Truth in Advertising and Marketing Quiz

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Questions and Answers

What must advertisements comply with to ensure truthfulness and non-deceptiveness?

They must include testimonials from past consumers.

They must meet the reasonable consumer test. (correct)

They must always use legal language.

They must highlight all claims without supporting evidence.

Which of the following is considered a deceptive practice under UDAAP?

Providing a competitive loan product

Disclosing all applicable fees upfront

Offering clear terms in advertisements

Engaging in bait and switch advertising (correct)

What defines a material fact in advertising?

A fact that does not influence consumer decisions.

A fact that is legally documented.

A fact that if known, could influence a reasonable consumer's choice. (correct)

A fact that is common knowledge among consumers.

Which of the following is an example of unintentional misrepresentation?

Omitting material facts in advertisements. Signup and view all the answers

What is one of the key requirements of the Mortgage Acts and Practices-Advertising (Reg N)?

It mandates record-keeping for advertising claims. Signup and view all the answers

Which of the following is NOT specifically prohibited by MAP in relation to loan misrepresentations?

The early payment discounts offered by lenders Signup and view all the answers

When advertising loan terms, which of the following must be disclosed if triggering terms are used?

The repayment terms Signup and view all the answers

Which statement correctly describes what is necessary regarding the APR when advertising loan terms?

APR and interest rate must be presented with equal prominence Signup and view all the answers

What is required in advertisements if the APR can increase after the loan is closed?

A statement indicating the APR may increase Signup and view all the answers

Which of the following describes permissible advertising practices under MAP?

Truthful statements avoiding exaggeration and supporting claims Signup and view all the answers

Which of the following triggers the need for additional disclosures in loan advertisements?

Mentioning the number of payments required Signup and view all the answers

What information must accompany a statement about the mortgage credit product's effectiveness?

Information stating that it resolves specific difficulties Signup and view all the answers

Which of the following options is a misconception about permissible statements in loan advertisements?

Exaggerated benefits can be included if they are true in some cases Signup and view all the answers

Study Notes

Truth in Advertising and Marketing (UDAAP and MAP Rule)

UDAAP (Unfair, Deceptive, or Abusive Acts or Practices): Regulators evaluate ads using a "reasonable consumer" standard. Lenders cannot misrepresent products, make false claims, or hide crucial information (material facts).
Material Fact: A fact that, if known, could change a reasonable consumer's decision.
Misrepresentation Types:
- Intentional: Deceptive, potentially criminal fraud.
- Bait and Switch: Attractive, but misleading, offer to lure consumers into less desirable products.
- Claiming Association: Falsely claiming affiliation with government agencies (e.g., VA, FHA).
- Unintentional/Negligent: Omitting material facts, errors in disclosures.
Truthful Advertising: To comply with UDAAP, ads must:
- Be supported by evidence.
- Avoid impossible claims.
- Maintain supporting evidence.
- Avoid taking advantage of less knowledgeable consumers.
- Meet the reasonable consumer test (as defined by CFPB).

Mortgage Acts and Practices-Advertising (MAP Rule)

MAP Rule (Reg N): Specific FTC rule for mortgage advertising. Prohibits lenders from:
- Misrepresenting interest rates, loan costs.
- Misrepresenting terms, repayment, escrow.
- Misrepresenting prepayment penalties.
- Misrepresenting variable rates, amortization types.
- Misrepresenting payment counts, available cash/credit.
- Misrepresenting the product's effectiveness in solving consumer issues.
- Misrepresenting association with government agencies or falsely claiming government benefit.
- Misrepresenting the creditor as a consumer's current lender or servicer.
- Misrepresenting reverse mortgage occupancy requirements.
- Misrepresenting the likelihood of loan approval.
- Misrepresenting refinance/modification possibilities.
- Misrepresenting counseling services availability.

Permissible Advertising Statements

Permissible Statements: Truthful, avoid exaggeration, consider average consumer knowledge, and follow disclosure requirements. Specific loan terms (e.g., interest rates) are allowed but must be fully disclosed if triggering terms are used.

Triggering Terms and Required Disclosures

Triggering terms require extra disclosures including:
- Down payment amount/percentage
- Repayment terms
- APR (annual percentage rate) in full
- APR and interest rate must have equal prominence.
- Payment examples supporting APR calculations (if variables like loan size, credit scores, or LTVs affect it).
- Statements about increased APR after closing (for adjustable-rate mortgages).

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Description

Test your knowledge on UDAAP and the MAP Rule in advertising. This quiz covers topics such as material facts, misrepresentation types, and truthful advertising practices. Understand what constitutes fair and deceptive advertising to better protect consumers.