A borrower-facing employee is unsure what to do when an ad shows an interest rate but omits the APR presentation. What is the correct response?
Correct Answer
A) State the rate as an annual percentage rate
Why this is correct: The rule from 12 CFR 1026.24(c) is clear and non-discretionary. For closed-end credit ads, any mention of a specific finance charge rate triggers the requirement to also disclose the APR. The APR provides a truer cost of credit by including other charges. The employee's correct and only course of action is to ensure the ad is corrected to state the rate as an annual percentage rate. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because TILA disclosures are required for the borrower's protection, irrespective of their apparent willingness. "Treat the APR in advertisements review as complete because the file contains a related refinance benefit note" is wrong because an unrelated note in the file does not cure the specific advertising disclosure violation. "Document the issue later instead of correcting the compliance problem first" is wrong because the priority is to correct the non-compliant ad; documentation alone is insufficient. Exam tip: When unsure, default to the specific regulatory requirement. General file contents or borrower demeanor do not override explicit advertising rules.
Why This Is the Correct Answer
The correct response is "State the rate as an annual percentage rate" because Lines 261-265 and 273-277; 12 CFR 1026.24(c).
Why the Other Options Are Wrong
Option B: Continue the activity because the borrower appears willing to proceed.
Continue the activity because the borrower appears willing to proceed. is not correct because it does not apply the rule tested by this file scenario.
Option C: Treat the APR in advertisements review as complete because the file contains a related refinance benefit note.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option D: Document the issue later instead of correcting the compliance problem first.
Document the issue later instead of correcting the compliance problem first. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
mortgage advertising compliance: 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 mortgage advertising compliance; 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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