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Question of the Week

  • QUESTION: Recently, an advertisement went out with a rate that was incorrect. Does the bank have to honor the rate?


    Part of the advertising requirements for Regulation Z includes a provision that “if an advertisement for credit states specific credit terms, it shall state only those terms that actually are or will be arranged or offered by the creditor.”

    If there was an error, the bank needs to consider how it will respond, consider the following: being prepared to adhere to the requirements of Regulation Z by honoring the advertisement’s stated rate; being prepared to acknowledge via a replacement/retraction that the advertisement was an error; determining whether a product may be offered that provides reasonable acceptable substitute to those who applied based on the original rate, etc. In additional the bank should consider corrective action to ensure that this is isolated, consulting the regulatory agency for guidance, documenting what happened and the correction process, reporting to the Board.

    Reference: Regulation Z 12 CFR 1026.16(a); 1026.24(a)