A real estate advertisement for a property states, 'Owner financing available at an attractive 5% interest rate!' Under the Truth in Lending Act (TILA) and Regulation Z, what additional information must be included in this advertisement?
- AThe lender's name, the total number of payments, and the total interest paid over the life of the loan.
- BNo additional information is required as this is owner financing, not a traditional lender.
- CThe total purchase price and the annual percentage rate (APR) only.
- DThe down payment, the terms of repayment, and the annual percentage rate (APR).
Show answer & explanationAnswer & explanation
Correct answer: D. The down payment, the terms of repayment, and the annual percentage rate (APR).
TILA and Regulation Z require that if an advertisement for credit (including owner financing, if the owner meets the 'creditor' definition by regularly extending credit) states any 'triggering terms' such as the interest rate, it must also disclose all 'required disclosures.' These include the amount or percentage of the down payment, the terms of repayment (including the number, amount, and due dates of payments), and the annual percentage rate (APR).
Why the other options are wrong
- A. The lender's name and total interest paid are not among the mandatory disclosures triggered by stating an interest rate in an advertisement. Total number of payments would be part of 'terms of repayment'.
- B. TILA can apply to owner financing if the owner regularly extends credit; the interest rate is a triggering term.
- C. While APR is required, the total purchase price is not a specific TILA disclosure requirement when an interest rate is stated. Other payment terms are also needed.
TILA Triggering Terms & Disclosures
Under TILA/Regulation Z, if an advertisement uses certain 'triggering terms' related to credit, it must then include specific additional disclosures.
- Triggering terms include down payment, payment amount, finance charge, or interest rate.
- If a triggering term is used, the ad must disclose: down payment, repayment terms (number, amount, due dates of payments), and APR.
- Applies to 'creditors' who regularly extend credit, which can include some owner-financiers.
Memory trick: TILA Ads: Trigger a Term? All the Details Must Germ!