DEFINITION of 'Triggering Term'

A word or phrase that when used in advertising literature requires the presentation of the terms of a credit agreement so that individuals can compare credit offers on a fair and equal basis.

Open-end and closed-end credit each have a set of triggering terms associated with them; if a single one is used in advertising material, then the full set of credit terms must also be displayed so as not to confuse or deceive consumers.

Triggering terms are set and monitored by the Federal Trade Commission, in the United States.

BREAKING DOWN 'Triggering Term'

Credit literature and advertising must abide by the Truth In Lending Act passed in 1969, which requires that lenders disclose key terms of an agreement, such as how finance charges are computed, when a charge can be imposed and charges computed as an annual percentage rate.

Triggering terms help clarify the conditions under which a consumer is borrowing money. It is important to read carefully all of the disclosures to get a true picture of the cost of borrowing money. Being oblivious to the terms of a loan and the charges that can be incurred can cause a consumer to become buried in debt.

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