A consumer complaint response raises a question about TILA advertising. Which action should the audit analyst recommend?
Correct Answer
D) State the APR when advertising a rate
Why this is correct: TILA and Regulation Z require that advertisements for closed-end credit secured by a dwelling be accurate and non-misleading. If an advertisement states a specific credit term (like a rate), it must also state other required terms, including the Annual Percentage Rate (APR). This ensures consumers can compare offers fairly. "State the APR when advertising a rate" directly follows this TILA advertising rule. Why the other choices are wrong: "Apply the correct general concept to the wrong refinance benefit stage rather than the TILA Advertising Requirements rule" is wrong because it misapplies concepts and fails to address the specific advertising disclosure requirement. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because advertising compliance is proactive and mandatory. "Rely on oral agreement when the rule requires documented compliance" is wrong because TILA advertising rules require specific written disclosures in ads. Exam tip: In mortgage ads, mentioning a rate triggers the requirement to also disclose the APR—this is a key TILA rule.
Why This Is the Correct Answer
The correct response is "State the APR when advertising a rate" because Mortgage advertisements must be truthful and include required APR or trigger-term disclosures.
Why the Other Options Are Wrong
Option A: Apply the correct general concept to the wrong refinance benefit stage rather than the TILA Advertising Requirements rule.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option B: 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 C: 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
More Federal Laws Questions
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