Zero Down Payment Ads – Required Disclosures

When you run an ad that references a down payment of any sort there are certain rules under regulation Z that require you to make certain disclosures.

Here’s what regulation Z says about ads that disclose any amount of a down payment.

  • You must provide the amount or percentage of the down payment – in this case we just say zero down payment is due at closing.
  • Number of payments or period of repayment.
  • The amount of the monthly payment
  • Terms of the repayment and whether there will be a balloon payment due
  • The amount of any finance charge
  • The annual percentage rate for the offer being made
  • If the ad you are placing is just a general ad, you can comply with these rules by using examples of typical transactions that are representative of terms received by a good percentage of your customers.

Also, You must also avoid UDAAP – unfair deceptive and abusive acts and practices

Here’s an example of a builder who did not follow the UDAAP rule. See the FTC enforcement story here: http://www.business.ftc.gov/blog/2014/06/deceptive-mortgage-ads-hit-close-home

 

zero zilch nada ad

 

Regulation Z Rules on Down Payments appears below (See Reg Z 1026.24(d)):

(d) Advertisement of terms that require additional disclosures. (1)Triggering terms. If any of the following terms is set forth in an advertisement, the advertisement shall meet the requirements of paragraph (d)(2) of this section:

(i) The amount or percentage of any down payment.

(ii) The number of payments or period of repayment.

(iii) The amount of any payment.

(iv) The amount of any finance charge.

(2) Additional terms. An advertisement stating any of the terms in paragraph (d)(1) of this section shall state the following terms, as applicable (an example of one or more typical extensions of credit with a statement of all the terms applicable to each may be used):

(i) The amount or percentage of the down payment.

(ii) The terms of repayment, which reflect the repayment obligations over the full term of the loan, including any balloon payment.

(iii) The “annual percentage rate,” using that term, and, if the rate may be increased after consummation, that fact.