What Is a Trigger Term in Credit Advertising?

A trigger term in credit advertising is a specific word or phrase that, when used in an advertisement, requires the advertiser to provide additional disclosures about the credit offer. These terms ensure transparency in financial promotions. They help consumers understand the complete cost and conditions of a credit product, preventing misleading statements and promoting informed financial decisions.

What Constitutes a Trigger Term

Words or phrases are legally designated as trigger terms because they imply certain credit costs or terms, which then require comprehensive disclosure. For closed-end credit products, such as mortgages or auto loans, examples of trigger terms include stating the amount or percentage of a down payment, like “5% down” or “80% financing available.” Mentioning the amount of any payment, such as “$150 per month” or “payments as low as $200,” also acts as a trigger. Similarly, specifying the number of payments, for instance, “60 monthly payments,” or the period of repayment, such as “5-year loans available,” will necessitate further disclosures. The presence of any finance charge amount in an advertisement also falls into this category.

For open-end credit, which includes products like credit cards or home equity lines of credit, different phrases can serve as trigger terms. These might include any mention of finance charges, periodic rates, or specific fees like transaction fees, late payment charges, or annual fees. Even statements indicating the absence of a charge, such as “no annual fee” or “no interest charges until next year,” can trigger additional disclosure requirements. The presence of just one of these terms in an advertisement obligates the advertiser to provide the additional required information.

Mandatory Disclosures Following a Trigger Term

When a trigger term is used in a credit advertisement, specific information must be clearly and conspicuously disclosed. For advertisements concerning closed-end credit, the Annual Percentage Rate (APR) must be stated, using that full term. If the APR is subject to increase after the credit transaction begins, this fact must also be disclosed. The terms of repayment must be provided, which includes the number, amount, and timing of payments. This might involve an example showing a loan amount, its term, and the corresponding monthly payment.

Additionally, the advertisement must disclose the amount or percentage of any down payment required. If the credit involves a finance charge, the total amount of that charge must also be presented. For open-end credit advertisements that use a trigger term, the disclosures include any minimum, fixed, transaction, or similar charge that constitutes a finance charge. The APR must be stated, and if it is a variable rate, that fact needs to be disclosed. Any membership or participation fees that could be imposed must also be clearly presented. These disclosures ensure consumers receive a complete understanding of the credit offer’s true cost and terms.

Where Trigger Terms Apply

The regulations surrounding trigger terms apply broadly to advertisements for consumer credit across various communication mediums. This includes advertisements appearing in newspapers, magazines, promotional flyers, and direct mailers. They also extend to broadcast media like radio announcements and television commercials. In the digital realm, these rules cover internet advertisements, social media campaigns, and electronic messages. Essentially, any commercial message that promotes a credit transaction, whether directly or indirectly, falls under this regulatory scope.

These rules ensure consistent and transparent advertising practices for a wide array of consumer credit products. This encompasses advertisements for mortgages, auto loans, student loans, and credit card offers. The regulations differentiate between closed-end credit, such as installment loans with a fixed repayment schedule, and open-end credit, like revolving credit lines. By requiring specific disclosures when trigger terms are used, these regulations contribute to broader consumer protection efforts, aiming to prevent misleading marketing and enable consumers to compare credit offers on a fair and equal basis.