Board's Rules Regarding the Availability of 
Information, 12 CFR part 261.

FOR FURTHER INFORMATION CONTACT: Jane E. Ahrens, Senior Counsel; 
Kathleen Ryan, Senior Attorney; or Deborah J. Stipick, Attorney; 
Division of Consumer and Community Affairs, at (202) 452-2412 or (202) 
452-3667.

SUPPLEMENTARY INFORMATION:

I. 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, presuming that creditors provide paper documents. 
Under the Electronic Signatures in Global and National Commerce Act 
(the E-Sign Act)(15 U.S.C. 7001 et seq.), however, electronic documents 
and signatures have the same validity as paper documents and 
handwritten signatures.

Board Proposals Regarding Electronic Disclosures

    Over the past few years, the Board has published several interim 
rules and proposals regarding the electronic delivery of disclosures. 
In 1996, after a comprehensive review of Regulation E (Electronic Fund 
Transfers), the Board proposed to amend the regulation to permit 
financial institutions to provide disclosures by sending them 
electronically (61 FR 19696, May 2, 1996). Based on comments received 
on the 1996 proposal, on March 25,1998, the Board published an interim 
rule permitting the electronic delivery of disclosures under Regulation 
E (63 FR 14528) and similar proposals under Regulation Z (63 FR 14548) 
and other financial services and fair lending regulations administered 
by the Board. The 1998 interim rule and proposed rules were similar to 
the 1996 proposed rule under Regulation E.
    The 1998 proposals and interim rule allowed depository 
institutions, creditors, lessors, and others to provide disclosures 
electronically if the consumer agreed, with few other requirements. For 
ease of reference, this background section uses the terms 
``institutions'' and ``consumers.''
    Industry commenters generally supported the Board's 1998 proposals 
and interim rule, but many of them sought specific revisions and 
additional guidance on how to comply with the

[[Page 17330]]

disclosure requirements in certain transactions and circumstances. In 
particular, they expressed concern that the rule did not specify a 
uniform method for establishing that an ``agreement'' was reached for 
sending disclosures electronically. Consumer advocates, on the other 
hand, generally opposed the 1998 proposals and the interim rule. They 
believed that consumer protections in the proposals were inadequate, 
especially in connection with transactions that are typically 
consummated in person (such as automobile loans and leases, home-
secured loans, and door-to-door credit sales).

September 1999 Proposals

    In response to comments received on the 1998 proposals, the Board 
published revised regulatory proposals in September 1999 under 
Regulations B, E, M, Z, and DD (64 FR 49688, 49699, 49713, 49722 and 
49740, respectively, September 14, 1999) (collectively, the ``1999 
proposals''), and an interim rule under Regulation DD (64 FR 49846). 
The interim rule under Regulation DD allowed depository institutions to 
deliver disclosures on periodic statements electronically if the 
consumer agrees.
    Generally, the 1999 proposals required institutions to use a 
standardized form containing specific information about the electronic 
delivery of disclosures so that consumers could make informed decisions 
about whether to receive disclosures electronically. If the consumer 
affirmatively consented, most disclosures could be provided 
electronically. To address concerns about potential abuses, the 1999 
proposals generally would have required disclosures to be given in 
paper form when consumers transacted business in person. The proposals 
contained rules for disclosures that are made available to consumers at 
an institution's Internet web site (governing, for example, how long 
disclosures must remain posted at a web site).
Comments on the September 1999 Proposals
    The Board received letters representing 115 commenters expressing 
views on the revised proposals. Industry commenters generally supported 
the Board's approach of establishing federal rules for a uniform method 
of obtaining consumers' consent to the receipt of electronic 
disclosures instead of deferring to state law. Still, many sought 
specific additional guidance and in some cases wanted more flexibility. 
They were concerned about the length of time the proposals would have 
required electronic disclosures to remain available to a consumer at an 
institution's Internet web site or upon request. In addition, they 
believed the proposed rule requiring paper disclosures for mortgage 
loans closed in person was not sufficiently flexible. In addition, they 
believed the proposed rule requiring paper disclosures for mortgage 
loans closed in person was not sufficiently flexible. Consumer 
advocates believed the 1999 proposals addressed many of their concerns 
about the 1998 proposals. Nevertheless, they urged the Board to 
incorporate greater protections for consumers, such as restricting the 
delivery of electronic disclosures to only those consumers who initiate 
transactions electronically.
    The Board also obtained views through four focus groups with 
individual consumers, conducted in the Washington-Baltimore 
metropolitan area. Participants reviewed and commented on the format 
and content of the proposed sample consent forms, as well as on 
alternative revised forms.

Federal Legislation Addressing Electronic Commerce

    On June 30, 2000, the President signed the E-Sign Act, which was 
enacted to encourage the continued expansion of electronic commerce. 
The E-Sign Act generally provides that electronic documents and 
signatures have the same validity as paper documents and handwritten 
signatures. The act contains special rules for the use of electronic 
disclosures in consumer transactions. Consumer disclosures may be 
provided in electronic form only if the consumer affirmatively consents 
after receiving certain information specified in the statute.
    The Board and other government agencies are permitted to interpret 
the E-Sign Act's consumer consent requirements within prescribed 
limits, but may not impose additional requirements for consumer 
consent. In addition, agencies generally may not re-impose a 
requirement for using paper disclosures in particular transactions, 
such as those conducted in person.
    The consumer consent provisions in the E-Sign Act became effective 
October 1, 2000, and did not require implementing regulations. Thus, 
financial institutions are currently permitted to use electronic 
disclosures under Regulations B, E, M, Z and DD if the consumer 
affirmatively consents in the manner required by section 101(c) of the 
E-Sign Act. Under section 101(c)(5) of the E-Sign Act, consumers who 
consented prior to the effective date of the act to receive electronic 
disclosures as permitted by any law or regulation, are not subject to 
the consent requirements.

II. The Interim Rule

    The Board is adopting an interim final rule to establish uniform 
standards for the electronic delivery of disclosures required under 
Regulation Z. Consistent with the requirements of the E-Sign Act, 
creditors generally must obtain consumer's affirmative consent to 
provide disclosures electronically.
    The interim rules also establish uniform requirements for the 
timing and delivery of electronic disclosures. Disclosures may be sent 
by e-mail to an electronic address designated by the consumer, or they 
may be made available at another location, such as an Internet web 
site. If the disclosures are not sent by e-mail, consumers must receive 
a notice alerting them to the availability of the disclosures. 
Disclosures posted on a web site must be available for at least 90 
days, to allow consumers adequate time to access and retain the 
information. With regard to the timing of electronic disclosures, for 
disclosures that must be provided before the consumer becomes obligated 
for an extension of credit, consumers are required to access the 
disclosures before becoming obligated. Under the interim rule, 
institutions must make a good faith attempt to redeliver electronic 
disclosures that are returned undelivered, using the address 
information available in their files. Similar rules are being adopted 
under Regulations B, E, M, and DD.

III. Request for Comment

Interim Rules

    The interim rules include most of the revisions that were part of 
the 1999 proposals and were not affected by the E-Sign Act. The Board 
is adopting these rules with some minor changes discussed below. The 
rules are adopted as interim rules, to allow commenters to present new 
information or views not previously considered in the context of the 
1998 and 1999 proposals. Since the Board's 1999 proposals were issued, 
more institutions have gained experience in offering financial services 
electronically. The Board believes that additional comments, beyond 
those previously considered in connection with the Board's earlier 
proposals, might inform the Board whether any developments in 
technology or industry practices have occurred that warrant further 
changes in the rules. The

[[Page 17331]]

comment period ends on June 1, 2001. The Board expects to adopt final 
rules on a permanent basis prior to October 1, 2001.

Interpreting E-Sign Provisions

    Under section 104(b) of the E-Sign Act, the Board and other 
government agencies are permitted to interpret the act, within 
prescribed limits. The Board may issue rules that interpret how the E-
Sign Act's consumer consent requirements apply for purposes of the laws 
administered by the Board. Also, the Board may, by regulation, exempt a 
particular category of disclosures from the E-Sign Act's consumer 
consent requirements if it will eliminate a substantial burden on 
electronic commerce without creating material risk for consumers.
    The Board requests comment on whether the Board should exercise its 
authority under the E-Sign Act in future rulemakings to interpret the 
consumer consent provisions or other provisions of the act, as they 
affect the Board's consumer protection regulations. Comment is 
requested on whether the statutory provisions relating to consumer 
consent are sufficient, or whether additional guidance is needed. For 
example, is interpretative guidance needed concerning the statutory 
requirement that consumers confirm their consent electronically in a 
manner that reasonably demonstrates they can access information in the 
form to be used by the creditor? Is clarification needed on the effect 
of consumers' withdrawing their consent, or on requesting paper copies 
of electronic disclosures? Institutions must also inform consumers of 
changes in hardware or software requirements if the change creates a 
material risk that the consumer will not be able to access or retain 
the disclosure. The Board solicits comment on whether regulatory 
standards are needed for determining a ``material risk'' for purposes 
of Regulation Z and other financial services and fair lending laws 
administered by the Board, and if so what standards should apply.
    Under section 104(d) of the E-Sign Act, the Board is authorized to 
exempt specific disclosures from the consumer consent requirements of 
section 101(c) of the E-Sign Act, if the exemption is necessary to 
eliminate a substantial burden on electronic commerce and will not 
increase the material risk of harm to consumers. The Board requests 
comment on whether it should consider exercising this exemption 
authority.

Study on Adapting Requirements to Online Banking and Lending

    The E-Sign Act eliminated legal impediments to the use of 
electronic records and signatures. The Board requests comment on 
whether other legislative or regulatory changes are needed to adapt 
current requirements to online banking and lending and facilitate 
electronic delivery of consumer financial services.
    As an example, under Regulations Z and DD, periodic statements 
inform consumers about their account activity over a period of time, 
typically monthly. The beginning and ending dates of the cycle 
determine costs and other information that must be disclosed. In 
addition, transmittal of the periodic statement triggers important 
consumer protections such as billing error resolution procedures. 
Online banking, however, can provide consumers with up-to-date 
information about their accounts on a continuing basis. Such 
information is a helpful supplement to--but does not comply as a 
substitute for--periodic statements. Should the rules for periodic 
statements be modified for online banking, and if so, how could the 
rules be crafted to maintain for consumers (1) a perspective of the 
cost and activity of an account over time, and (2) protections for 
resolving errors or liability for unauthorized transactions.
    The comments may assist the Board in future efforts to update the 
regulations. The comments may also be used in connection with a study 
required under the Gramm-Leach-Bliley Act of 1999. That act requires 
the federal bank supervisory agencies to conduct a study of banking 
regulations that affect the electronic delivery of financial services 
and to submit to the Congress a report recommending any legislative 
changes that are needed to facilitate online banking and lending.

IV. Section-by-Section Analysis

    Pursuant to its authority under section 105 of TILA, the Board 
amends Regulation Z to establish uniform standards for the use of 
electronic communication to provide disclosures required by this 
regulation. Electronic disclosures can effectively reduce compliance 
costs without adversely affecting consumer protections. The purpose of 
Regulation Z disclosures is to ensure that consumers have meaningful 
information about credit terms and to promote comparison shopping. The 
use of electronic communication may allow creditors to provide 
Regulation Z disclosures to the consumer earlier in the lending 
process. To the extent that a creditor may make electronic disclosures 
available at its Internet web site instead of providing the disclosures 
directly to the consumer, the Board finds that such an exception is 
warranted, acting pursuant to its authority under section 105(a) of 
TILA. Below is a section-by-section analysis of the rules for providing 
disclosures by electronic communication, including references to 
changes in the official staff commentary.

Subpart B--Open-end Credit

Section 226.5  General Disclosure Requirements

5(a) Form of Disclosures
    Section 226.5(a)(5) is added to provide a cross reference to rules 
governing the electronic delivery of disclosures in Sec. 226.36.
5(b) Time of Disclosures
5(b)(2) Periodic Statements
    Comment 5(b)(2)(ii)-3 is revised. Under the current rules for open-
end plans, creditors may permit, but may not require, consumers to pick 
up their periodic statements in lieu of receiving them automatically. 
In 1997, the staff commentary was revised to clarify that consumers who 
elect to pick up written periodic statements might, instead, receive 
copies of such statements by electronic means (62 FR 10193, March 6, 
1997). Consumers making that election, however, would not waive their 
right to also obtain written periodic statements. Accordingly, the 
comment did not specify the manner or form of consumers' consent to 
electronic copies of their statement.
    As discussed below, Sec. 226.36(b) as adopted sets forth the 
general rule that a creditor subject to Regulation Z may provide 
disclosures electronically only if the creditor complies with section 
101(c) of the E-Sign Act. This requirement applies to electronic 
statements provided in accordance with comment 5(b)(2)(ii)-3, and the 
comment has been revised accordingly.

Section 226.5a  Credit and Charge Card Applications and Solicitations

    Regulation Z requires credit and charge card issuers to provide 
cost disclosures in certain applications and solicitations to open card 
accounts.
5a(a) General Rules
5a(a)(2) Form of Disclosures
    Regarding the timing of the Sec. 226.5a disclosures, the 1999 
proposal stated that for electronic card applications or solicitations, 
the disclosures must appear on the screen before the

[[Page 17332]]

application or solicitation appears. Under the final rule, a consumer 
must be able in all cases to access the disclosures at the time the 
blank application or reply form is made available by electronic 
communication, such as on a card issuer's Internet web site. Card 
issuers have flexibility in satisfying this requirement. For example, 
if a link is not used, the application or reply form must clearly and 
conspicuously refer to the fact that rate, fee and other cost 
information either precedes or follows the application or reply form. 
Alternatively, card issuers may provide a link to electronic 
disclosures as long as consumers cannot bypass the disclosures before 
submitting the application or reply form. Or the disclosures could 
automatically appear on the screen when the application or reply form 
appears. A card issuer need not confirm that the consumer has read the 
disclosures. As adopted, comment 5a(a)(2)-8 has been modified from the 
1999 proposal to provide additional guidance. Similar guidance is 
provided for home-equity lines of credit and adjustable rate mortgage 
(ARM) loans.
5a(b) Required Disclosures
5a(b)(1) Annual Percentage Rate
    Section 226.5a(b)(1)(ii) is revised and (iii) is added to address 
the accuracy of the APR in connection with electronic credit and charge 
card applications and solicitations. Where terms are disclosed in card 
applications and solicitations, card issuers are required to disclose 
the periodic rate that would apply, expressed as an APR. For fixed 
rates, card issuers are required to disclose the APR currently 
available under the plan. For variable rates, the APR disclosed in a 
direct mail solicitation must be accurate within 60 days before 
mailing; in a take-one, within 30 days before printing.
    As part of the 1999 proposals, the Board proposed a single standard 
for APR accuracy in electronic disclosures: for a variable-rate plan, 
the disclosed APR would be deemed accurate if it is one that was in 
effect within 30 days before the disclosures are sent to the consumer's 
e-mail address. If disclosures are made available at another location 
such as the card issuer's Internet web site, the APR would be one in 
effect within the last 30 days. Commenters generally supported applying 
a uniform standard to both the e-mail and web site posting methods of 
providing applications or solicitations. The final rule is adopted as 
proposed.
5a(c) Direct-mail and Electronic Applications and Solicitations
    The format and content requirements differ for cost disclosures in 
card applications or solicitations sent in direct mail campaigns and 
for those made available to the general public such as in ``take-one'' 
applications and catalogs or magazines. Disclosures accompanying direct 
mail applications and solicitations must be presented in a table. 
Disclosures in a take-one also may be presented in a table with the 
same content as for direct mail, but the act and regulation permit two 
alternatives for format and content: (1) A narrative that describes how 
finance charges and other charges are assessed, and (2) a statement 
that costs are involved, along with a toll-free telephone number to 
call for further information.
    With regard to the format and content of disclosures, the Board's 
1999 proposals generally applied the same rules to card applications 
and solicitations made in the electronic context as apply to paper-
based applications and solicitations. Card issuers sending applications 
or solicitations to a consumer's e-mail address would follow the direct 
mail rules; applications or solicitations made available to the general 
public would follow the take-one rules. Commenters generally supported 
the proposal.
    The Board believes that in the context of on-line credit shopping, 
consumers would benefit from consistent disclosures among credit card 
issuers, whether consumers view an application or solicitation from an 
e-mail address or at another location such as a card issuer's web site. 
The option to distribute paper-based take-ones without cost information 
addresses, in part, a concern that the disclosures may become 
inaccurate with no practical means to recall the take-ones. This 
concern is not an issue for disclosures posted on an Internet web site. 
Requiring all card issuers to post a table on web sites that have 
credit and charge card applications or solicitation would not be unduly 
burdensome. Pursuant to the Board's general authority under section 
105(a) to create exceptions to carry out the purposes of the act and 
the Board's specific authority under section 127(c)(5) to modify 
disclosures to carry out the purposes of the rules affecting 
applications and solicitations, Sec. 226.5a(c) is revised to apply the 
direct mail rules to electronic credit and charge card applications or 
solicitations.

Section 226.5b Requirements for Home-Equity Plans

5b(b) Time of Disclosures
    Comment 5b(b)-7 is added to provide guidance on the timing of 
disclosures for electronic applications for a home-equity line of 
credit (HELOC). Regulation Z requires that disclosures (including a 
brochure) be provided at the time an application for a HELOC is 
provided to a consumer. The disclosures generically describe the 
creditor's HELOC product. In the September 1999 proposal, comment 
5b(b)-7 stated that if a HELOC application is made available 
electronically, such as on a creditor's Internet web site, the 
disclosures must appear before the application is provided.
    The final comment has been modified to provide guidance similar to 
that given for credit and charge card applications and solicitations 
under Sec. 226.5a and ARM loans under Sec. 226.19(b). In all cases, a 
consumer must be able to access the disclosures (including the 
brochure) at the time the blank application or reply form is made 
available by electronic communication, such as on a creditor's Internet 
web site.
5b(c) Duties of Third Parties
    Under Sec. 226.5b(c), persons other than the creditor that provide 
applications for a HELOC must give the consumer a brochure at the time 
the application is given, and in some cases also provide other 
disclosures. Section 226.5b(c)(2) is added to clarify that such persons 
who are required to comply with Regulation Z may use electronic 
communication to do so, as long as the requirements of Sec. 226.36(b) 
are satisfied.

Section 226.15  Right of Rescission

15(b)(1) Notice of Right to Rescind
    Section 226.15 provides that in certain open-end plans secured by a 
consumer's principal dwelling, the consumer has three business days to 
rescind the transaction after becoming obligated on the debt. Consumers 
with an ownership interest in the dwelling used as security must 
receive (1) cost disclosures about the transaction, and (2) two copies 
of a notice that explains consumers' rescission rights and how to 
effect rescission, including a form the consumer may use to notify the 
creditor if the consumer decides to rescind the transaction.
    Section 226.15(b)(1) is revised to permit a creditor to provide a 
single rescission notice by electronic communication to each consumer 
with an ownership interest in the dwelling who has affirmatively 
consented to

[[Page 17333]]

electronic delivery of the notice. Comment 15(b)-1 is revised to 
provide guidance on electronic rescission notices. Similar guidance is 
provided under Sec. 226.23 regarding rescission notices for closed-end 
transactions.

Section 226.16  Advertising

16(c) Catalogs or Other Multiple-page Advertisements; Electronic 
Advertisements
    Stating certain credit terms in an advertisement for an open-end 
credit plan triggers the disclosure of additional terms. Section 
226.16(c) permits creditors using a multiple-page advertisement to 
state the additional disclosures in a table or schedule as long as the 
triggering credit terms appearing anywhere else in the advertisement 
refer to the page where the table or schedule is printed. Of the few 
comments received on this provision, commenters supported expanding the 
use of a table or schedule to electronic advertisements. Section 
226.16(c) is revised to cover electronic advertisements as proposed and 
a conforming amendment in the staff commentary is made to comment 
16(c)(1)-1. Comment 16(c)(1)-2 is added as proposed to provide guidance 
in complying with the requirements of this section for creditors using 
electronic communication.

Subpart C--Closed-end Credit

Section 226.17  General Disclosure Requirements

17(a) Form of Disclosures
    Section 226.17(a)(3) is added to provide a cross reference to rules 
governing the electronic delivery of disclosures in Sec. 226.36.
17(g) Mail or Telephone Orders--Delay in Disclosures
    Section 226.17(g) allows creditors to defer TILA disclosures when a 
consumer makes a credit purchase or requests credit by mail, telephone, 
or any other written or ``electronic communication'' without face-to-
face or direct solicitation by the creditor. The deferral rule pre-
dates online or Internet banking; the term ``electronic communication'' 
included credit requests by telegraph transmissions and facsimiles. The 
rationale underlying the deferral is that creditors cannot provide 
transaction-specific disclosures in written form as required by the 
regulation at the time of the consumer's purchase or request. In such 
cases, creditors may delay providing disclosures until the first 
payment due date, provided certain information has been ``made 
available in written form'' before the consumer's request.
    The interim final rule provides as did the 1999 proposal that 
creditors offering loan products by electronic communication (for 
example, those offered on the Internet) may not delay providing 
disclosures under Sec. 226.17(g). The difficulties in providing 
disclosures for credit requests by mail or telephone are not present 
for credit requests received by e-mail or through the Internet. Thus, 
specific disclosures must be provided before transactions are 
consummated using electronic communication as defined in Sec. 226.36. 
The language has been revised from the proposal to clarify that the 
deferral rule in Sec. 226.17(g) remains available to creditors offering 
loan products by facsimile machine (as well as mail and telephone) 
without face-to-face or direct telephone solicitation.

Section 226.19  Certain Residential Mortgage and Variable-rate 
Transactions

19(b) Certain Variable-rate Transactions
    For certain loans with variable-rate features (loans where the APR 
may increase during the loan term) that are secured by the consumer's 
principal dwelling, creditors must provide consumers with a booklet and 
other disclosures generically describing the creditor's product when an 
application is given (or a nonrefundable fee is paid, whichever occurs 
earlier). In the September 1999 proposal, comment 19(b)-2 was revised 
to address the timing for providing disclosures required by 
Sec. 226.19(b) when electronic communication is used. The final rule 
has been modified consistent with the rules for providing disclosures 
with applications and solicitations for credit and charge cards under 
Sec. 226.5a and applications for home-equity lines of credit under 
Sec. 226.5b. In all cases, a consumer must be able to access the 
disclosures (including the brochure) at the time the blank application 
is made available by electronic communication, such as on a creditor's 
Internet web site.

Section 226.23  Right of Rescission

23(b)(1) Notice of Right to Rescind
    Section 226.23 provides that in certain transactions secured by a 
consumer's principal dwelling, the consumer has three business days to 
rescind the transaction after becoming obligated on the debt. Consumers 
with an ownership interest in the dwelling used as security must 
receive (1) cost disclosures about the transaction, and (2) two copies 
of a notice that explains consumers' rescission rights and how to 
effect rescission, including a form the consumer may use to notify the 
creditor if the consumer decides to rescind the transaction. Consistent 
with amendments to Sec. 226.15(b)(1) regarding rescission notices 
provided electronically for open-end credit plans, Sec. 226.23(b)(1) is 
amended to permit a creditor delivering rescission notices 
electronically to send a single notice to each consumer with an 
ownership interest in the dwelling used as security (rather than two 
notices). Comment 23(b)-1 is added to provide guidance on electronic 
rescission notices.

Section 226.24  Advertising

    Regulation Z prescribes certain disclosures for closed-end loan 
advertisements. Although the specific requirements differ somewhat for 
closed-end loans and open-end credit plans, the revisions adopted by 
the Board for closed-end loan advertisements are substantially similar 
to those discussed above for open-end credit plans.
24(b) Advertisement of Rate of Finance Charge
    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. Comment 24(b)-6 contains guidance on how this rule applies to 
an electronic advertisement.
24(d) Catalogs and Other Multiple-page Advertisements; Electronic 
Advertisements
    Stating certain credit terms in an advertisement for closed-end 
credit triggers the disclosure of additional terms. Section 226.24(d) 
permits creditors using a multiple-page advertisement to state the 
additional disclosures in a table or schedule as long as the triggering 
credit terms appearing elsewhere in the advertisement refer to the page 
where the table or schedule is printed. Section 226.24(d) is revised to 
cover electronic advertisements, as proposed, and a conforming 
amendment is made to comment 24(d)-2. Comment 24(d)-4 is added as 
proposed to provide guidance in complying with the requirements of this 
section for creditors using electronic communication.

Subpart D--Miscellaneous

Section 226.27  Language of Disclosures

    To provide consistency among the regulations, Sec. 226.27 is 
revised as proposed to permit creditors to provide disclosures in 
languages other than

[[Page 17334]]

English as long as disclosures in English are available to consumers 
who request them.

Subpart E--Special Rules for Certain Home Mortgage Transactions

Section 226.31  General Rules

31(b) Form of Disclosures
    Section 226.31(b) is revised to provide a cross reference to rules 
governing the electronic delivery of disclosures in Sec. 226.36.

Subpart F--Electronic Communication

Section 226.36  Requirements for Electronic Communication

36(a) Definition
    As adopted, the definition of the term ``electronic communication'' 
remains substantially unchanged from the 1999 proposals. Section 
226.36(a) limits the term to a message transmitted electronically that 
can be displayed on equipment as visual text; an example is a message 
displayed on a personal computer monitor screen. Thus, audio-and voice-
response telephone systems are not included. Because the rule permits 
the use of electronic communication to satisfy the statutory 
requirement for written disclosures that must be clear and conspicuous, 
the Board believes visual text is an essential element of the 
definition. Creditors that accommodate vision-impaired consumers by 
providing disclosures that do not use visual text must also provide 
disclosures using visual text.
    Some commenters asked for clarification that the definition was not 
intended to preclude the use of devices other than personal computers, 
which also can display visual text. The equipment on which the text 
message is received is not limited to a personal computer, provided the 
visual display used to deliver the disclosures meets the ``clear and 
conspicuous'' format requirement, discussed below.
36(b) General Rule
    Effective October 1, 2000, the E-Sign Act permits creditors to 
provide disclosures using electronic communication, if the creditor 
complies with the consumer consent requirements in Section 101(c). 
Under section 101(c) of the E-Sign Act, creditors must provide specific 
information about the electronic delivery of disclosures before 
obtaining the consumer's affirmative consent to receive electronic 
disclosures. The consent requirements in the E-Sign Act are similar but 
not identical to the Board's 1999 proposal. Accordingly, Sec. 226.36(b) 
sets forth the general rule that creditors subject to Regulation Z may 
provide disclosures electronically if the creditor complies with 
section 101(c) of the E-Sign Act.
    The E-Sign Act authorizes the use of electronic disclosures. It 
does not affect any requirement imposed under TILA other than a 
requirement that disclosures be in paper form, and it does not affect 
the content or timing of disclosures. Electronic disclosures are 
subject to the regulation's format, timing and retainability rules and 
the clear and conspicuous standard. Comment 36(b)-1 contains this 
guidance.
Presenting Disclosures in a Clear and Conspicuous Format
    Electronic disclosures must be clear and conspicuous, as is the 
case for all written disclosures under TILA and Regulation Z. See 
Secs. 226.5(a)(1), 226.17(a)(1), and 226.31(b). A creditor must provide 
electronic disclosures using a clear and conspicuous format. Also, in 
accordance with the E-Sign Act: (1) The creditor must disclose the 
requirements for accessing and retaining disclosures in that format; 
(2) the consumer must demonstrate the ability to access the information 
electronically and affirmatively consent to electronic delivery; and 
(3) the creditor must provide the disclosures in accordance with the 
specified requirements. Comment 36(b)-2 contains this guidance.
    Commenters posed a few questions about the applicability of the 
clear and conspicuous standard to particular situations. Some asked 
whether electronic advertisements or other unrelated promotional 
information may appear on the same screen as mandatory disclosures that 
are posted on an Internet web site. Except to the extent required by 
the regulation, disclosures do not have to be provided separately from 
other information. Advertisements should not be integrated into the 
text of the disclosure in a manner that violates the clear and 
conspicuous standard.
    Commenters also had questions about the use of navigational tools 
with electronic disclosures. For example, some believed that such tools 
might be helpful in directing consumers to related information that 
explains the terminology used in the disclosures. Many Internet web 
sites use navigational tools that are conspicuous through the use of 
bold text, larger fonts, different colors, underlining, or other 
methods of highlighting. Such tools are not per se prohibited so long 
as they are not used in a manner that would violate the clear and 
conspicuous standard.
Providing Timely Disclosures
    Disclosures delivered electronically must comply with existing 
timing requirements under TILA and Regulation Z. See, for example, 
Secs. 226.5(b), 226.17(b), and 226.31(c). Commenters on the Board's 
1999 proposals requested specific guidance that an electronic 
disclosure would be considered timely based on the time it is sent by 
e-mail or posted on an Internet web site, regardless of when the 
consumer receives or reads the disclosure.
    Under the final rule, consistent with rules for disclosures that 
are sent by postal mail, disclosures provided by e-mail are timely when 
they are sent by the required time. Disclosures posted periodically at 
an Internet web site are timely if, by the required time, the creditor 
both makes the disclosures available at that location and, in 
accordance with Sec. 226.36(d)(2), sends a notice alerting the consumer 
that the disclosures have been posted. For example, under Sec. 226.9, 
creditors offering open-end plans must provide a change-in-terms notice 
to consumers at least 15 days in advance of certain changes. For a 
change-in-terms notice posted on the Internet, a creditor must both 
post the notice and notify consumers of its availability at least 15 
days in advance of the change. Comment 36(b)-4 contains this guidance.
    Certain disclosures must be provided before the consumer becomes 
obligated. For example, when a creditor permits the consumer to 
consummate a closed-end transaction on-line, the consumer must be 
required to access the disclosures required under Sec. 226.18 before 
becoming obligated. A link to the disclosures satisfies the timing rule 
if the consumer cannot bypass the disclosures before becoming 
obligated. Or, the disclosures in this example must automatically 
appear on the screen, even if multiple screens are required to view the 
entire disclosure. Comment 36(b)-3 contains this guidance, as proposed, 
but has been expanded to provide the following additional guidance.
    For disclosures that are not required to be segregated and thus may 
be interspersed into the text of another document, the creditor may 
satisfy the requirement to provide the disclosures if the document 
appears automatically or via a nonbypassable link. For example, when a 
creditor permits the consumer to open a credit card account and make a 
purchase immediately thereafter, disclosures required under Sec. 226.6 
must be provided before the first

[[Page 17335]]

transaction. The consumer must be required to access the disclosures 
(or the document containing the disclosures such as a credit card 
agreement) before becoming obligated for the plan (or before the first 
transaction).
    Some industry commenters believed that requiring disclosures to 
automatically appear or be accessed by the consumer is cumbersome and 
unnecessary. Some commenters suggested that the Board allow the 
required disclosures to be accessible via a clearly marked navigational 
tool; they believe that once the tool is provided, the disclosure 
should be deemed to have been provided to the consumer.
    TILA and Regulation Z require that creditors provide or send 
disclosures to consumers. It is not sufficient for creditors to provide 
a bypassable navigational tool that merely gives consumers the option 
of receiving the disclosures. Such an approach reduces the likelihood 
that consumers will notice and receive the disclosures. The final rule 
ensures that consumers actually see cost disclosures provided 
electronically so that they have the opportunity to read them when 
shopping for credit or before becoming obligated for an extension of 
credit, as applicable.
    Commenters on the various proposals requested guidance regarding 
the creditor's duty in cases where a creditor cannot provide timely 
disclosures because an automated loan machine or other automated 
equipment controlled by the creditor malfunctions or otherwise fails to 
operate properly. Where the creditor controls the equipment and 
disclosures are required at that time, a creditor might not be liable 
for failing to provide timely disclosures if the defense in section 
130(c) of TILA is available.
Providing Disclosures in a Form the Consumer May Keep
    Under TILA and Regulation Z, many of the disclosures required to be 
in writing must be in a form the consumer can retain. Electronic 
disclosures are subject to this requirement. Comment 36(b)-5 contains 
guidance on this requirement.
    Consumers may communicate electronically with creditors through a 
variety of means and from various locations. Depending on the location 
(at home, at work, in a public place such as a library), a consumer may 
not have the ability at a given time to preserve TILA disclosures 
presented on-screen. To ensure that consumers have an adequate 
opportunity to access and retain the disclosures, the creditor also 
must send them to the consumer's designated e-mail address or make them 
available at another location, for example, on the creditor's Internet 
web site, where the information may be retrieved at a later date.
    Where the creditor controls the equipment providing the electronic 
disclosures (for example, an automated loan machine or computer 
terminal located in the creditor's lobby), the creditor must ensure 
that the consumer has the opportunity to retain the required 
information. Comment 36(b)-6 contains guidance on this requirement.
36(c) When Consent is Required
    Under the E-Sign Act, consumers must affirmatively consent before 
they receive electronic disclosures ``relating to a transaction'' if 
the disclosures are required by law or regulation to be in writing. 
Section 226.36(c) is added to provide that certain disclosures are not 
deemed to be related to a transaction for purposes of the E-Sign Act's 
consumer consent provision. These include disclosures in connection 
with advertisements (Sec. 226.16 and Sec. 226.24), credit and charge 
card applications and solicitations (Sec. 226.5a), HELOC and ARM loan 
applications (Sec. 226.5b and Sec. 226.19(b)), and disclosures under 
Sec. 226.17(g)(1)-(5). In some circumstances, disclosures are available 
to the general public, such as advertisements and solicitations; in 
other circumstances, consumers receiving disclosures with a 
solicitation for credit may not enter in the credit transaction. Those 
entering into credit transactions will ultimately receive disclosures 
subject to the consent requirements.
36(d) Address or Location to Receive Electronic Communication
    Consistent with the 1999 proposals, the interim rule provides that 
creditors may deliver electronic disclosures by sending them to a 
consumer's e-mail address. Alternatively, the rule provides that 
creditors may make the disclosures available at another location such 
as an Internet web site. If the creditor makes a disclosure available 
at such a location, the creditor effectively delivers the disclosure by 
sending a notice alerting the consumer when the disclosure can be 
accessed and preserving the disclosure at the location for at least 90 
days. The time period for keeping disclosures available at a location 
such as a creditor's Internet web site under the interim rule differs 
from the 1999 proposals, based on commenters' concerns as discussed 
below.
36(d)(1)
    For purposes of Sec. 226.36(d), a consumer's electronic address is 
an e-mail address that is not limited to receiving communications 
transmitted solely by the creditor, as proposed. This guidance is 
contained in comment 36(d)(1)-1.
    An electronic address would not include systems that permit 
communication only between the consumer and the creditor, for example, 
home-banking programs that allow consumers to communicate directly with 
a creditor on-line with the use of a computer and modem. These systems, 
like a creditor's web site accessed via the Internet, give consumers 
access to information about their accounts at a location controlled by 
the creditor. In both cases, the creditor determines how long account 
information will be available to the consumer. Consumers who receive 
disclosures at their e-mail address, however, may choose when to 
review, and for how long to retain, account information. Consumers who 
receive disclosures by contacting a creditor's site need to be alerted 
when the information is first available in order to ensure that they 
have the opportunity to access the information before it is removed. 
Thus, disclosures provided using systems such as home-banking programs 
are treated in the same manner as disclosures made available at an 
Internet web site, and a notice alerting the consumer when disclosures 
are posted must be sent, by e-mail or to a postal address, at the 
creditor's option.
36(d)(2)
    Under Sec. 226.36(d)(2)(i) of the interim rule, for disclosures 
made available at an Internet web site, a notice alerting the consumer 
when disclosures are posted must be sent by e-mail (or to a postal 
address, at the creditor's option). Section 226.36(d)(2)(i) requires 
that the alert notice identify the account involved and the address or 
other location where the disclosure is available. Comment 36(d)(2)-1 
provides guidance on the level of detail required in identifying the 
account.
    As proposed, under Sec. 226.36(d)(2)(ii) of the interim rule, 
disclosures provided at an Internet web site must remain available for 
at least 90 days. The requirement seeks to ensure that consumers have 
adequate time to access and retain a disclosure under a variety of 
circumstances, such as when a consumer may not be able for an extended 
period of time to access the information due to computer malfunctions, 
travel, or illness. Making the periodic statement for 90 days also

[[Page 17336]]

ensures that it will be available for a sufficient time in most cases 
to allow alleged errors to be resolved under the procedures in 
Regulation Z. The 90-day period is uniform for all disclosures, for 
ease of compliance. Comment 36(d)(2)-2 is added to provide that during 
this period, the actual disclosures must be available to the consumer, 
but the creditor has discretion to determine whether they should be 
available at the same location for the entire period.
    Some industry commenters believed the 90-day time period is 
reasonable and feasible. About an equal number of commenters believed 
it was too burdensome and costly; some of these commenters suggested 
periods that ranged from 30 to 60 days.
    The 1999 proposals provided that after the 90-day time period, 
disclosures would be available upon consumers' request, generally for 
24 months, in the same format as initially provided to the consumer. 
The 24-month period is consistent with a creditor's duty to retain 
records that evidence compliance. Consumer advocates supported the 
proposed retention period; some recommended that disclosures should be 
available upon request for the length of the contractual relationship 
with the consumer.
    Industry commenters strongly opposed the 24-month period. Many 
believed that keeping copies of electronic disclosures actually 
provided to consumers for that period of time would be costly and 
burdensome. Moreover, industry commenters believed that once a consumer 
has accessed the disclosures, the consumer rather than the creditor 
should have the duty to retain them for future reference. They also 
noted that under existing record retention requirements applicable to 
paper disclosures, a creditor need only demonstrate compliance with the 
rules, but need not retain copies of the actual disclosures provided to 
consumers.
    The requirement for creditors to provide duplicate disclosures upon 
request for 24 months has not been adopted. A creditor's duty to retain 
evidence of compliance for 24 months remains unchanged.
36(d)(3) Exceptions
    Section 226.36(d)(3) is added to make clear that the requirements 
of paragraphs (i) and (ii) of Sec. 226.36(d)(2) do not apply to 
disclosures in credit and charge card applications and solicitations 
mailed or otherwise distributed to the general public (Sec. 226.5a), 
certain credit advertisements (Secs. 226.16 and .24), cost information 
for representative transactions made available to consumers or to the 
public (Sec. 226.17(g)), or disclosures for certain home-secured credit 
(Secs. 226.5b and 19(b)).
36(e) Redelivery
    Industry commenters on the 1998 proposal asked for clarification 
that sending the electronic disclosures complies with the regulation, 
and that institutions are not required to confirm that the consumer 
actually received them. Consumer advocates asked that institutions be 
required to verify the delivery of disclosures by return receipt, in 
the case of e-mail. In the 1999 proposals, the Board solicited comment 
on the need for and the feasibility of such a requirement.
    Consumer advocates believe that e-mail systems are not yet 
sufficiently reliable, and that safeguards are necessary to ensure that 
consumers actually receive disclosures. Industry commenters stated that 
a return receipt requirement would be costly and burdensome, and would 
require creditors to monitor return receipts in every case to determine 
that individual consumers received the disclosures.
    Section 101(c) of the E-Sign Act requires that consumers consent 
electronically, or confirm their consents electronically, in a manner 
that reasonably demonstrates that the consumer can access the 
information that the creditor will be providing. This requirement seeks 
to verify at the outset that the consumer is actually capable of 
receiving the information in the electronic format being used by the 
creditor. After the consumer consents, the E-Sign Act also requires 
creditors to notify consumers of changes that materially affect 
consumers' ability to access electronic disclosures.
    The interim rule does not impose a verification requirement because 
the cost and burden associated with verifying delivery of all 
disclosures would not be warranted. When electronic disclosures are 
returned undelivered, however, Sec. 226.36(e) imposes a duty to attempt 
redelivery (either electronically or to a postal address) based on 
address information in the institution's own files. Unlike paper 
disclosures delivered by the postal service, there generally is no 
commonly-accepted mechanism for reporting a change in electronic 
address or for forwarding e-mail. Where a creditor actually knows that 
the delivery of an electronic disclosure did not take place, the 
creditor should take reasonable steps to effectuate delivery in some 
way. For example, if an e-mail message to the consumer (containing an 
alert notice or other disclosure) is returned as undeliverable, the 
redelivery requirement is satisfied if the creditor sends the 
disclosure to a different e-mail address or postal address that the 
creditor has on file. Sending the disclosures a second time to the same 
electronic address would not be sufficient if the institution has a 
different address for the consumer on file. Comment 36(e)-1 provides 
this guidance.
    This redelivery requirement is limited to situations where the 
electronic communication cannot be delivered and does not apply to 
situations where the disclosure is delivered but, for example, cannot 
be read by the consumer due to technical problems with the consumer's 
software. A creditor's duty to redeliver a disclosure under 
Sec. 226.36(e) does not affect the timeliness of the disclosure. 
Creditors comply with the timing requirements of the regulation when a 
disclosure is initially sent in a timely manner, even though the 
disclosure is returned undelivered and the creditor is required under 
Sec. 226.36(e) to take reasonable steps to attempt redelivery.
36(f) Electronic Signatures
    The E-Sign Act provides that electronic signatures have the same 
validity as handwritten signatures. Section 106 of the act defines an 
electronic signature. Section 226.36(f) is added to incorporate the E-
Sign Act's definition of electronic signature into the regulation. To 
comply with the E-Sign Act, an electronic signature must be executed or 
adopted by a consumer with the intent to sign the record. Accordingly, 
regardless of the technology used to meet this requirement, the process 
must evidence the consumer's identity. Comment 36(f)-1 provides this 
guidance.

Additional Issues

Document Integrity
    The interim rule does not impose document integrity standards. 
Consumer advocates and others expressed concerns that electronic 
documents can be altered more easily than paper documents. They say 
that consumers' ability to enforce rights under the consumer protection 
laws could be impaired, in some cases, if the authenticity of 
disclosures they retain cannot be demonstrated.
    Institutions are generally required to retain evidence of 
compliance with the Board's consumer regulations. Accordingly, the 
Board requested comment on the feasibility of requiring institutions to 
have systems in place capable of detecting whether or not information 
has been altered, or to use

[[Page 17337]]

independent certification authorities to verify disclosure documents.
    Consumer advocates strongly supported document integrity 
requirements (including the use of certification authorities) that 
would apply to all-electronic disclosures. Signatures, notary seals, 
and verification procedures such as recordation are used to protect 
against alterations for transactions memorialized in paper form. 
Consumer advocates believe that comparable verification procedures are 
needed for electronic disclosures as well.
    Industry commenters opposed mandatory document integrity standards 
for electronic disclosures. Because the technology in this area is 
still evolving, they believe that mandatory standards would be 
premature. Others believe that imposing document integrity standards or 
requiring the use of certification authorities would be costly to 
implement.
    The Board recognizes the concerns about document integrity, but 
believes it is not practicable at this time to impose document 
integrity standards for consumer disclosures or mandate the use of 
independent certification authorities. Effective methods may be too 
costly. Other less costly methods may deter alterations in some cases, 
but would not necessarily ensure document integrity.
    Moreover, the issue of document integrity affects electronic 
commerce generally and is not unique to the written disclosures 
required under the consumer protection laws administered by the Board. 
Section 104(b)(3) of the E-Sign Act authorizes federal or state 
regulatory agencies to specify performance standards to assure the 
accuracy, record integrity, and accessibility of records that are 
required to be retained, but prohibits the agencies from requiring the 
use of a particular type of software or hardware in order to comply 
with record retention requirements. Technology is likely to develop to 
protect electronic contracts and other legal documents. Thus, it seems 
premature for the Board to specify any particular standards or methods 
for consumer disclosure at this time.

V. Form of Comment Letters

    Comment letters should refer to Docket No. R-1043, and, when 
possible, should use a standard typeface with a font size of 10 or 12. 
This will enable the Board to convert the text to machine-readable form 
through electronic scanning, and will facilitate automated retrieval of 
comments for review. Also, if accompanied by an original document in 
paper form, comments may be submitted on 3\1/2\ inch computer diskettes 
in any IBM-compatible DOS- or Windows-based format.

VI. Regulatory Flexibility Analysis

    The Board has reviewed these interim amendments to Regulation Z, in 
accordance with section 3(a) of the Regulatory Flexibility Act (5 
U.S.C. 604). Two of the three requirements of a final regulatory 
flexibility analysis under the Act are (1) a succinct statement of the 
need for and the objectives of the rule and (2) a summary of the issues 
raised by the public comments, the agency's assessment of those issues, 
and a statement of the changes made in the final rule in response to 
the comments. These two areas are discussed above.
    The third requirement of the analysis is a description of 
significant alternatives to the rule that would minimize the rule's 
economic impact on small entities and reasons why the alternatives were 
rejected. This interim final rule is designed to provide creditors with 
an alternative method of providing disclosures; the rule will relieve 
compliance burden by giving creditors flexibility in providing 
disclosures required by the regulation. Overall, the costs of providing 
electronic disclosures are not expected to have significant impact on 
small entities. The expectation is that providing electronic 
disclosures may ultimately reduce the costs associated with providing 
disclosures.

VII. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (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. 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.
    The collection of information that is revised by this rulemaking is 
found in 12 CFR Part 226 and in Appendices F, G, H, J, K, and L. This 
information is mandatory (15 U.S.C. 1601 et seq.) to evidence 
compliance with the requirements of the Regulation Z and the Truth in 
Lending Act (TILA). The respondents/recordkeepers are for-profit 
financial institutions, including small businesses. Institutions are 
required to retain records for twenty-four months. This regulation 
applies to all types of creditors, not just state member banks. 
However, under Paperwork Reduction Act regulations, the Federal Reserve 
accounts for the burden of the paperwork associated with the regulation 
only for state member banks. Other agencies account for the paperwork 
burden on their respective constituencies under this regulation.
    The revisions provide that creditors may deliver disclosures 
electronically upon obtaining consumers' affirmative consent in 
accordance with the E-Sign Act. The revisions also provide guidance to 
institutions on the timing and delivery of electronic disclosures, to 
ensure that consumers have adequate opportunity to access and retain 
the information.
    With respect to state member banks, it is estimated that there are 
1000 respondent/recordkeepers and an average frequency of 136,294 
responses per respondent each year. The current annual burden is 
estimated to be 1,886,392 hours. No comments specifically addressing 
the burden estimate were received, therefore, the numbers remain 
unchanged. There is estimated to be no additional cost burden and no 
capital or start up cost associated with the interim final rule.
    Because the records would be maintained at state member banks and 
the notices are not provided to the Federal Reserve, no issue of 
confidentiality arises under the Freedom of Information Act.
    The Board has a continuing interest in the public's opinions of the 
Federal Reserve's 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.

VIII. Solicitation of Comments Regarding the 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. The Board invites comments on whether 
the interim rule is clearly stated and effectively organized, and how 
the Board might make the rule easier to understand.

List of Subjects in 12 CFR Part 226

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

[[Page 17338]]


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

PART 226--TRUTH IN LENDING (REGULATION Z)

    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

    2. Section 226.5 is amended by adding a new paragraph (a)(5) as 
follows:


Sec. 226.5  General disclosure requirements.

    (a) Form of disclosures. * * *
    (5) Electronic communication. For rules governing the electronic 
delivery of disclosures, including the definition of electronic 
communication, see Sec. 226.36.
* * * * *

    3. Section 226.5a is amended by revising paragraph (b)(1)(ii), 
adding a new paragraph (b)(1)(iii), and revising paragraph (c) as 
follows:


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

* * * * *
    (b) Required disclosures. * * *
    (1) Annual percentage rate. * * *
    (ii) When variable rate disclosures are provided under paragraph 
(c) of this section, an annual percentage rate disclosure is accurate 
if the rate was in effect within 60 days before mailing the 
disclosures. When variable rate disclosures are provided under 
paragraph (e) of this section, an annual percentage rate disclosure is 
accurate if the rate was in effect within 30 days before printing the 
disclosures. Disclosures provided by electronic communication are 
subject to paragraph (b)(1)(iii) of this section.
    (iii) When variable rate disclosures are provided by electronic 
communication, an annual percentage rate disclosure is accurate if the 
rate was in effect within 30 days before mailing the disclosures to a 
consumer's electronic mail address. If disclosures are made available 
at another location such as the card issuer's Internet web site, the 
annual percentage rate must be one in effect within the last 30 days.
* * * * *
    (c) Direct-mail and electronic applications and solicitations. The 
card issuer shall disclose the applicable items in paragraph (b) of 
this section on or with an application or solicitation that is mailed 
to consumers or provided by electronic communication.
* * * * *
    4. Section 226.5b is amended by redesignating paragraph (c) as 
paragraph (c)(1), adding a heading for paragraph (c)(1), and adding a 
new paragraph (c)(2) as follows:


Sec. 226.5b  Requirements for home-equity plans.

* * * * *
    (c) Duties of third parties. (1) General. * * *
    (2) Electronic communication. Persons other than the creditor that 
are required to comply with paragraphs (d) and (e) of this section may 
use electronic communication in accordance with the requirements of 
Sec. 226.36, as applicable.
* * * * *
    5. Section 226.15 is amended by revising the first sentence of the 
introductory text of paragraph (b) 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 by electronic 
communication as provided in Sec. 226.36(b)). * * *
* * * * *

    6. Section 226.16 is amended by revising paragraph (c) 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 advertisement using electronic communication, 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 
advertisement using electronic communication 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

    7. Section 226.17 is amended by:
    a. Adding a new paragraph (a)(3); and
    b. Revising the introductory text in paragraph (g).


Sec. 226.17  General disclosure requirements.

    (a) Form of disclosures. * * *
    (3) Electronic communication. For rules governing the electronic 
delivery of disclosures, including a definition of electronic 
communication, see Sec. 226.36.
* * * * *
    (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 to the consumer or to the public before the actual purchase order 
or request:
* * * * *

    8. Section 226.23 is amended by revising the first sentence of 
paragraph (b)(1) 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 by electronic communication as provided in 
Sec. 226.36(b)). * * *
* * * * *

    9. Section 226.24 is amended by revising paragraph (d) 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 advertisement using electronic communication, 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

[[Page 17339]]

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 
advertisement using electronic communication 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 D--Miscellaneous

    10. Section 226.27 is revised to read as follows:


Sec. 226.27  Language of disclosures.

    Disclosures required by this regulation may be made in a language 
other than English, provided that the disclosures are made available in 
English upon the consumer's request. This requirement for providing 
English disclosures on request does not apply to advertisements subject 
to Secs. 226.16 and 226.24.

Subpart E--Special Rules for Certain Home Mortgage Transactions

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


Sec. 226.31  General rules.

* * * * *
    (b) Form of disclosures. (1) General. The creditor shall make the 
disclosures required by this subpart clearly and conspicuously in 
writing, in a form that the consumer may keep.
    (2) Electronic communication. For rules governing the electronic 
delivery of disclosures, including a definition of electronic 
communication, see Sec. 226.36.
* * * * *


Sec. 226.35  [Reserved]

    12. Add and reserve a new Sec. 226.35.

    13. Add a new subpart F to part 226 to read as follows:

Subpart F--Electronic Communication


Sec. 226.36  Requirements for electronic communication.

    (a) Definition. ``Electronic communication'' means a message 
transmitted electronically between a creditor and a consumer in a 
format that allows visual text to be displayed on equipment, for 
example, a personal computer monitor.
    (b) General rule. In accordance with the Electronic Signatures in 
Global and National Commerce Act (the E-Sign Act) (15 U.S.C. 7001 et 
seq.) and the rules of this part, a creditor may provide by electronic 
communication any disclosure required by this part to be in writing.
    (c) When consent is required. Under the E-Sign Act, a creditor is 
required to obtain a consumer's affirmative consent when providing 
disclosures related to a transaction. For purposes of this requirement, 
the disclosures required under Secs. 226.5a, 226.5b(d) and 226.5b(e), 
226.16, 226.17(g)(1) through (5), 226.19(b) and 226.24 are deemed not 
to be related to a transaction.
    (d) Address or location to receive electronic communication. A 
creditor that uses electronic communication to provide disclosures 
required by this part shall:
    (1) Send the disclosure to the consumer's electronic address; or
    (2) Make the disclosure available at another location such as an 
Internet web site; and
    (i) Alert the consumer of the disclosure's availability by sending 
a notice to the consumer's electronic address (or to a postal address, 
at the creditor's option). The notice shall identify the account 
involved and the address of the Internet web site or other location 
where the disclosure is available; and
    (ii) Make the disclosure available for at least 90 days from the 
date the disclosure first becomes available or from the date of the 
notice alerting the consumer of the disclosure, whichever comes later.
    (3) Exceptions. A creditor need not comply with paragraphs 
(d)(2)(i) and (ii) of this section for the disclosures required under 
Secs. 226.5a, 226.5b(d) and 226.5b(e), 226.16, 226.17(g)(1) through 
(5), 226.19(b) and 226.24.
    (e) Redelivery. When a disclosure provided by electronic 
communication is returned to a creditor undelivered, the creditor shall 
take reasonable steps to attempt redelivery using information in its 
files.
    (f) Electronic signatures. An electronic signature as defined under 
the E-Sign satisfies any requirement under this part for a consumer's 
signature or initials.

    14. In Supplement I to Part 226, the following amendments are made:
    a. In Section 226.5--General Disclosure Requirements, under 
Paragraph 5(b)(2)(ii), paragraph 3. is revised.
    b. In Section 226.5a--Credit and Charge Card Applications and 
Solicitations, under 5a(a)(2) Form of Disclosures, a new paragraph 8. 
is added.
    c. In Section 226.5b--Requirements for Home Equity Plans, under 
5b(b) Time of Disclosures, a new paragraph 7. is added.
    d. In Section 226.15--Right of Rescission, under 15(b) Notice of 
Right to Rescind., two new sentences are added at the end of paragraph 
1.
    e. In Section 226.16--Advertising, the heading 16(c) Catalogs and 
Multiple-page Advertisements is revised and under Paragraph 16(c)(1)., 
paragraph 1. is revised and a new paragraph 2. is added.
    f. In Section 226.19--Certain Residential Mortgage and Variable-
Rate Transactions, under 19(b) Certain variable-rate transactions., 
paragraph 2. is revised.
    g. In Section 226.23--Right of Rescission, under 23(b) Notice of 
Right to Rescind., two new sentences are added at the end of paragraph 
1.
    h. In Section 226.24--Advertising, under 24(b) Advertisement of 
rate of finance charge, a new paragraph 6. is added.
    i. In Section 226.24--Advertising, the heading 24(d) Catalogs and 
multiple-page advertisements is revised and under 24(d), paragraph 2. 
is revised and a new paragraph 4. is added.
    j. A new Subpart F is added to Supplement I.
    The amendments read as follows:

Supplement I to Part 226--Official Staff Interpretations

* * * * *

Subpart B--Open-End Credit

Section 226.5--General Disclosure Requirements

* * * * *

(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. If the 
consumer wishes to receive the statement by electronic 
communication, the creditor must comply with the consumer consent 
requirements as provided in Sec. 226.36(b).
* * * * *

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

* * * * *

5a(a) General Rules

5a(a)(2) Form of Disclosures

* * * * *
    8. Timing of disclosures for electronic applications or 
solicitations. In all cases, a consumer must be able to access the 
disclosures at the time the blank application

[[Page 17340]]

or reply form is made available by electronic communication, such as 
on a card issuer's Internet web site. Card issuers have flexibility 
in satisfying this requirement. For example, if a link is not used, 
the application or reply form must clearly and conspicuously refer 
to the fact that rate, fee, and other cost information either 
precedes or follows the application or reply form. Alternatively, 
card issuers may provide a link to 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. Or 
the disclosures could automatically appear on the screen when the 
application or reply form appears. A card issuer need not confirm 
that the consumer has read the disclosures.
* * * * *

Section 226.5b--Requirements for Home-Equity Plans

* * * * *

5b(b) Time of Disclosures

* * * * *
    7. Applications available by electronic communication. In all 
cases, a consumer must be able to access the disclosures (including 
the brochure) at the time the blank application or reply form is 
made available by electronic communication, such as on a creditor's 
Internet web site. Creditors have flexibility in satisfying this 
requirement. For example, if a link is not used, the application or 
reply form must clearly and conspicuously refer the consumer to the 
fact that rate, fee, and other cost information either precedes or 
follows the application or reply form. Alternatively, creditors may 
provide a link to electronic disclosures as long as consumers cannot 
bypass the disclosures before submitting the application or reply 
form. Or the disclosures could automatically appear on the screen 
when the application or reply form appears. A creditor need not 
confirm that the consumer has read the disclosures or brochure.
* * * * *

Section 226.15--Right of Rescission

* * * * *

15(b) Notice of Right to Rescind

    1. Who receives notice. * * * If e-mail is used, the creditor 
complies with Sec. 226.15(b)(1) if one notice is sent to each co-
owner. Each co-owner must consent to receive electronic disclosures 
and each must designate an electronic address for receiving the 
disclosure.
* * * * *

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. The rule applies 
only if the advertisement contains one or more of the triggering 
terms from Sec. 226.16(b).
    2. Electronic communication. If an advertisement using 
electronic communication 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. Timing. A creditor must give the disclosures required under 
this section at the time an application form is provided or before 
the consumer pays a nonrefundable fee, whichever is earlier.
    i. Intermediary agent or broker. In cases where a creditor 
receives a written application through an intermediary agent or 
broker, however, footnote 45b provides a substitute timing rule 
requiring the creditor to deliver the disclosures or place them in 
the mail not later than three business days after the creditor 
receives the consumer's written application. (See comment 19(b)-3 
for guidance in determining whether or not the transaction involves 
an intermediary agent or broker.) This three-day rule also applies 
where the creditor takes an application over the telephone.
    ii. Telephone request. In cases where the consumer merely 
requests an application over the telephone, the creditor must 
include the early disclosures required under this section with the 
application that is sent to the consumer.
    iii. Mail solicitations. In cases where the creditor solicits 
applications through the mail, the creditor must also send the 
disclosures required under this section if an application form is 
included with the solicitation.
    iv. Conversion. In cases where an open-end credit account will 
convert to a closed-end transaction subject to this section under a 
written agreement with the consumer, disclosures under this section 
may be given at the time of conversion. (See the commentary to 
Sec. 226.20(a) for information on the timing requirements for 
Sec. 226.19(b)(2) disclosures when a variable-rate feature is later 
added to a transaction.)
    v. Electronic applications. In all cases, a consumer must be 
able to access the disclosures (including the brochure) at the time 
the blank application form is made available by electronic 
communication, such as on a creditor's Internet web site. Creditors 
have flexibility in satisfying this requirement. For example, if a 
link is not used, the application form must clearly and 
conspicuously refer the consumer to the fact that rate, fee, and 
other cost information either precedes or follows the application or 
reply form. Alternatively, creditors may provide a link to 
electronic disclosures as long as consumers cannot bypass the 
disclosure before submitting the application form. Or the 
disclosures could automatically appear on the screen when the 
application form appears. A creditor need not confirm that the 
consumer has read the disclosures or brochure.
* * * * *

Section 226.23--Right of Rescission

* * * * *

23(b) Notice of right to rescind

    1. Who receives notice. * * * If e-mail is used, the creditor 
complies with Sec. 226.23(b)(1) if one notice is sent to each co-
owner. Each co-owner must consent to receive electronic disclosures 
and each must designate an electronic address for receiving the 
disclosure.
* * * * *

Section 226.24--Advertising

* * * * *

24(b) Advertisement of Rate of Finance Charge

* * * * *
    6. Electronic communication. A simple annual rate or periodic 
rate that is applied to an unpaid balance may be stated only if it 
is provided in conjunction with an annual percentage rate. In an 
advertisement using electronic communication, the consumer must be 
able to view both rates simultaneously. This requirement is not 
satisfied if the consumer can view annual percentage rate only by 
use of a link that takes the consumer to information appearing at 
another location.
* * * * *

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. 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 communication. If an advertisement using 
electronic communication 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 (but see comment 24(b)-6).
* * * * *

[[Page 17341]]

Subpart F--Electronic Communication

Section 226.36--Requirements for Electronic Communication

36(b) General Rule
    1. Relationship to the E-Sign Act. The E-Sign Act authorizes the 
use of electronic disclosures. It does not affect any requirement 
imposed under this part other than a requirement that disclosures be 
in paper form, and it does not affect the content or timing of 
disclosures. Electronic disclosures are subject to the regulation's 
format, timing, and retainability rules and the clear and 
conspicuous standard. For example, to satisfy the clear and 
conspicuous standard for disclosures, electronic disclosures must 
use visual text.
    2. Clear and conspicuous standard. A creditor must provide 
electronic disclosures using a clear and conspicuous format. Also, 
in accordance with the E-Sign Act:
    i. The creditor must disclose the requirements for accessing and 
retaining disclosures in that format;
    ii. The consumer must demonstrate the ability to access the 
information electronically and affirmatively consent to electronic 
delivery; and
    iii. The creditor must provide the disclosures in accordance 
with the specified requirements.
    3. Timing and effective delivery when a consumer becomes 
obligated on-line.
    i. When a creditor permits the consumer to consummate a closed-
end transaction on-line, the consumer must be required to access the 
disclosures required under Sec. 226.18 before becoming obligated. A 
link to the disclosures satisfies the timing rule if the consumer 
cannot bypass the disclosures before becoming obligated. Or the 
disclosures in this example must automatically appear on the screen, 
even if multiple screens are required to view the entire disclosure. 
The creditor is not required to confirm that the consumer has read 
the disclosures.
    ii. For disclosures that are not required to be segregated and 
thus may be interspersed into the text of another document, the 
creditor may satisfy the requirement to provide the disclosures if 
the document appears automatically or via a nonbypassable link. For 
example, when a creditor permits the consumer to open a credit card 
account and make a purchase immediately thereafter, disclosures 
required under Sec. 226.6 must be provided before the first 
transaction. The consumer must be required to access the disclosures 
(or the document containing the disclosures such as a credit card 
agreement) before becoming obligated for the plan (or before the 
first transaction). The creditor is not required to confirm that the 
consumer has read the disclosures.
    4. Timing and effective delivery for disclosures provided 
periodically. Disclosures provided by e-mail are timely based on 
when the disclosures are sent. Disclosures posted at an Internet web 
site such as periodic statements, or change-in-terms and other 
notices, are timely when the creditor has both made the disclosures 
available and sent a notice alerting consumer that the disclosures 
have been posted. For example, under Sec. 226.9, creditors offering 
open-end plans must provide a change-in-terms notice to consumers at 
least 15 days in advance of certain changes. For a change-in-terms 
notice posted on the Internet, a creditor must both post the notice 
and notify consumers of its availability at least 15 days in advance 
of the change.
    5. Retainability of disclosures. Creditors satisfy the 
requirement that disclosures be in a form that the consumer may keep 
if electronic disclosures are delivered in a format that is capable 
of being retained (such as by printing or storing electronically). 
The format must also be consistent with the information required to 
be provided under section 101(c)(1)(C)(i) of the E-Sign Act (15 
U.S.C. 7001(c)(1)(C)(i)) about the hardware and software 
requirements for accessing and retaining electronic disclosures.
    6. Disclosures provided on creditor's equipment. A creditor that 
controls the equipment providing electronic disclosures to consumers 
(for example, a computer terminal in a creditor's lobby or an 
automated loan machine at a public kiosk) must ensure that the 
equipment satisfies the regulation's requirements to provide timely 
disclosures in a clear and conspicuous format and in a form that the 
consumer may keep. For example, if disclosures are required at the 
time of an on-line transaction, the disclosures must be sent to the 
consumer's e-mail address or must be made available at another 
location such as the creditor's Internet web site, unless the 
creditor provides a printer that automatically prints the 
disclosures.

36(d) Address or Location to Receive Electronic Communication

Paragraph 36(d)(1)

    1. Electronic address. A consumer's electronic address is an e-
mail address that is not limited to receiving communications 
transmitted solely by the creditor.

Paragraph 36(d)(2)

    1. Identifying account involved. A creditor may identify a 
specific account in a variety of ways and is not required to 
identify an account by reference to the account number. For example, 
where the consumer has only one credit card account, and no 
confusion would result, the card issuer may refer to ``your credit 
card account.'' If the consumer has two credit card accounts, the 
card issuer may, for example, differentiate accounts based on the 
card program or by using a truncated account number.
    2. 90-day rule. The actual disclosures provided to consumer must 
be available for at least 90 days, but the creditor has discretion 
to determine whether they should be available at the same location 
for the entire period.

36(e) Redelivery

    1. E-mail returned as undeliverable. If an e-mail to the 
consumer (containing an alert notice or other disclosure) is 
returned as undeliverable, the redelivery requirement is satisfied 
if, for example, the creditor sends the disclosure to a different e-
mail address or postal address that the creditor has on file for the 
consumer. Sending the disclosures a second time to the same 
electronic address is not sufficient if the creditor has a different 
address for the consumer on file.

36(f) Electronic Signatures

    1. Relationship to E-Sign Act. The E-Sign Act provides that 
electronic signatures have the same validity as handwritten 
signatures. Section 106 of the E-Sign Act (15 U.S.C. 7006) defines 
an electronic signature. To comply with the E-Sign Act, an 
electronic signature must be executed or adopted by a consumer with 
the intent to sign the record. Regardless of the technology used to 
meet this requirement, the process must evidence the consumer's 
identity.


    By order of the Board of Governors of the Federal Reserve 
System, March 23, 2001.
Robert deV. Frierson,
Associate Secretary of the Board.
[FR Doc. 01-7727 Filed 3-29-01; 8:45 am]
BILLING CODE 6210-01-P