What it means
Under the US Truth in Lending rules, known in practice through Regulation Z, an advertiser that mentions certain terms must also state other terms clearly. The mentioned terms are the triggers, and the extra disclosures are what they set off.
The aim is to let a consumer compare credit offers on a like-for-like basis. The commonly listed triggering terms are the amount or percentage of any down payment, the number of payments or length of repayment, the amount of any payment, and the amount of any finance charge.
If an advert says "only $199 a month", it has used a triggering term and must also give the other required details. Those details normally include the amount or percentage of the down payment, the repayment terms, and the annual percentage rate (the yearly cost of borrowing, including certain fees, shown as a percentage).
If the rate can increase after the loan starts, the advert must say so. The disclosures have to be clear and conspicuous, meaning noticeable and readable, not buried in small print.
For a business, the practical effect is that marketing copy needs a compliance check before it goes live. A car dealership, furniture retailer or online lender that runs a campaign with an eye-catching payment figure can face enforcement action if the full disclosures are missing.
Fines, refunds to affected customers and the cost of withdrawing and reprinting corrected advertising can add up to far more than the original campaign budget. One nuance is that general statements do not trigger the rules.
An advert saying "easy financing available" or "low rates" without any specific figure typically does not, although it still has to be truthful. The exact rules differ by product, and a similar concept exists for consumer leases.
Training is the cheapest protection. Sales staff, social media managers and agencies should be told which figures to avoid quoting alone, and which template wording is approved.
Many firms keep a short library of pre-approved advert layouts so that the disclosures are built in from the start.
In practice
Real-world examples.
Example
A car dealer advertises a sedan for "$299 a month". The monthly payment is a triggering term, so the advert must also show the down payment, the number of payments and the annual percentage rate.
Example
An online furniture store promotes a sofa with "no money down, 24 equal payments". The number of payments is a triggering term, and the advert needs to add the payment amount, the finance charge and the rate.
Example
A home improvement company posts "easy financing, call for details" on a billboard with no figures. No specific credit term is stated, so no extra disclosures are triggered, but the company's lawyer still checks that the claim is not misleading.
Case study
Seen in the real world.
Sunvale Motors is an illustrative, fictional used-car dealer that launched a radio and web campaign with the line "drive away for $189 a month". The marketing manager did not realise the payment amount was a triggering term.
A routine compliance review caught the issue before the second week of the campaign. The legal adviser, who had seen similar cases at other dealers, required the dealer to add the down payment, the number of monthly payments and the annual percentage rate to every web advert, and to read a short disclosure at the end of each radio spot.
The illustrative lesson is that the fix cost very little because it was caught early. Sunvale then added a standing step to its campaign checklist so that every advert containing a payment, a deposit or a term of months is reviewed before release. The marketing manager also asked the agency to supply every future draft with the disclosure block already placed, so the review became a quick confirmation rather than a rewrite.
Watch out
Common mistakes.
- Assuming a figure in small print satisfies the rule, when the required disclosures must be clear and conspicuous.
- Believing that only the interest rate triggers extra disclosure, when a payment amount or down payment can do it too.
- Treating the rules as the lender's job alone, when the advertiser or retailer making the offer can be responsible.
Questions
People also ask.
What is the difference between a triggering term and a trigger term?
In credit advertising, they usually mean the same thing, namely a stated credit term that requires further disclosure.
Does this apply outside the United States?
The wording is specific to US rules, but many countries have similar requirements for advertising credit.
Who checks adverts for triggering terms?
Normally a compliance officer or legal adviser, working with marketing before publication, and ideally again whenever the offer or the wording changes during a campaign.
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