A Connecticut-licensed broker places an advertisement that reads: 'Buy any home through us and receive a $500 gift card at closing!' No disclosure is made that this offer is subject to lender approval or that it may affect the buyer's loan terms. Under Connecticut and applicable federal standards, this advertisement is BEST described as:
Correct Answer
D) Potentially problematic, because undisclosed buyer incentives may violate RESPA, CUTPA, and Connecticut advertising rules if material conditions are omitted
Advertising buyer incentives such as gift cards at closing without disclosing material conditions — including that the incentive must be disclosed to and approved by the lender, and that it may affect loan terms — is potentially problematic under multiple legal frameworks. RESPA prohibits undisclosed kickbacks and referral fees, and undisclosed incentives that affect HUD-1/Closing Disclosure figures can trigger RESPA violations. Connecticut's CUTPA (CGS § 42-110a) prohibits deceptive advertising, and omitting material conditions from an advertised offer can be deceptive. CREC may also view such advertising as misleading under Connecticut advertising regulations.
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