You Say There’s a Trigger Term

In this day and age where banks are looking for every slight advantage to outduel the competition, it’s important to consider the potential risks that may occur. In the world of bank advertising, this could mean compliance risk associated with being unfair, deceptive or misleading and/or technical violations of laws and regulations, which could come with a pretty steep price tag.    

With mortgage rates at an all-time low, many banks are taking advantage of this rate environment and advertising their suite of affordable mortgage loan products. So, there’s no better time than the present to remind ourselves of the general closed-end loan advertising requirements under Regulation Z (v). 

As we may already know, Regulation Z has a gamut of advertising requirements for both open and closed-end advertising (the latter is our focus here). First and foremost, is to only advertise loan terms that are actually available to consumers. What does this mean? Well, if the banks advertising a really low annual percentage rate (“APR”), such as 1.99% APR, then that rate should be available to borrowers. That one’s pretty straight forward. 

Next, whenever adverting a rate it must be stated in terms of the annual percentage rate, which does allow a bank to use the abbreviation APR without actually having to state the full term in totality (unlike what is required on the deposit side of the house regarding advertisements containing rates of return.)

As we move through the regulation, we get into trigger terms, which are the meat and potatoes of advertising compliance. And, interesting enough, the actual advertisement of the APR (as mentioned above) is not considered a trigger term for closed-end loans. So, then what is a trigger term?

Thankfully, Regulation Z (1026.24(d)(1)) does a good job of defining what is actually meant by a closed-end loan triggering terms, including: the amount or percentage of any downpayment, the number of payments or period of repayment, the amount of any payment, and the amount of any finance charge.