Minnesota State Real Estate Practice Test

Under the Truth-in-Lending Act, which of the following is NOT required to be disclosed in an advertisement that uses trigger terms?

1. Prepayment penalties and rebates

2. Annual percentage rate

3. Total payments

4. Loan term

The correct answer is: Prepayment penalties and rebates

In the context of the Truth-in-Lending Act (TILA), advertisements that use trigger terms are required to include specific disclosures to ensure that consumers are fully informed about the terms of credit. Trigger terms are specific phrases or numbers that, when used in an advertisement, necessitate additional information to be provided to the consumer. The inclusion of the annual percentage rate (APR), total payments, and loan term in advertisements is mandated because these elements directly impact a consumer’s understanding of the financial commitment they are considering. The APR reflects the true cost of borrowing expressed as an annual rate, while total payments sum up the entire amount a borrower will pay over the life of the loan, including both principal and interest. In contrast, prepayment penalties and rebates are not considered trigger terms under TILA's advertising requirements. While these elements are important for understanding total loan costs, they do not have to be disclosed in response to the use of trigger terms in an advertisement. Therefore, omitting prepayment penalties and rebates from the disclosures aligns with the requirements set forth by the Truth-in-Lending Act. This distinction highlights the focus of TILA on more fundamental terms of the loan, allowing consumers to make more informed decisions about loans based on the key financial figures that will