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The following Q&A came in during our recent webinar on “Regulation Z Rules for Home Equity Lines of Credit”:

Question: Since the Official Interpretation of “Advertisement” excludes “Communications about an existing credit account (for example, a promotion encouraging additional or different uses of an existing credit card account)”, our understanding is that marketing materials for existing HELOCs (e.g., promoting additional draws on a HELOC) are not subject to the advertising requirements prescribed in Reg. Z Sec. 1026.16. Thus, if those marketing materials for existing HELOCs refer to a promotional rate, there is no requirement that the materials also refer to a post-promotional rate, as would be required under Sec. 1026.16(d)(6) for “advertisements” promoting the origination of HELOCs.

Do you agree?

Answer: I agree with your logic. I can find nothing in the Regulation or the Official Interpretation that directly addresses the issue.

I do have a concern. If your “non-advertisement” advertisement provides the good news (the promotional rate) but fails to include the bad news (the post-promotional rate) the failure might be viewed as a deceptive act or practice in a UDAP or UDAAP action.

You could raise the issue directly with the CFPB. If the agency agrees with your viewpoint then you would have comfort that the CFPB would be unlikely to cite a violation; however their approval would offer no protection from civil liability. If the CFPB disagrees with your viewpoint, then your organization would be damned if it proceeded without approval.

I suggest that you contact legal counsel and obtain a written legal opinion on the issue. If counsel provides a positive response, then if adverse action results from a regulatory agency or from a civil case, then recourse against counsel would provide some level of offset to the legal liability.

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