The Truth in Lending Act Information

The Truth in Lending act was created in the year 1968 with the purpose of protecting consumers in their transactions with creditors and lenders. It was implemented by the Federal Reserve by several regulations. The most important features of the act are the information that should be disclosed to a borrower before a credit is extended, the annual rate of percentage, loan term and the total costs of the borrower. All information should be conspicuously on the documents presented to the borrower before signing.

Another purpose of the act is to provide consumers a way to compare loan provisions for a well-informed choice and so that they may comprehend the loan costs before they sign. The act covers revolving credit, card lending, lines of credit, consumer and business loans and installment agreements. The Truth in Lending Act or TILA regulates what companies may advertise regarding the benefits of their services and loans. Although the TILA could vary from state to state, the main feature is still the proper disclosure of vital information to protect both the lender and consumer in their transactions. Other provisions in the Act prohibit credit card companies from issuing cards to those who have not applied for them. It limits the amount that the cardholder is charged for unauthorized use of the card and regulates credit advertising by disclosing specific information. These disclosures allow you to make a thorough comparison of credit offers. The act also requires a meaningful disclosure of several credit terms and is designed to protect borrowers or consumers from unfair and inaccurate credit billing.

The TILA strengthens competition and promote economic stabilization by informed utilization of credit. Furthermore, it is to be construed in favor of consumers for creditors who fail to comply with it and be liable to consumers regardless of the violation nature or the intent of the creditor. The TILA applies to a person or business that provides credit who met the conditions such as offering credit to consumers, regular offering or extension of credit, subject to finance charge or payable by written agreement in more than four installments and credit is mainly for family, personal or household purposes.

TILA is not applicable to creditors extending credit mainly for commercial, business, agricultural or organizational and other purposes that are regulated otherwise, like securities brokers. Nevertheless, rules that govern issuing credit cards and liability for unauthorized use are applicable to all credit cards. The disclosures in the TILA include the creditor identity, amount that is financed, itemization of the amount financed, and annual rate of percentage, which includes variable-rate disclosures, finance charge, total payments, and schedule of payment, prepayment or late payment fines. If applicable in a transaction, it also includes the total cost of sales, demand feature, security interest, deposit required, insurance and contract reference.

Failure to comply with the Truth in Lending Act requirements is subject to civil remedies, which could be brought in an US court or in other competent court within a year after the violation happened. This term does not apply when violations of the TILA are used as a defense, counterclaim or set-off except as provided by the law of state.

Source: http://ezinearticles.com/6209688

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