An advertisement states "as low as 6.99% APR" and nothing more. A marketing manager asks whether that sentence triggers the additional disclosures.
Correct Answer
A) Disclose required terms when a trigger term is used
Why this is correct: TILA and Regulation Z advertising rules specify that if an advertisement includes a "trigger term" (like the amount of any payment, the finance charge, or the APR), it must also clearly and conspicuously state other required terms, such as the APR, the amount or percentage of the down payment, and the terms of repayment. This is a mandatory disclosure combination. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because advertising disclosures are prescribed by law. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because ads must be compliant when published. "Rely on oral agreement when the rule requires documented compliance" is wrong because advertising claims and disclosures are inherently written or broadcast, requiring documented proof of compliance. Exam tip: For TILA ads, think: 'Trigger term = required disclosures.' If you see a payment amount advertised, look for the APR and other terms.
Why This Is the Correct Answer
The correct response is "Disclose required terms when a trigger term is used" because Mortgage advertisements must be truthful and include required APR or trigger-term disclosures.
Why the Other Options Are Wrong
Option B: Use an internal exception instead of the required federal disclosure or timing rule.
Use an internal exception instead of the required federal disclosure or timing rule. is not correct because it does not apply the rule tested by this file scenario.
Option C: Wait until a regulator asks for the file before applying the federal requirement.
Wait until a regulator asks for the file before applying the federal requirement. is not correct because it does not apply the rule tested by this file scenario.
Option D: Rely on oral agreement when the rule requires documented compliance.
Rely on oral agreement when the rule requires documented compliance. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
TILA advertising: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
Match the file facts to TILA advertising; do not choose an exception or shortcut that skips the required rule.
Common Mistakes to Avoid
- -Choosing an internal exception instead of the governing rule
- -Treating preliminary or informal facts as a substitute for required documentation
- -Answering from a familiar but unrelated mortgage topic
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