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Ch 3 Federal Financial Disclosure Laws

Terms in this set (68)

• Closed-end credit transaction: The balance is expected to be repaid
—along with interest and finance changes
—by a specified future date.
Additional Regulation Z provisions include:

• Rate. If an advertisement states a simple annual rate of interest and multiple rates apply over the term of the loan, the advertisement must also disclose the advertised rate:
- Each simple annual rate of interest that will apply.
- Period of time each simple annual rate of interest applies.
- The APR for the loan.

• Payment Amount. If the advertisement states the amount of any payment, it must disclose:
- The amount of each payment that applies over the term of the loan.
- The period of time during which each payment applies.

• Payment and Rate Comparisons.
- Advertisements may not compare payments or rates and a "teaser" payment or simple annual rate unless the ad includes a clear comparison to the terms required to be disclosed.

• Use of the Term "Fixed." If an ad references both variable and non-variable rate loans, the terms
"adjustable rate mortgage," "variable rate mortgage," or "ARM" must appear equally with "fixed" or "fixed rate mortgage."
- If an ad references a variable rate loan, the phrase
"adjustable rate mortgage," "variable rate mortgage," or "ARM" must appear before the use of the term "fixed."
- If the ad references a non-variable rate loan where the payment amount increases, the word "fixed" must statethe rate may vary.

• Catalogs, Multiple-Page Ads, Electronic Ads.
If a catalog or multiple-page/electronic ad gives information in a table/schedule in detail that includes triggering terms, it would be considered a single advertisement if:
- The table or schedule is clearly set forth, and
- Any statement of the triggering credit terms appearing elsewhere in the ad refers to the location where the table/schedule starts.
- The schedule of terms must include all disclosures for a representative scale of amounts.
Regulation Z was amended to comply with the Mortgage Disclosure Improvement Act of 2009 to address the unique challenges in advertising open-end credit plans.
• Open-end
- A loan where credit is extended to the borrower during the term and the creditor may impose a finance charge on the outstanding unpaid balance.

These loans are subject to these additional provisions:
•Additional Disclosures. If any of the triggering terms are used or the payment terms of the plan are set forth, the ad must also clearly state:
- A loan fee that is a percentage of the plan's credit limit
expressed as a single dollar amount or a rational range - A periodic rate used to compute the finance charge,
expressed as an annual percentage rate
- The maximum annual percentage rate that may be imposed in a variable-rate plan
• Additional Disclosures (cont.)
- If an ad states an initial APR not based on the index and margin used to make later rate adjustments in a variable-rate plan, the ad must indicate the time the initial rate is in effect and a current APR.
• Balloon Payments.
- In an ad that states a minimum payment, and a balloon payment would result if the minimum periodic payment is made, that fact must be stated with equal prominence and proximity.
• Promotional Rates and Payment. If a HELOC ad states a promotional rate or payment, the ad must disclose all of the following:
- The period of time when the promotional rate or payment
- If a promotional rate, any APR that applies
- If a promotional payment, the amounts and time periods of any payments that will apply.
If an ad stating a promotional rate is broadcast on radio or television, a toll-free telephone number to get additional cost information must be indicated.