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The Truth in Lending Act and Advertising

The main purpose of the Truth in Lending Act is to assure the meaningful disclosure of consumer credit and lease terms, including those in advertisements, so that consumers can easily compare terms and shop wisely for credit.

Before passage of the Act, an advertiser might have used only the most attractive credit or lease terms, thus distorting the true cost of the credit or lease. For example, an advertisement might have read, "'63 Chevy, only $30 per month." Whether this is a bargain depends upon information missing from the advertisement, such as the down payment and the number of payments. The ad also omits the annual percentage rate and does not state whether the transaction is a credit sale or a lease. The Act requires that the advertisement tell the whole story.

For example, if an advertisement contains any of a number of terms specified in the Act, then that advertisement must also include certain prescribed disclosures. In other words, the specified terms "trigger" the disclosures. If, on the other hand, the ad does not use "triggering" terms, it need not make the disclosures. The type of transaction you advertise-closed-end credit, open-end credit, or a consumer lease-determines whether a term is a "triggering term" and, if so, what disclosures are required.

If you, as an advertiser, are unclear about what type of plan is being advertised, or about any of the specific terms of the plan - including the annual percentage rate-you may want to contact the creditor directly to obtain this information. This may help ensure that the credit terms you advertise are accurate.