What Is a Triggering Term?
A triggering term is a word or phrase that, when used in advertising literature, requires the presentation of the terms of a credit agreement. Examples include, _financing available_, _low or no down payment_, _easy monthly payments_, _pay weekly_, and _terms to fit your budget_. Carefully reading disclosures can help consumers get an accurate picture of the cost of borrowing money; being oblivious to the terms of a loan and the charges incurred can cause a consumer to pay more than they should for credit or become more indebted than they intended. If an advertiser uses any number of terms of a credit agreement, such as how finance charges are computed, when a charge can be imposed, and charges computed as an annual percentage rate, then the advertisement must also contain certain specified disclosures. The purpose of triggering terms is to clarify the terms of a loan or agreement and to give consumers the opportunity to compare credit or lease offers. A triggering term is a word or phrase that, if used in credit advertising, requires additional credit agreement disclosures.
Understanding Triggering Terms
Whether in print, broadcast, or online, credit advertising must abide by the Truth in Lending Act passed in 1969, which provides for the enforcement of credit advertising standards. The rule helps protect consumers from predatory advertising and lending practices by assuring the disclosure of consumer credit and lease terms.
Triggering terms help clarify the conditions under which a consumer is borrowing money. If an advertiser uses any number of terms of a credit agreement, such as how finance charges are computed, when a charge can be imposed, and charges computed as an annual percentage rate, then the advertisement must also contain certain specified disclosures. In short, certain terms — when used to lure customers — trigger additional disclosures.
Examples of Triggering Terms
Open-end and closed-end credit arrangements, as well as leases, each have a set of triggering terms associated with them. For example, if any of the following sample triggering terms are used in advertising, then disclosures must be made:
If any of the above term triggers are used, then the following must be disclosed:
On the other hand, some terms or phrases do not trigger additional disclosures. Examples include, financing available, low or no down payment, easy monthly payments, pay weekly, and terms to fit your budget.
Triggering Terms Special Considerations
Carefully reading disclosures can help consumers get an accurate picture of the cost of borrowing money; being oblivious to the terms of a loan and the charges incurred can cause a consumer to pay more than they should for credit or become more indebted than they intended.
Meanwhile, a way for credit companies to meet disclosure requirements is by using real-life repayment examples. For instance, if a mortgage lender is advertising a 5% down payment on loans, they might provide an example that shows a 30-year fixed-rate loan, the repayment amounts, and the interest rate that was used at the time of the advertisement.
Related terms:
Adequate Notice
Adequate notice is a written document that specifies the terms and conditions of a loan or extension of credit to a consumer in detail. read more
Annual Percentage Rate (APR)
Annual Percentage Rate (APR) is the interest charged for borrowing that represents the actual yearly cost of the loan, expressed as a percentage. read more
Bad Credit
Bad credit refers to a person's history of failing to pay bills on time, and the likelihood that they will fail to make timely payments in the future. read more
Closed-End Credit
Closed-end credit is a loan or extension of credit in which the proceeds are dispersed in full when the loan closes and must be repaid by a specified date. read more
Closing Costs
Closing costs are the expenses, beyond the property itself, that buyers and sellers incur to finalize a real estate transaction. read more
Consumer Credit Protection Act of 1968 (CCPA)
The Consumer Credit Protection Act of 1968 (CCPA) is federal legislation outlining disclosure requirements for consumer lenders. read more
Consumer Credit
Consumer credit is personal debt taken on to purchase goods and services. Credit may be extended as an installment loan or a revolving line of credit. read more
Credit Agreement
A credit agreement is a legally-binding contract that documents the terms of a loan agreement. It outlines the details of the loan and its clauses. read more
Down Payment
A down payment is a sum of money the buyer pays at the outset of a large transaction, such as for a home or car, often before financing the rest. read more
Federal Trade Commission (FTC)
The FTC is an independent agency that aims to protect consumers and ensure a competitive market by enforcing consumer protection and antitrust laws. read more