When Must APR Be Disclosed

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Question:

I am an assistant manager at an in-store branch. The bank compliance officer tells me I can't advertise our mortgage or auto rates without disclosing the APR. It was my understanding that this must be disclosed when actually PROCESSING a specific loan. I thought I had seen newspaper ads w/o the disclosed APR. He told me they were probably mortgage companies. Is he correct? Must we disclose the APR even in advertisements? If so, are there restrictions on HOW it is disclosed, such as spreading the fees over the life of the loan vs. using the first year only (which makes the APR higher)? Are there any fees that we can leave out of the APR?

Answer:

Answer by Richard Insley: If you advertise rates, you MUST disclose the APR. It is calculated by exactly the same method you use to compute the APR that goes on each disclosure form you give out when making a loan. If you see ads by other businesses that quote rates but do not include the APR, they are violating Reg. Z. Section 226.24 of Reg. Z contains the advertising rules for closed-end loans.

Answer:

Answer by John Burnett: There are also certain "trigger terms" that, if found in an ad for closed-end credit, will require that other information -- such as the APR -- be disclosed.

The trigger terms for closed-end loan ads are found in section 226.24(c) of Regulation Z. Among them are the amount or percentage of any down payment (applies only if advertiser is selling and financing), the number of payments or period of repayment, the amount of any payment, and the amount of any finance charge.

In my experience, the "number of payments or period of repayment" trips banks up often, since we love to advertise "30-year terms available," for example.

First published on BankersOnline.com 06/12/06