We have an ad that states:

Our 4.00% APR* Home Equity Loan Should Help You On Your Way!!

*APR=Annual Percentage Rate. APR on approved loan with auto debit is as low as 4.00% fixed rate as of June 25, 2014.

Would we be ok charging a fee, and including it as a finance charge, which is going to increase the APR by a little bit, and having the above verbiage?

Reg Z states that we only should state what terms would be available to the customer. With the verbiage, "as low as,"
and starting our rate at 4.00% we will end up being above 4.00%. I don't feel that would be ok.

If the advertised APR is off by no more than the allowable tolerance, you can probably defend the difference. I'd be more concerned about UDAAP.

I believe a consultant said that the tolerance rule under Reg Z had nothing to do with advertising. The tolerance would only play a part on disclosures.

And yes, I am concerned about UDAAP. I guess we could either not charge the fee or lower the initial rate so that when the finance charge was added the rate would be at 4.00%.

Did this consultant happen to provide a sectional reference? I don't see anything in Section 1026.24 that alters the accuracy standard set in Section 1026.22. I'm not suggesting the tolerance should be used in this manner--only that you might be able to wiggle off the TIL hook.

The UDAAP concern is much higher. It's a classic case of deceptive advertising if you state or create the impression that the APR is equal to the interest rate when there are FCs other than interest.

Plus you need to be darn sure a good portion of your customer base is going to get that 4%, or somewhere very close to it. If you advertise 'as low as 4%', and only 5% of your customers are getting that, you're going to have a tough time justifying that to your examiners.