A quality-control reviewer flags a case because an ad shows an interest rate but omits the APR presentation. What correction is appropriate?
Correct Answer
D) State the rate as an annual percentage rate
Why this is correct: The governing concept is Regulation Z's closed-end credit advertising rule (the governing federal rule It requires that if an advertisement states a finance charge rate, it must also state the Annual Percentage Rate (APR). The appropriate correction for an ad missing the APR is to add it, stating the rate as an APR. Why the other choices are wrong: "Treat advertising and consumer protection as satisfied by an oral manager approval" is wrong because oral approval does not satisfy the written disclosure requirement. "Treat prior mortgage experience as a substitute for the required compliance condition" is wrong because experience does not excuse following the specific rule. "Use a generic national checklist instead of the requirement in this consumer-facing workflow" is wrong because checklists must be tailored to specific legal requirements like the APR rule. Exam tip: When correcting a flagged issue, the fix must directly address the specific regulatory violation identified.
Why This Is the Correct Answer
The correct response is "State the rate as an annual percentage rate". Closed-end credit advertising rules require the finance charge rate to be stated as an annual percentage rate.
Why the Other Options Are Wrong
Option A: Treat advertising and consumer protection as satisfied by an oral manager approval.
Treat advertising and consumer protection as satisfied by an oral manager approval. is not correct because it bypasses the rule supported by the explanation.
Option B: Treat prior mortgage experience as a substitute for the required compliance condition.
Treat prior mortgage experience as a substitute for the required compliance condition. is not correct because it bypasses the rule supported by the explanation.
Option C: Use a generic national checklist instead of the requirement in this consumer-facing workflow.
Use a generic national checklist instead of the requirement in this consumer-facing workflow. is not correct because it bypasses the rule supported by the explanation.
Memory Technique
When an ad mentions a rate, look for APR.
Exam Tip
When an ad mentions a rate, look for APR.
Common Mistakes to Avoid
- -The note rate and the APR are not interchangeable advertising disclosures.
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