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My bank’s home equity line of credit product has an introductory rate. For advertising purposes, should the bank be disclosing the applicable margin after the Wall Street Journal index + Applicable Margin?

My bank’s home equity line of credit (HELOC) product has an introductory rate. For advertising purposes, should the bank be disclosing the applicable margin (i.e., Applicable Margin of 3.25% APR to 7.00% APR) after the Wall Street Journal index + Applicable Margin?

As it relates to the regulatory requirements for advertisements of home-equity plans, see §1026.16(d)(2) stating that if any of the terms required to be disclosed under§ .6(a)(1) or (2) or the payment terms (i.e., “trigger terms”) are set forth then an advertisement must also include (among other items) any discounted or premium rates along with; the period of time such initial rate will be in effect, and 2) “A reasonably current annual percentage rate that would have been in effect using the index and margin.” See then the Commentary to § .16(d)-6 stating that an index and margin is considered ‘reasonable current’ if;

  1. “For direct mail advertisements, it was in effect within 60 days before mailing;
  2. For advertisements in electronic form it was in effect within 30 days before the advertisement is sent to a consumer's email address, or in the case of an advertisement made on an Internet Web site, when viewed by the public; or
  3. For printed advertisements made available to the general public, including ones contained in a catalog, magazine, or other generally available publication, it was in effect within 30 days before printing.”

If the margin may differ based on borrower qualifications or factors (e.g., the LTV, borrowers credit score, etc.) then a representative example should be provided that indicates the criteria used for the disclosed rate as well as a statement that the prospective applicant could ask for available margins. Be careful, however, to ensure that the representative example is one that could reasonably be obtained, as doing otherwise could subject your institution to UDAAP criticism. (March 2017)

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