truth_in_lending_act
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Table of Contents
Truth in Lending Act (TILA)
The Truth in Lending Act (TILA) is a federal law designed to promote informed consumer credit decisions by requiring clear disclosure of loan terms and costs.
Key Purpose
- Ensure consumers can compare credit offers
- Prevent deceptive lending practices
- Standardize disclosure of borrowing costs
Transactions Covered
- Most consumer credit transactions
- Residential mortgage loans
- Refinances and home equity loans
- Does not apply to commercial or agricultural loans
Required Disclosures
- Annual Percentage Rate (APR)
- Finance charges
- Amount financed
- Total of payments
- Payment schedule
Right of Rescission
- Applies to refinances of a principal residence
- Borrower may cancel within 3 business days
- Does not apply to purchase loans
Regulation Z
- TILA is implemented by Regulation Z
- Overseen by the Consumer Financial Protection Bureau (CFPB)
Penalties
- Civil liability
- Criminal penalties for willful violations
- Extended rescission rights for disclosure failures
Exam Tip
- TILA focuses on loan cost disclosure
- APR is the key concept tested
- Remember 3-day right of rescission
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