Question

A developer advertises homes for sale with a total down payment of $2,000. A qualified buyer offers to pay the $2,000 down, but the developer states that the $2,000 down homes are all sold. Is this transaction covered under Truth in Lending Act

Answer 1

Yes, this transaction is covered by the Truth and Lending Act because it represents an illegal and deceptive sales practice known as bait and switch advertising. Regulation Z (Truth and Lending Act) prohibits developers from carrying out deceptive advertising that might hurt the financial position of the potential buyer.

Generally bait and switch practices happen when a company advertises a certain product with a deep discount, but when a customer approaches, the product is no longer available and another substitute (but more expensive) product is offered.