Questions and Answers

I heard the phrase "triggering term" the other day while discussing the advertising rules of Regulation Z.  Can you explain what a triggering term use and why it is important?

A triggering term is a piece of information that triggers a disclosure requirement if the information appears in the advertisement.  For example, under the closed-end credit rules, the amount or a percentage of any downpayment is a triggering term.  If the advertisement contains the amount or percentage of the downpayment, certain additional disclosures are required. 

Here is a list of the triggering terms for closed-end credit: 

  • The amount or percentage of any downpayment
  • The number of payments or period of repayment
  • The amount of any payment
  • The amount of any finance charge  

If a triggering term appears in the advertisement, all of the following terms must also appear in the advertisement: 

  • The amount or percentage of any downpayment
  • The terms of repayment
  • The annual percentage rate, using that term, and the fact that the rate may increase after consummation, if that is the case

See 12 CFR 226.24

(Posted: 04/22/2008)

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The Practical Guide to Bank Compliance can assist you with your Reg Z compliance issues and questions.