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Truth in Lending: 6.4.2 “Triggered” Advertising Disclosures

Certain disclosure requirements are triggered if the advertisement expressly or impliedly mentions any specific terms of a credit plan, even if they are not required disclosures (such as seller’s points, or the minimum periodic payment),370 or mentions terms required to be disclosed in the account-opening disclosures under Regulation Z § 1026.6, such as finance charge, periodic rate, annual percentage rate, or security interest.371 These triggers include both affirmative or negative referenc

Truth in Lending: 6.4.3 Special Disclosures Required for Credit Sales Advertising

In some cases, retail sellers will use open-end credit plans to finance the purchase of “big ticket” goods or services, such as electronics or furniture. These sellers and their affiliated creditors will offer open-end credit plans to avoid making closed-end disclosures, which contain more information about the price of credit.374

Truth in Lending: 6.4.5.1 Introduction

TILA requires specific introductory rate disclosures when such rates are included in promotional materials accompanying credit card applications and solicitations.386 Regulation Z extends these introductory rate disclosures to all advertisements that offer an introductory rate, not just those accompanying applications and solicitations.387 While this rule applies to all advertisements in any form, many of the specific formatting requirements discussed below only apply to written or electroni

Truth in Lending: 6.4.5.2 Scope

The special advertising disclosures for promotional rates apply to “introductory rates,” which Regulation Z defines as a “promotional rate” offered in conjunction with the opening of an account.394 In turn, a “promotional rate” is defined as any APR for an open-end (not home-secured) plan for a specified period of time that is lower than the APR that will be in effect at the end of that period.395 The fact that an issuer reserves the right to increase the rate using a change-in-terms notice

Truth in Lending: 6.4.5.3 Required Disclosures

The promotional rate disclosures require creditors to use the term “introductory” when offering an introductory APR.405 This disclosure must be made in “immediate proximity” to each listing of the introductory rate.406 The official interpretations clarify that, for written or electronic advertisements, using the term “introductory” in the same phrase as the listing of the introductory rate is deemed to be in immediate proximity.407 Furthermor

Truth in Lending: 6.4.6.1 Introduction

“Deferred interest” programs are credit card accounts that promote “no interest” until a certain date, but then retroactively assess interest starting from the purchase date if the consumer does not pay off the entire balance by the specified date.

Truth in Lending: 6.4.6.3 Required Disclosures

Deferred interest advertisements must state the deferred interest period in a clear and conspicuous manner in the advertisement.451 If the phrase “no interest” or a similar term is used, the advertisements must state “if paid in full” by the end of the deferred interest period.452

Truth in Lending: 6.4.7 Liability for Violation of TILA Advertising Provisions

No direct civil liability attaches to violation of the TILA advertising sections in part C, although a violation arguably would violate a state deceptive practices statute.470 Statutory and actual damages are available if the deception can be characterized as a violation of the disclosure requirements for credit card applications and solicitations and if the consumer has used the card or paid a periodic, annual, membership, activity, or inactivity fee.471 In addition, the promotional rate di

Truth in Lending: 6.5.1 Introduction

The first set of disclosures that a consumer will see for credit and charge cards consists of the application and solicitation disclosures. These disclosures apply only to credit and charge cards. For all other forms of open-end credit (except home equity lines of credit),474 the first set of disclosures that a consumer sees will be the account-opening disclosures.475

Truth in Lending: 6.5.2.1 When Required

Disclosures must be given on or with an application or solicitation to open a credit or charge card account.481 “Solicitation” is defined as an offer by the card issuer to open a credit or charge card account that does not require the consumer to complete an application.482 Generally, these solicitations are referred to as “preapproved” solicitations.

Truth in Lending: 6.5.2.2 Exceptions

The application and solicitation disclosure rules do not apply to home equity plans accessible by a credit or charge card subject to the Home Equity Loan Consumer Protection Act;486 overdraft lines of credit tied to asset accounts that are accessed by check guarantee or debit cards; or lines of credit accessed by check guarantee or automated teller machine (ATM) cards.487 If a traditional credit card is also used to access such lines, the application and disclosure rules apply to the account

Truth in Lending: 6.5.2.3.1 Tabular format

Certain information must be provided in the form of a table with headings.497 This table must use headings, content and format substantially similar to any of the model forms found in appendix G-10 to part 1026.498 However, disclosures do not need to be identical to the model forms.499

Truth in Lending: 6.5.2.4.1 Location and prominence of table

If the applications/solicitations table is provided electronically, the table must be provided in close proximity to the application or solicitation.538 This standard was established by amendments to TILA found in the April 2005 amendments to the Bankruptcy Act.539 Although the Act referred to “internet” solicitations, Regulation Z applies the standard to all electronic solicitations, as well as applications.540

Truth in Lending: 6.5.2.4.2 Timing: when electronic disclosures are required to be made

If a consumer accesses a credit card application or solicitation electronically, such as online at a home computer, the issuer must provide the required disclosures in electronic form in order to meet the requirement to provide disclosures in a timely manner on or with the application or solicitation.547 The issuer is not permitted to mail paper disclosures to the consumer because such disclosures would not be “on or with” the application.548

Truth in Lending: 6.5.2.5 Disclosure of Fees Based on a Percentage

If the amount of any fee required to be disclosed is determined on the basis of a percentage of another amount—for example, if a card issuer imposes an annual fee based on a percentage of the credit line—the card issuer may state the percentage and what it is applied to rather than the dollar amount of the fee.550 If a card issuer is able to determine the dollar amount of the fee, the card issuer would, of course, be permitted to disclose that amount.

Truth in Lending: 6.5.2.6 Disclosure of Fees That Vary by State

If any cash advance, late payment, balance transfer, over-the-credit-limit, or returned-payment fee required to be disclosed varies from state to state, the card issuer has two options to disclose the fee.551 The creditor may disclose either: (1) the specific fee applicable to the consumer’s account; or (2) the range of fees, if the disclosure includes a statement that the amount of the fee varies by state and refers the consumer to a table (that must be provided with the application/solicitation table) where the amount of the fee applicabl

Truth in Lending: 6.5.3.1 General

Regulation Z sets forth all the items concerning credit costs and terms required to be disclosed in credit and charge card applications and solicitations.553 The requirements differ for credit card versus charge card accounts.

Truth in Lending: 6.5.3.2.1 General rule

Creditors must disclose each periodic rate that may be used to compute the finance charge on an outstanding balance for purchases, cash advances, or balance transfers.562 Each periodic rate must be expressed as an annual percentage rate (APR), calculated according to the Act and Regulation Z.563 Issuers are required to disclose the rate only as an APR, and are prohibited disclosing the periodic rate itself.564

Truth in Lending: 6.5.3.2.2 “Periodic rate” does not include fees

A periodic rate is defined as a rate of finance charge that is or may be imposed by a creditor on a balance for a day, a week, a month, or other subdivision of a year.571 A periodic rate does not include a transaction charge that is not connected to a period of time, even if it is computed as a percentage of the transaction amount.572 However, if the transaction charge or fee is associated with a period of time, e.g., 15% fee for an extension repaid in thirty days, it could constitute period

Truth in Lending: 6.5.3.2.3 Rates dependent on a consumer’s creditworthiness

Regulation Z permits card issuers to disclose multiple APRs or a range of APRs, instead of a single fixed APR or a single variable rate formula, if the issuer determines the APR in part on a later determination of the consumer’s creditworthiness.575 These disclosures do not seem to fulfill TILA’s purpose to inform consumers of the price tag of the credit offered and to facilitate comparison shopping.

Truth in Lending: 6.5.3.2.4 Rates that vary by state

Where rates or other terms vary from state to state, issuers may disclose either the specific APR applicable to the consumer’s account, or the range of APRs along with a statement that the APR varies by state.587 The statement must also refer the consumer to a disclosure provided with the application/solicitation table where the APR applicable to the consumer’s account is disclosed.588 The issuer may not list APRs for multiple states in the application/solicitation table.

Truth in Lending: 6.5.3.2.5 Variable rate disclosure

Variable rates exist when changes in the APR are part of the plan and are tied to an index or formula.590 For credit cards that are covered under the Credit CARD Act, variable rates must be based on an index that is not under the creditor’s control.591 For more on variable rates, see § 6.6.5.4, infra.