| In some situations, the Truth in Lending Act permits a creditor to use examples of typical credit terms in an advertisement for closed-end credit. For example, the use of typical credit terms is permissible if a home builder wants to advertise credit terms for many houses, each with a different price, or a bank wants to offer mortgage loans in varying amounts, with different repayment terms. In these situations, if advertising disclosures are required, the ad may show one or more examples of a typical credit transaction, as long as each example contains all of the terms that are required to be disclosed. The examples must be labeled as such and must be representative of the credit that is actually available.
For example, suppose an auto dealer has "60-month financing" available on various types of vehicles. The dealer could comply with the law by stating the credit terms available with 60-month financing based upon an automobile that a consumer could purchase on those terms as follows: "60-month financing available. Example: 1988 Olds Ciara 20 percent down; $ 289 per month; 11 percent APR. On approved credit."
In some situations, the Act may require the ad to include more than one sample loan in the advertisement in order to represent the "typical" situations. For example, a creditor is advertising 30-year financing on several houses in a development. Some of the homes included in the ad are eligible for FHA financing, but others require larger loan amounts with higher financing terms. In this case, the ad would need to provide two examples, with each including the credit terms required by the Act (down payment, terms of repayment, and the annual percentage rate). Copyright 2010 LexisNexis, a division of Reed Elsevier Inc. |