HELOC Advertisement

I'm reviewing a postcard that is going to customers for a HELOC promotion. The bank is offering a fixed rate for 3 years and then the rate goes to variable (WSJ prime). The postcard is reading (in large print) "x.xx% FIXED FOR THREE YEARS". I thought I understood that they also had to show the "go to" rate. Something like x.xx%/x.xx% APR. They explain the go to rate in the fine print, but is that sufficient? Thank you.

See 226.16 (d)(2)seems to apply.
(2) Discounted and premium rates. If an advertisement states an initial annual percentage rate that is not based on the index and margin used to make later rate adjustments in a variable-rate plan, the advertisement also shall state the period of time such rate will be in effect, and, with equal prominence to the initial rate, a reasonably current annual percentage rate that would have been in effect using the index and margin.

Could it appear this way? It is a postcard. This would be on the front.

x.xx% APR* as of 7/14/06
3 YEARS FIXED
-----------------------
x.xx% APR* after 3 years

The asterisk refers to the fine print that would appear on the back of the card. Thank you.

Disclose both rates with equal prominence. If you use the asterick, must include " * see details on reverse side " or similar language to direct the reader. Be sure to disclose all the required terms triggered by disclosing APRs.

We do have all other terms on the back of the card. Equal prominence meaning they can be the same font size, bold, etc.? But they don't have to be side by side do they? Would my example above not be equal prominence if they both appear on the same page, just one below the other same font size, etc.? Thanks!

[Equal prominence meaning they can be the same font size, bold, etc.? ]

Yes. They do not have to be side by side but should appear on the same page.

If this helps here's a sampling of a post-card add we did (without the theme graphics).


Save 100 Basis Points (1%) on your Home Equity Line of Credit for the first 100 days!

The Peoples State Bank will reduce your qualifying rate by 100 basis points (1%) on any outstanding balance for the first 100 days from the date you open your new Home Equity Line of Credit with us.

And during our luau of savings, no closing costs! *

Come to one of our 10 branches and apply soon, this offer won’t last long!

Call xxx-xxxx to find out more about our Home Equity Lines of Credit.

The following verbiage was done in 9 point font.

Based on the Wall Street Journal Prime Rate as of July 3, 2006, the APR for our Prime Zero plan would be 7.25%*. After 100 days the rate would convert to the then current Wall Street Journal Prime Rate and may change monthly thereafter. Using the Prime Rate in affect as of July 3, 2006, the APR would increase to 8.25% after 100 days.

* Offer applies to new accounts only and is a limited time offer. Limited to credit qualified home owners. Starting rate may vary with changes in the Prime Rate. Loan to values in excess of 80% will have an APR one percent (1.00%) higher. Maximum allowable APR is 21 %. Home owners’ property insurance will be required. The $50.00 annual maintenance fee is waived for the first year.

So you didn't show your rate on the front of the card? I know this is probably more of a "marketing" thought and our bank wants to show the rate on the front to them that is the draw. Thank you for sharing this.

His situation is different from yours. In your scenerio you are advertising a limited time offer APR as a numerical figure. His ad describes "reducing the rate" and includes triggering term info as a result. However, you could do the same thing if you wish.