Question 1
Domain 3: Ethics, Fraud Prevention, and Consumer ProtectionAn advertisement states "Get a home loan with only $5,000 down!" This is an example of a:
Correct answer: C
Explanation
“$5,000 down” is a specific down payment amount, which is a trigger term in mortgage advertising. Under Regulation Z, when an ad states a down payment amount, it must also disclose additional credit terms such as the amount or percentage of the down payment and other required loan information.
Why each option is right or wrong
A. Compliant advertisement
B. Bait and switch
C. Trigger term requiring additional disclosures
Under Regulation Z, 12 C.F.R. § 1026.24(d)(1), a mortgage advertisement that states a specific down payment amount is a trigger term and must be accompanied by additional required disclosures. Because the ad uses an exact dollar figure for the down payment, it cannot stand alone; the creditor must also disclose the amount or percentage of the down payment and other material credit terms required by the rule.
D. Prohibited deceptive practice