GNYADA 2019 Membership Directory & Services Guide

Credit Advertising Federal Truth in Lending (TILA) and Regulation Z, and the Consumer Leasing Act and Regulation M, all contain advertising requirements relating to credit terms. Regulation Z permits creditors to state only those terms that actually are or will be arranged or offered by the creditor. Further, if an advertisement states a rate of finance charge, it must state the rate as an “annual percentage rate,” using that term. Similarly, Regulation M states that an advertisement for a consumer lease may state that a specific lease of property at specific amounts or terms is available only if the lessor usually and customarily leases or will lease the property at those amounts or terms. Advertising certain “triggering terms”about closed-end credit (down payment, number of payments or period of repayment, payment amount or amount of any finance charge in a credit sale) requires including other terms about the cost of credit in the advertisement as well (in a credit sale, the down payment, terms of repayment (which reflect the repayment obligations over the full term of the loan, including any balloon payment, and generally equate to the payment schedule), and the APR, labeled as such, and 101 that the rate is subject to increase, if applicable). Similarly for consumer leasing, if a lessor provides a percentage rate in an advertisement, the rate may not be more prominent than any of the required consummation disclosures (with the exception of the notice stating that “this percentage may not measure the overall cost of financing this lease”required to accompany the rate), and the lessor may not use the term “annual percentage rate,”“annual lease rate,” or equivalent term. In advertising leases, if the ad includes the amount of any lease payment or the capitalized cost reduction or other payment due prior to or at lease signing (or that no payment is required), or by delivery if delivery occurs after consummation, it must also include a specific reference that the advertised transaction is a lease, the total amount due at lease signing or by delivery if delivery occurs after consummation, the number, amounts, and due dates or periods of scheduled payments, whether a security deposit is required, and a statement that an extra charge may be imposed at the end of the lease term where the lessee’s liability (if any) is based on the difference between the residual value and its realized value at the end of the lease term. There are different rules for open-end credit. Both Regulation Z and Regulation M require that disclosures be given in a clear and conspicuous manner, and also contain special rules for catalog and electronic advertisements, as well as television and radio advertisements. Prescreening You can also“prescreen”a list of leads or even a single lead under the Fair Credit Reporting Act (FCRA). Prescreening is governed by the FCRA and involves giving a credit bureau a list of credit criteria for the credit bureau to produce a list of consumers meeting the criteria. (Under the “prescreen of one”model, the credit bureau applies the credit criteria to a single consumer and indicates whether or not the consumer meets them.) FCRA requires dealers to make a“firm offer of credit”to these consumers, which the creditor is obligated to honor, provided the consumers continue to meet the prescreen criteria and meet any additional post-screen credit criteria as well as provide any required collateral. FCRA requires specific “clear and conspicuous” disclosures that must be included in the prescreen mailing, including conspicuously disclosing to the consumer how to opt out of further prescreening. The BCFP has issued a FCRA rule regulating the content and format of these disclosures, and the rule includes models that offer a compliance safe harbor. Dealers should apply the models for the most reliable approach to compliance with these disclosure requirements. Prescreening differs from preapproval inquiries in that a consumer who meets the prescreen criteria must receive a firm offer of credit. Persons who do not pass the prescreen criteria do not need to receive adverse action notices unless they otherwise affirmatively apply for credit and are declined.

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