Truth in Lending Act Summary

The Truth in Lending Act - (15 U.S.C. §§ 1601-1667f, as amended)

What is required?

The Truth in Lending Act (TILA) protects consumers by requiring creditors to disclose certain information about finance charges, annual percentage rates, payment amount, and fees that may be charged to the consumer.

Who is regulated?

TILA regulates most creditors. Common examples of creditors regulated by this law include banks, credit unions, finance companies offering car loans, credit card companies, and home mortgage lenders.

When does the law apply?

When these companies make a loan, it is likely that they are regulated by TILA. TILA covers most types of credit transactions including car purchases and leases, home mortgages and refinancing, personal loans and lines of credit, credit cards, private student loans and payday loans.

For example:

• If a creditor extends a loan to a consumer who is buying a new car, it is required to properly disclose, among other things, the APR (annual percentage rate) and finance charge of the loan. This allows the consumer to better understand the terms of the loan and make an informed decision when comparing it to other loans. These requirements apply to other common loans such as personal loans, home loans, etc.

 

• When you open a credit card, you are entitled to certain disclosures such as the APR, finance charge and other fees such as late fees. This allows the consumer to make an informed decision about whether to open a credit card. 

 

• Additional disclosures are required for loans and credit cards when the APR on the loan or account can change or is a variable rate.  The disclosure must explain how and when the rate will change and give information regarding the basis for the rate change.

 

• A credit card company or other lender of open-end credit, such as a line of credit, must send a billing statement each month containing information such as your balance, any transactions on the account, your payment amount and the finance charges assessed during that month on the account.  The statement must be sent at least 21 days before the due date of the payment.

Is there a solution?

If a creditor violates a consumer’s rights under TILA, a consumer may be entitled to recover actual damages and statutory damages of up to $2,000 on loans such as car loans and home equity lines of credit, up to $4000 for home purchase loans and up to $5,000 for credit card issues and lines of credit not secured by your home. In addition, TILA contains a “fee-shifting” provision which may require the defendant to pay for the plaintiff’s attorney fees and court costs.

Last Modified: Friday, March 22, 2013