Reg Z - HELOC Billboard Ad

Posted By: Last Mango

Reg Z - HELOC Billboard Ad - 01/25/02 05:47 AM

A billboard advertisement for a HELOC promotes “Prime + 0%”. There are no disclosures. A marketing person claims that “Prime + 0%” cannot be readily determined, is not a statement of the rate, and therefore is not a triggering term for the Reg. Z advertising rules. Based on the definition of advertising in the rule, I believe this ad is not exempt. Also, based on the following Commentary references I believe that "Prime + 0%" is a triggering term.

Am I out of line with this?

[i]Paragraph 16(b) Advertisement of terms that require additional disclosures.

3. IMPLICIT TERMS. Section 226.16(b) applies even if the triggering term is not stated explicitly, but may be readily determined from the advertisement.

7. TRIGGERING TERMS. The following are examples of terms that trigger additional disclosures:
• "Small monthly service charge on the remaining balance, which describes how the amount of a finance charge will be determined."

Paragraph 16(d) Additional requirements for home equity plans.

1. TRIGGER TERMS. Negative as well as affirmative references trigger the requirement for additional information. For example, if a creditor states "no annual fee," "no points," or "we waive closing costs" in an advertisement, additional information must be provided. (See comment 16(d)-4 regarding the use of a phrase such as "no closing costs.") Inclusion of a statement such as "low fees," however, would not trigger the need to state additional information.[i/]

Posted By: meg

Re: Reg Z - HELOC Billboard Ad - 01/25/02 05:59 AM

I agree with you. We got an attorney opinion on this issue several years ago stating that a reference to prime does trigger the additional disclosures. Good luck convincing marketing!
Posted By: Anonymous

Re: Reg Z - HELOC Billboard Ad - 01/25/02 02:52 PM

I would question that interpretation. The reg states that Section 226.16(b) applies even if the triggering term is not stated explicitly, but may be readily determined from the advertisement.

If an ad states "prime" can you readily determine from the advertisement what the APR is? We probably can because we work in banking, but most people would need to go to the Wall Street Journal or some other publication to find out what the current prime rate is, especially with the way prime has been changing so much recently. In my opinion, no APR is being advertised so no additional disclosures are required.


Posted By: NotALawyer

Re: Reg Z - HELOC Billboard Ad - 01/25/02 03:27 PM

I would agree that a triggering event has occurred. The advertisement does not say "Best rates", "Low rates" or "Rates below prime". These statements contain some amount of ambiguity and a precise rate cannot be readily determined. "Prime + 0%" can be readily determined by looking up what what the prime rate is at that time.

It appears the earlier references to "APR" should be "interest rate".

Robert Marx
Opinions stated are not necessarily that of my employer.

Posted By: redsfan

Re: Reg Z - HELOC Billboard Ad - 01/25/02 03:43 PM

I agree with Robert and Meg. Therule does not stipulate that you have to be able to immediately determine the rate, just that you can determine the rate from the ad. "Prime + 0" lets you readily determine the rate.
Posted By: Last Mango

Re: Reg Z - HELOC Billboard Ad - 01/25/02 08:46 PM

Thanks everyone for your response. I was struggling with this one.

Lee, I originally took your position but our loan people have said we are getting many customers from this advertisement. It seems to me that at least some customers have an idea what the Prime Rate is.