Regulation Z

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DEFINITION of 'Regulation Z'

A specific Federal Reserve Board regulation that requires debt lenders to disclose all the specifics of a given loan. This was done to promote a level of credit protection for the underlying consumer. Most of the requirements imposed by the 1968 Truth in Lending Act are contained within Regulation Z, and the two terms are often used interchangeably.

INVESTOPEDIA EXPLAINS'Regulation Z'

One of the end results of this regulation is how a lender has to disclose how much interest will be charged on the loan.

For example, for both credit card and mortgage loans, the respective lender (credit card issuer or the mortgage issuing bank) must clearly say just how much interest will be incurred by the loan in terms of an annual percentage rate. So, a lender would not be allowed to quote a low interest rate and then state in the fine print that the interest rate is expressed in per week terms, instead of the common expression of per annum.

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