The following guidelines are based on the FTC's Truth-In-Lending Act. There are two kinds of credit, closed-end and open-end, and each has required disclosures when certain triggering terms are used in advertising.
Typically, closed-end credit transactions involve credit that is extended for a specific time period and the amount financed, finance charge, and schedule of payments is agreed upon by the lender and the customer. Closed-end credit includes sales credit and loans. If an advertisement for closed-end credit contains any of the following triggering terms, three specific disclosures must also be included in the advertisement.
- The amount of down payment
- The amount of any payment
- The number of payments
- The period of repayment
- The amount of any finance charge
If any of the triggering terms is used in an advertisement, the following three disclosures must be included:
- The amount or percentage of the down payment
- The terms of the repayment
- The annual percentage rate
Examples of open-end credit are bank and gas company credit cards and stores' revolving charge accounts. In open-end credit, the creditor reasonably expects the customer to make repeated transactions.
The triggering terms for open-ended credit are:
- Statement of when the finance charge begins to accrue, including any "free ride" period, if any
- Statement of either the periodic rate used to compute the finance charge or the annual percentage rate
- The method of determining the balance on which a finance charge may be imposed
- The method of determining the finance charge, including a description of how any finance charge other than the periodic rate will be determined
- The amount of any charge (other than the finance charge) that may be imposed as part of the plan
- The fact that the creditor will acquire a security interest
The required disclosures are:
- Any minimum, fixed, transaction, activity, or similar charges that could be imposed.
- Any periodic rate that may be applied, expressed as an "annual percentage rate". If the plan provides for a variable periodic rate, that fact must be stated.
- Any membership or participation fee.