Pub. 1 2019-20 Issue 3

http://wvcar.com WVADA 18 By Johnnie E. Brown Pullin, Fowler, Flanagan, Brown & Poe, PLLC Advertising: An Overview, Part 2 O ur previous Counselor’s Corner provided an overview of deception and unfairness within federal advertising law. This time, let’s discuss more practical applications by discussing “trigger terms” in retail and leasing advertising. The Truth-In-Lending Act has two very important sets of reg - ulations dealing with advertising. The first is Regulation Z, dealing with retail installment sales, and Regulation M, which applies to consumer lease transactions. Both of these regula - tions contain provisions that require specific disclosures when advertising a retail installment sale or lease offer. Trigger term compliance within the Truth In Lending Act, Regulations Z and M, is one of the most easily and frequently checked matters by federal and state regulators. If credit or lease terms are adver- tised, the advisement must meet the specific requirements of the Truth-In-Lending Act. In the context of retail installment sales, an advertisement must include four separate disclosures. These are as follows: 1. The amount of or percentage of any down payment; 2. The number of or periods of repayment; 3. The amount of the monthly payment; and 4. The annual percentage rate (APR). If one of the first three disclosures (down-payment, length of repayment, or monthly payment) is advertised alone, that “triggers” the disclosure of the remaining three. However, fed - eral law states that if a dealer only advertises an annual per - centage rate, that does not “trigger” the other three. Con - sequently, a minor exception occurs when only advertising a percentage rate when it pertains to Regulation Z compliance, but don’t forget to include other disclaimers, such as, “for qualified buyers only.” A common violation that I see is when a dealer, or even ma - jor manufacturers, advertise, for example “0% financing for 60 months,” without any further disclosures. The period of repayment, i.e. 60 months, actually “triggers” and requires the two remaining disclosures of monthly payment and the amount or percentage of down payment to be included. A more compliant way to advertise this type of promotion is to simply leave out the time frame and use a phrase such as “limited term financing.” Of course, dealers can advertise the amount of time for the finance terms so long as the proper disclosures are included in the advertisement. For example, some promotions will include a proper disclosure which will read as follows for 60-month financing: “$16.67 per month per $1,000 financed with 0% down payment on approved credit.” Please remem - ber that this disclosure must be clear and conspicuous so that a reasonable consumer can see it. Also, advertising such COUNSELOR’S CORNER