HELOC Rules & Advertising "Variable Rate Tied To Prime Rate"

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Question:

We are planning a home equity/home improvement brochure which gives the basics for each product. Under HELOC terms, can we say competitive variable rate tied to the prime rate without it triggering more disclosure? I would have thought so, but I am asking a guru because there are two differing thoughts on the bankers' thread postings. Obviously, we are trying to have this brochure generic enough to not have to update it each time the prime rate changes.

Answer:

This idea skates on very thin ice and that is probably why you see debate among compliance managers. The question is really whether saying that your margin is "competitive" is the same as stating a rate. The conservative view says yes, the daredevils say try it. Before running such an ad, it would be a good idea to test it on your regulators. If they have no concerns, go ahead. However, if they express any concerns, I would recommend a more careful approach that is less likely to be interpreted as a trigger term.

First published on BankersOnline.com 08/4/03