The Truth in Lending Act

Understanding The Truth in Lending Act

the federal Truth in Lending Act (TILA) was created in Congress in 1968. The act was part of the Consumer Protection Act. The law was passed so that consumers would be protected in credit transactions. Lenders are required to disclose clearly to the consumer the terms and costs of lending agreements. TILA also requires that lenders provide in writing the accurate cost of credit, including finance charges added to the loan, and the annual percentage rate charge. This disclosure allows the consumer to compare different loan schedules, rates, and finance charges.

If an institution violates TILA, action may be brought forth in any Untied States district court or any other competent court. Action needs to be done one year from the date on which the violation took place. However, the limitation does not apply when TILA violations are declared as a defense or counterclaim, except as otherwise provided by state law.

Consumers who refinance their homes or take out home equity loans have rescission rights. Meaning, under TILA, a consumer may rescind within three business days from a consumer credit transaction involving a non-purchase-money transaction in the consumer’s primary residence.

As a consumer, you need to protect yourself and understand the TILA disclosure. If you have questions make sure to ask. The more you know as a consumer, the more protected you will be.