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#1158696 - 04/06/09 10:28 PM Disclosing in loan ad
Runreb Offline
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Runreb
Joined: Apr 2002
Posts: 480
Please refresh my memory on this.
When you disclose in an auto ad that the loan rate is as low as x.xx% it has to be stated as the APR, correct? In other words, if the interest rate is 5.00% you must disclose the final APR, e.g., 5.01% APR? You could not just state that rates are low as 5.00%??

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Lending Compliance
#1158701 - 04/06/09 10:58 PM Re: Disclosing in loan ad Runreb
Richard Insley Offline
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Richard Insley
Joined: Oct 2000
Posts: 10,180
Toano, VA
APR only, or APR plus simple rate. See Section 226.24(b).
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#1158888 - 04/07/09 02:55 PM Re: Disclosing in loan ad Richard Insley
Runreb Offline
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Runreb
Joined: Apr 2002
Posts: 480
On a somewhat related matter but in prior HELOC ads, I've noticed ads showing wording like "Prime-1/2%, currently 3.50%APR" or "Rate as low as 4.50% APR." In those cases, are they backing into the APR to have an even number? Otherwise, it seems the APR would be something like 3.52% or 4.51%. Can you clarify for me?
Thanks

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#1158931 - 04/07/09 03:15 PM Re: Disclosing in loan ad Runreb
Richard Insley Offline
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Richard Insley
Joined: Oct 2000
Posts: 10,180
Toano, VA
HELOCs are open-end credit & different rules apply. See Section 226.16 (open-end) instead of 226.24 (closed-end.)
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#1159007 - 04/07/09 03:59 PM Re: Disclosing in loan ad Richard Insley
Runreb Offline
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Runreb
Joined: Apr 2002
Posts: 480
So would the 3.50% and 4.50% both be considered the periodic rate as well as the APR? Therefore, it is okay to disclose APR as 3.50%, 4.50%, etc.?
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#1159380 - 04/07/09 08:49 PM Re: Disclosing in loan ad Runreb
Runreb Offline
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Runreb
Joined: Apr 2002
Posts: 480
Just want to make sure we're saying it correctly. If an auto ad says rates as low as 3.50% then that rate must be the APR and not the interest rate. In other words, we would have to back into the resulting APR.? If there are no fees and the interest basis is 365/365 then the rate and apr would likely be the same. But, if the interest basis is different then the interest rate and apr will be different. Additional thoughts? Thanks

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#1159486 - 04/07/09 10:50 PM Re: Disclosing in loan ad Runreb
Richard Insley Offline
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Richard Insley
Joined: Oct 2000
Posts: 10,180
Toano, VA
Auto loans are closed-end credit and the rule is that you may not state a simple rate without also stating (with equal prominence) the (properly calculated) APR. With no fees and an interest basis of 365/365, the simple rate and APR should differ only when you use the U.S. Rule to compute your interest and payment schedule, and then switch to the actuarial method for the APR. Unless the interest rate is sky high, this difference will only be a few basis points--never enough to worry about being out of tolerance.
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