A billboard for a closed-end, dwelling-secured consumer loan displays a 4.5% simple annual interest rate in large type. The 5.1% APR underneath is much less conspicuous, in type a quarter of that size. Does this relative prominence comply with Regulation Z?
Correct Answer
C) Non-compliant: the 4.5% may not appear more conspicuously than the APR
C. The simple annual rate cannot be more conspicuous than the APR. Regulation Z permits the simple annual rate alongside the APR for this credit. Merely including both numbers does not satisfy the separate prominence requirement. Scope and exceptions: This tests prominence only. Other content and disclosure requirements still apply to the complete advertisement. Source: 1026.24(c) — https://www.consumerfinance.gov/rules-policy/regulations/1026/24/
Why This Is the Correct Answer
C. The simple annual rate cannot be more conspicuous than the APR. Regulation Z permits the simple annual rate alongside the APR for this credit. Merely including both numbers does not satisfy the separate prominence requirement. Scope and exceptions: This tests prominence only. Other content and disclosure requirements still apply to the complete advertisement.
Why the Other Options Are Wrong
Option A: Compliant, since the 4.5% is the rate the borrower actually pays monthly
An annual rate is not a monthly rate; payment calculations do not excuse the prominence problem.
Option B: Compliant: both figures appear, which is all the rule asks for
Presence and prominence are different requirements.
Option D: Non-compliant: a simple annual rate may never appear in an advertisement
The rule permits the simple annual rate subject to conditions.
Exam Tip
Check how rates are presented, not just whether they appear.
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