An originator posts a social-media advertisement for a closed-end home mortgage: "Rates from 5.25%! DM me." The figure is only a simple interest rate, and the advertisement contains no APR. What must be corrected under Regulation Z, independently of any state-specific advertising identifier rule?
Correct Answer
C) The advertisement must disclose the APR; the simple rate cannot be more conspicuous than the APR
C. Disclose the APR and do not make the simple rate more conspicuous. Advertising a simple interest rate invokes the rate-advertising requirement, independently of payment or down-payment triggering terms. A later private reply does not cure the missing APR in the public advertisement. Scope and exceptions: The APR cannot be calculated from 5.25% alone without the relevant charges and terms. Variable or multiple-rate offers may need further disclosures. State advertising identifiers remain a separate issue. Source: Section 1026.24(c), (d), (f) — https://www.consumerfinance.gov/rules-policy/regulations/1026/24/
Why This Is the Correct Answer
C. Disclose the APR and do not make the simple rate more conspicuous. Advertising a simple interest rate invokes the rate-advertising requirement, independently of payment or down-payment triggering terms. A later private reply does not cure the missing APR in the public advertisement. Scope and exceptions: The APR cannot be calculated from 5.25% alone without the relevant charges and terms. Variable or multiple-rate offers may need further disclosures. State advertising identifiers remain a separate issue.
Why the Other Options Are Wrong
Option A: Nothing; social-media advertisements are exempt from Regulation Z
Social media is not categorically exempt.
Option B: The APR can always be omitted if it is supplied later in a private message
Required advertising disclosures cannot simply be deferred to a private message.
Option D: Nothing; a rate is not a payment-amount triggering term
It confuses the separate rate rule with the triggering-term rule.
Exam Tip
Check the advertised-rate rule even when no payment amount appears.
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