1968 consumer protection law
Truth in Lending Act: disclosures you are entitled to
The Truth in Lending Act (TILA, 1968) requires lenders to disclose the APR, finance charges, total amount financed, total payments, and payment schedule before a borrower signs. The disclosure lets borrowers compare loans on equal footing. TILA also gives mortgage borrowers a 3-day right of rescission on refinances, and protects against unfair credit billing practices.
Level
Try calculatorKey takeaways
04 · ideas- TILA requires disclosure of APR, finance charge, and total payment amount
- Right of rescission: 3 business days to cancel certain home equity loans
- Regulation Z implements TILA and specifies disclosure formats
- Loan Estimate and Closing Disclosure replaced the old GFE and HUD-1
The Truth in Lending Act (TILA), enacted in 1968 and implemented through Regulation Z, requires lenders to disclose the costs of consumer credit in standardized form.
Four key TILA disclosures:
- APR: The cost of credit expressed as a yearly rate, including fees
- Finance charge: Total dollar cost of the credit
- Amount financed: Net loan amount after fees are deducted
- Total of payments: How much will be paid when all scheduled payments are made
These must appear in a specific format, allowing consumers to compare offers from different lenders on a consistent basis.