Truth In Lending Act - TILA

AAA

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.

RELATED TERMS
  1. Cardholder Agreement

    A printed booklet a credit cardholder receives that contains ...
  2. Volcker Rule

    The Volcker rule separates investment banking, private equity ...
  3. Compliance Examination

    A periodic examination of banks to make sure banks are operating ...
  4. Adequate Notice

    A written document that specifies in detail the terms and conditions ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), ...
  6. Adjustable-Rate Mortgage - ARM

    A type of mortgage in which the interest rate paid on the outstanding ...
Related Articles
  1. Credit & Loans

    Which debts are covered under consumer protection laws?

    Discover what type of consumer debts are protected through a variety of federal regulations, and learn how protections change based on the nature of the debt.
  2. Credit & Loans

    What are the differences between APR in Europe and the U.S.?

    Learn how the regulatory authorities in the U.S., the European Union and the U.K. treat the calculation and disclosure of APR for loans.
  3. Savings

    What are the different types of annual percentage ratings (APR)?

    Learn the differences between annual percentage rate, annual percentage yield and effective annual rate to compare interest rates.
  4. Credit & Loans

    Mortgages: Fixed-Rate Versus Adjustable-Rate

    Both of these have advantages and disadvantages depending on your financial needs and prospects.
  5. Credit & Loans

    How To Read Loan And Credit Card Agreements

    The devil is always in the details! Find out what you're signing yourself up for.
  6. Home & Auto

    Homeowners, Beware These Scams!

    If you're in a pinch for money, you're the prime target for con artists and thieves.
  7. Retirement

    Understanding Credit Card Interest

    Paying these rates can impact your disposable income and your investment returns.
  8. Options & Futures

    Make A Risk-Based Mortgage Decision

    Find out how to choose which mortgage style is right for you.
  9. Options & Futures

    Home-Equity Loans: The Costs

    Learn the factors to consider when comparing the different programs offered by various lenders.
  10. Credit & Loans

    The History Of Consumer Credit Rights

    The Fair Credit Billing Act of 1974 gave consumers the power to dispute credit card charges.

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center