The Truth in Lending Act (TILA)
Laws Protecting Consumers in Regard to Lending
TILA Definition:
The Truth in Lending Act (TILA) is a federal law enacted in 1968 to promote transparency and fairness in consumer credit. It requires lenders, credit card issuers, and other financial institutions to clearly disclose key loan terms and costs before a borrower agrees. These disclosures include the annual percentage rate (APR), finance charges, amount financed, total of payments, and the payment schedule. TILA is designed to protect consumers from unfair lending practices and to help them compare credit offers more easily. The law is enforced by the Consumer Financial Protection Bureau (CFPB) and applies to most types of credit, including mortgages, credit cards, auto loans, and personal loans.
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Frequently Asked Questions:
What is the purpose of TILA?
TILA ensures borrowers receive standardized information about credit terms so they can make informed financial decisions and compare offers.
What disclosures are required under TILA?
Lenders must provide the APR, finance charges, amount financed, total of payments, payment schedule, and certain borrower rights before finalizing a loan.
Does TILA apply to all loans?
TILA applies to most consumer credit, including mortgages, auto loans, credit cards, and installment loans. However, it does not cover business loans or loans to corporations.
How does TILA protect consumers?
TILA gives consumers the right to clear cost disclosures, limits certain lending practices, and provides rescission rights for specific loans, such as some home equity lines of credit.
What is Regulation Z?
Regulation Z is the CFPB regulation that implements TILA. It spells out the specific disclosure requirements, timing, and borrower protections lenders must follow.
