Truth In Lending Act - TILA
Definition of 'Truth In Lending Act - TILA'
A federal law enacted in 1968 with the intention of protecting consumers in their dealings with lenders and creditors. The Truth in Lending Act was implemented by the Federal Reserve through a series of regulations.
The most important aspects of the act concern the pieces of information that must be disclosed to a borrower prior to extending credit: annual percentage rate (APR), term of the loan and total costs to the borrower. This information must be conspicuous on documents presented to the consumer before signing, and also possibly on periodic billing statements.
Investopedia explains 'Truth In Lending Act - TILA'
TILA applies to most types of credit, whether it be closed-end credit (such as an auto loan or mortgage), or open-ended credit (such as a credit card). The act regulates what companies can advertise and say about the benefits of their loans or services. For example, borrowers considering an adjustable-rate mortgage must be offered specific reading materials from the Federal Reserve Board to ensure they understand the parameters of an ARM.
Different states and industries have their own variations of TILA, but the chief feature remains the proper disclosure of key information to protect both the consumer and the lender in credit transactions.