Truth In Lending Act

Passed: May 29, 1968

Important Elements

  • this act protects you against inaccurate and unfair credit billing/credit card practices
  • lenders have to provide you with loan cost information so that you can compare and contrast them to other companies as you shop for certain types of loans
  • loans that are covered under this act (TILA) you are allowed three days to reconsider your decision and or back out of the loan process without losing any money (protecting you against high-pressure sales tactics practiced by some lenders)
  • this act does not tell the banks how much interest they may charge or whether they have to grant a consumer loan

Suggestions For Businesses & Consumers

Businesses:

  • TILA requires lenders to disclose credit terms in an easily understood manner so that consumers can confidently comparison shop interest rates and conditions
  • this could be bad for a business if their rates/conditions are not very desirable
  • on the flip side, if they do have favorable rates/conditions after all, it could be beneficial to the business
  • as a lender, you should know that you will be held accountable for a Truth in Lending (TIL) disclosure statement
  • this statement includes information about the amount of your loan, the annual percentage rate (APR), finance charges (including application fees, late charges, prepayment penalties), a payment schedule, and the total repayment amount over the lifetime of the loan

Consumers:

  • TILA requires lenders to disclose credit terms in an easily understood manner so that consumers can confidently comparison shop interest rates and conditions
  • this will be helpful for consumers trying to find the best deal possible in a fast way
  • this act benefits consumers by ensuring they will be treated fairly (being informed about the true cost of credit)
  • consumers who are refinancing residential mortgage loans have the “right of rescission”
  • this is a three-day cooling off period during which they may cancel the loan without losing any money this is another benefit for the consumers
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