Coming in October: regulation changes for consumer loan advertising.

• Author: Pry, Carl G.

Advertising consumer loans is already a challenge. The roles here come fl()m the Federal Reserve's Regulation Z (Truth in Lending). which mandate certain disclosures be included in an ad if certain "triggering" terms :ire stated. For instance, the annual percentage rate (APR) must be disclosed if you state the repayment term of a closed-end loan.

Last year, the Fed amended Reg. Z, adding provisions introducing a new category of mortgage loans, "higher-priced mortgage loans." In addition, they added new requirements to how dwelling-secured loans (both open- and closed-end) are advertised; these requirements apply to all such ads, not just those that promote loans that meet the new definition. The result is that advertising consumer mortgage products will become much more restrictive than it is today, giving you an opportunity to get closer with your compliance officer (sarcasm intended). The new rules take effect Oct. 1, 2009.

The rules can be classified into two categories: making sure required information is "clear and conspicuous," and prohibiting unfair and deceptive practices. Some of the requirements under the first, "clear and conspicuous" standard include:

* If a promotional, or teaser, rate (or payment) is advertised, additional information must appear "'with equal prominence and in close proximity to any advertised rate." This isn't defined more clearly than that, but placing the information immediately above, below, or next to the rate, and in the same type size, would meet the requirement. For both closed- and open-end credit, the required information includes the period of time that teaser rate would be in effect, and the APR of the loan (or current payment) after the initial rate expires.

* If the loan or line has a variable rate, the ad must also state...