The Truth in Lending Act, TILA, is a federal law designed to help consumers understand credit terminology and interest rates. The act requires disclosures about common credit terms and the costs associated with a line of credit.
Prior to the TILA, there was no way for consumers to compare loans and lines of credit side by side.
Consumer Rights with the Truth in Lending Act
All lenders are required by law to provide a Truth in Lending disclosure statement that includes information directly related to the loan or line of credit. This can include the annual percentage rate (APR), any and all finance charges, penalties, and a payment schedule.
Lastly, the lender must provide you with the total repayment amount over throughout the life of the loan, so consumers can know how much a loan or line of credit will cost them in a dollar amount.
The TILA law applies to closed-end accounts, which can include auto loans, mortgages, and credit cards. Consumers that decide to refinance a home mortgage also have the “Right of Recission”. This means that the borrower is eligible to cancel the loan at no cost three days after the loan went into effect.
What is Regulation Z?
The Federal Reserve Board established Regulation Z so that lenders are required to provide consumers with the actual cost of a line of credit in writing before you sign for credit. Regulation Z is associated as being another name for the Truth in Lending Act. The two terms have been used interchangeably.
The CARD Act
One of the most significant changes to the Truth in Lending Act was through the Credit Card Accountability Responsibility and Disclosure Act (CARD Act). The CARD Act requires all financial institutions and business to disclose essential information when issuing new credit cards.
When a new credit card is issued, a creditor must disclose all interest rates, grace periods, and fees associated with the account. The card issuer is also requried to send it’s customers notices before an annual fee is applied.
All in all, TILA grants consumers many rights over credit related businesses. If you have less than perfect credit and don’t know where to go, CrediReady can help. Our trusted network of credit repair experts can boost your score and help you qualify for the credit you need.
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