On our Home Equity Application Disclosure it state, ” Please ask us for the current index value, margin, and annual percentage rate.” Below that it states, “Frequency of Annual Percentage Rate Adjustments- However under no circumstances will your annual percentage rate exceed X% per annum, or go below X% per annum at any time during the term of the Plan.” On our Credit Agreement/ Note does the APR have to be within those percentages stated in the early disclosures? Or does our first sentence cover us if they were to be higher?
The credit agreement/note is the actual contract between you and the borrower. You are required to provide the applicant a disclosure that reflects the term of the loan for which they applied. It appears that the application disclosure is not consistent with the actual terms of the disclosure. If, at application, you tell the applicant that, “under no circumstances will your annual percentage rate exceed X% per annum, or go below X% per annum” and then the actual APR is outside of those parameters you have engaged in a deceptive act or practice.
You need to modify your application disclosure to be consistent with the terms actually offered to the borrower.