An MLO creates a comparative advertisement showing 'Bank A: 6.5% vs. Our Rate: 5.8%' The MLO's rate requires 2 discount points while Bank A's rate requires no points. This advertisement violates which principle?
Correct Answer
B) It violates fair comparison standards by not disclosing material differences in loan terms
Regulation Z requires that comparative advertisements provide fair and meaningful comparisons. When comparing rates with materially different terms (such as points vs. no points), the advertisement must clearly disclose these differences to avoid misleading consumers.
Why This Is the Correct Answer
Regulation Z requires that comparative advertisements provide fair and meaningful comparisons. When comparing rates with materially different terms (such as points vs. no points), the advertisement must clearly disclose these differences to avoid misleading consumers.
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An MLO tells Asian applicants that they need larger down payments 'because that's what investors prefer for your type of loan,' while telling similarly qualified white applicants that standard down payments are acceptable. This practice represents: