United States
Hong KongVariable-Rate Ads Comparing a Short-Term Rate or Payment
For an advertisement for a variable-rate dwelling-secured transaction that compares a payment or simple annual rate available for less than the full loan term with the longer-term terms, Regulation Z requires a clear and conspicuous comparison to the disclosures under § 1026.24(f)(2) and (3).
More key points
- If the advertised rate or payment is based on the index and margin used for later adjustments, an equally prominent nearby statement must say it is subject to adjustment and give when the first adjustment occurs.
On this page5 sections
A mortgage advertisement can make a temporary introductory payment look like the long-term cost. Regulation Z addresses comparisons between a short-period rate or payment and the terms that apply over the full loan. For variable-rate products, additional language may be required right beside the advertised figure.
Start with the comparison rule
Under 12 CFR 1026.24(i)(2), an advertisement for credit secured by a dwelling generally may not compare actual or hypothetical payments or rates with a payment or simple annual rate available for less than the full loan term unless it includes a clear and conspicuous comparison to the information required by § 1026.24(f)(2) and (3). Those provisions address the payment terms over the loan term and related disclosures.
Extra statement for specified variable-rate ads
If the ad is for a variable-rate transaction and the advertised payment or simple annual rate is based on the index and margin that will set later adjustments, § 1026.24(i)(2)(ii) requires an equally prominent statement in close proximity to the payment or rate. It must explain that the figure is subject to adjustment and state the period when the first adjustment will occur.
Why proximity and prominence matter
A technically accurate disclosure can still mislead if it is visually buried or separated from the attractive introductory figure. The regulation requires the statement to be equally prominent and close to the advertised rate or payment in this circumstance. The general clear-and-conspicuous standard also applies to the presentation.
Do not mix up related rules
This comparison rule is distinct from the rules against misleading use of the word “fixed” for a variable-rate product and from the general APR requirements. One advertisement can trigger multiple provisions. Identify the claim, the period it applies to, whether the loan is variable rate, and what index-and-margin basis the ad uses.
Exam takeaway
For the specified variable-rate comparison, remember both layers: a clear full-term comparison, plus an equally prominent nearby notice that the advertised figure adjusts and when the first adjustment occurs.
Common questions
Does every ARM ad comparison require the same extra statement?
The additional first-adjustment statement in § 1026.24(i)(2)(ii) applies when the stated variable-rate conditions are met, including the index-and-margin basis described there.
Where must the adjustment notice appear?
Equally prominent and in close proximity to the advertised rate or payment.
Is this the same as the fixed-rate wording rule?
No. Regulation Z has a separate rule addressing misleading use of “fixed” in variable-rate advertising.