The Truth in Lending Act (TILA) is a federal law established in 1968. The Federal Reserve Board started this law with the primary aim of protecting consumers in their relationships with creditors and lenders.
Since its implementation, TILA has been used to guard consumers against illegal practices, or predatory exercises from the lenders.
Its terms apply mostly in different types of credit such as the closed-end credit, and the open-end credit such as the credit card and line of credit.
The laws vary between different industries and states. Although the main feature remains the disclosure of all information relating the lender-borrower transactions.
Usually, TILA requires the following statement disclosures from the lender to the borrower:
The Truth in Lending Act regulates what financial institutions can advertise, or say regarding the benefits associated with their products.
For instance, a borrower who has an adjustable rate mortgage needs must be given all related reading materials to ensure that they understand the basics. The documents they read must be authorized by The Federal Reserve Board.
It is required when the lender and the borrower engage in large contract agreements. You have most probably seen your truth in disclosure copy if you have been taken a loan for a large purchase, such as a house or a car loan.
Although you might not have been able to recognize it well by its name, it’s important to understand it. It will protect you against any future inappropriate business transactions.
The law does not regulate any interest rates which the lender decides to charge on their services. The law does also not dictate the party to get the credit extension beyond the standard laws in case of discrimination.