Truth in Lending Act (TILA)
The Truth in Lending Act (TILA) is a federal law that requires lenders to disclose the terms and costs of a consumer credit transaction. The purpose of TILA is to help consumers understand the costs and terms of credit so that they can compare offers and make informed decisions.
TILA requires lenders to disclose the following information to consumers:
Annual Percentage Rate (APR): The cost of credit as a yearly rate, including interest, fees, and other charges.
Finance Charge: The dollar amount of the credit cost, including interest, fees, and other charges.
Amount Financed: The amount of credit provided to the borrower.
Total Payments: The total amount the borrower will pay back over the life of the loan.
Payment Schedule: The number, amount, and timing of payments required.
TILA also requires lenders to provide a statement of the borrower's right to cancel certain types of loans within a specified period of time.
The law applies to most types of consumer credit, including mortgages, car loans, and credit cards. It applies to lenders who regularly extend consumer credit, including banks, credit unions, and finance companies.
TILA is enforced by the Consumer Financial Protection Bureau (CFPB), which can take legal action against lenders who violate the law. Consumers who believe their rights under TILA have been violated can also take legal action against lenders.