What risk does an advertisement that misrepresents credit terms pose?

A misrepresentation of credit terms in advertisements poses a risk of significant fines and can lead to a loss of consumer trust. This is rooted in the principles of Truth in Lending (Regulation Z), which mandates that lenders provide clear and accurate information to consumers about credit terms. When advertisements are misleading, they can deceive consumers into entering financial agreements that are not in their best interests.

Regulatory bodies, such as the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB), enforce compliance with these regulations and have the authority to impose substantial penalties on businesses that fail to adhere to the truth-in-lending standards. This not only results in financial repercussions but also undermines consumer confidence in the lender's offerings. Consequently, the perception of the business’s integrity can diminish, affecting its reputation in the market.

Thus, the correct answer highlights the legal and reputational consequences of misrepresenting credit terms, emphasizing the importance of transparency and accuracy in advertising to avoid potential sanctions and maintain consumer trust.