Compliance Blog

In my last blog post, I discussed advertising requirements under TISA and exemptions for certain media. Today, I will be examining Regulation Z advertising requirements and exemptions for television and radio advertisements.

Regulation Z, Section 1026.16(b) and (d) require additional disclosures if an advertisement mentions the following key terms:

1)      “Any term required to be disclosed under section 1026.6(b)(3)” for a non-home-secured credit plan (1026.16(b)(1));

2)      “Any term required to be disclosed under section 1026.6(a)(1) or (a)(2)” for a home-equity plan (1026.16(b)(1) and (d)(1);

3)      The periodic payment amount (1026.16(b)(2));

4)      The payment terms of a home-equity plan (1026.16(d)(1));

5)      Initial annual percentage rate bit based on index or margin (1026.16(d)(2));

6)      Balloon payment (1026.16(d)(3)); and

7)      Tax implications (1026.16(d)(4)).

However, section 1026.16(e) provides a partial exemption from the additional terms requirements if the advertisement was made through television or the radio. For television or radio advertisements for a HELOC or open-end credit (not secured by real estate) that contain any of the key terms under section 1026.16(b)(1) or (d)(1) may, as an alternative to the required additional disclosures, provide the information required under section 1026.16(b)(1)(ii) or (d)(1)(ii) and a toll-free phone number.

In other words, a television or radio advertisement that includes a trigger term may provide, as an alternative to the additional disclosures:

1) Any periodic rate that may be applied, expressed as an annual percentage rate and, if applicable, the fact that the rate is variable; and

2) A toll-free telephone number with a statement that members may obtain additional cost information by calling the number.

This means that a credit union would not need to disclose, as applicable:

1)      Finance charges (1026.16(b)(1)(i));

2)      Membership/participation fees (1026.16(b)(1)(iii));

3)      Other loan fees (1026.16(d)(1)(i)); and

4)      The maximum annual variable rate (1026.16(d)(1)(iii)).

The credit union may also want to note that the tax implication disclosure required under Section 1026.16(d)(4) is not required for HELOC television and radio advertisements.

A television or radio advertisement for a HELOC must still make the following disclosures under Section 1026.16:

1) Discounted and premium rates (1026.16(d)(2));

a. The period of time the initial rate will be in effect; and

b. A reasonably current annual percentage rate;

2) Balloon payment (1026.16(d)(3));

a. That a balloon payment will result; and

b. The amount and timing of the balloon payment; and

3) Promotional rates and payments (1026.16(d)(6)).

A television or radio advertisement for open-end credit that is not secured by real estate must still disclose, under Section 1026.16:

1) The total of payments and time period to repay the obligation, if the advertisement states a periodic payment (1026.16(b)(2));

2) Promotional rates and fees (1026.16(g)); and

3) Deferred interest disclosures (1026.16(h)).

For closed-end credit, section 1026.24(d) requires additional disclosures if an advertisement mentions:

1)      “Amount or percentage of any downpayment” (1026.24(d)(1)(i));

2)      “Number of payments or period of repayment” (1026.24(d)(1)(ii));

3)      “Amount of any payment” (1026.24(d)(1)(iii)); and

4)      “Amount of any finance charge” (1026.24)(d)(1)(iv)).

If any of the above items are mentioned, a credit union must provide additional terms under section 1026.24(d)(2). However, section 1026.24(g) provides a partial exemption for television or radio advertisements. Specifically, if a television or radio advertisement states any of the above trigger terms under section 1026.24(d)(1), an advertisement must either:

1)      State the following required additional terms under section 1026.24(d)(2);

a.       The amount or percentage of a downpayment (1026.24(d)(2)(i));

b.       The terms of repayment (1026.24(d)(2)(ii)); and

c.       The annual percentage rate (1026.24(d)(2)(iii)); or

2)      State the annual percentage rate required under section 1026.24(d)(2)(iii) and provide a toll-free telephone number.

The credit union may also want to note that a television or radio advertisement for a closed-end mortgage is also exempt from:

1) The tax implication disclosure (1026.24(h));

2) Disclosures of rates and payments (1026.24(f)).

For further information regarding trigger terms and advertisements, member credit unions may want to review NAFCU’s Advertising Guide. Specifically, credit unions may want to review pages 61, 64, 76, 97, and 99 of the Guide, as these pages contain helpful trigger term charts.