Advertising a Down Payment Triggers Additional Disclosures
If your company wants to advertise a three percent down payment that can be used to purchase a new home, this reference of the three percent down payment triggers additional disclosures.
What needs to be disclosed? The Annual Percentage Rate (APR) and the “terms of the repayment” need to be disclosed.
But what the heck are the terms of the repayment? Is this the loan term, the loan product type? The interest rate?
Here’s the answer:
2. Disclosure of repayment terms. The phrase “terms of repayment” generally has the same meaning as the “payment schedule” required to be disclosed under §1026.18(g). Section 1026.24(d)(2)(ii) provides flexibility to creditors in making this disclosure for advertising purposes. Repayment terms may be expressed in a variety of ways in addition to an exact repayment schedule; this is particularly true for advertisements that do not contemplate a single specific transaction. Repayment terms, however, must reflect the consumer’s repayment obligations over the full term of the loan, including any balloon payment, see comment 24(d)(2)–3, not just the repayment terms that will apply for a limited period of time. For example:
i. A creditor may use a unit-cost approach in making the required disclosure, such as “48 monthly payments of $27.83 per $1,000 borrowed.”
ii. In an advertisement for credit secured by a dwelling, when any series of payments varies because of the inclusion of mortgage insurance premiums, a creditor may state the number and timing of payments, the fact that payments do not include amounts for mortgage insurance premiums, and that the actual payment obligation will be higher.