Maryland Home Improvement PSI Practice Exam

According to the Truth-in-Lending Act, if "trigger terms" are used in an advertisement, which of the following disclosures is NOT required?

1. Cash price or amount of the loan.

2. Amount of down payment required.

3. Number, amount, and frequency of payments.

4. Prepayment penalties and rebates.

The correct answer is: Prepayment penalties and rebates.

The Truth-in-Lending Act (TILA) requires specific disclosures to ensure that consumers are fully informed about the terms of a credit transaction when "trigger terms" are mentioned in advertising. Trigger terms are specific phrases or figures that elicit a call for further explanation (such as payment amounts or interest rates). When trigger terms are used, the following disclosures must be made: the cash price or amount of the loan, the amount of the down payment required, and the number, amount, and frequency of payments. These disclosures help consumers understand the full context of the financing being advertised, allowing for a clearer comparison of credit costs. The requirement for disclosures related to prepayment penalties and rebates is not mandated when trigger terms are used. While it's important for consumers to know about prepayment penalties and other conditions associated with loans, TILA does not classify these as critical disclosures directly tied to the use of trigger terms in advertisements. Therefore, the absence of this particular disclosure is consistent with TILA guidelines, making it the correct answer in this context.