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.

BREAKING DOWN '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.

  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

    Mortgages: Fixed-Rate Versus Adjustable-Rate

    Both of these have advantages and disadvantages depending on your financial needs and prospects.
  2. 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.
  3. Home & Auto

    Homeowners, Beware These Scams!

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

    Understanding Credit Card Interest

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

    Make A Risk-Based Mortgage Decision

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

    Home-Equity Loans: The Costs

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

    The History Of Consumer Credit Rights

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

    How to Use Boring CDs to Diversify

    Markets are volatile and are in for more punishment. CDs can help investors earn some interest while they're waiting out the storm.
  9. Investing

    Breaking Down the Federal Reserve's Dual Mandate

    The Fed has been tasked with a dual mandate by Congress to achieve monetary stability. We explain what the dual mandate is and what it means.
  10. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  1. Does consumer protection cover my debts?

    The most impactful consumer protection laws and regulations in the United States are overseen by the Federal Trade Commission ... Read Full Answer >>
  2. How can I tell if a loan uses simple or compound interest?

    When analyzing the terms of a loan, it is important to consider more than the interest rate. Two loans can have identical ... Read Full Answer >>
  3. Are APRs different in different countries?

    Money lenders of all types, ranging from credit card companies to mortgage lenders, are free to charge any interest rates ... Read Full Answer >>
  4. What are the differences between APR in Europe and the U.S.?

    The annual percentage rate of a loan is the measurement of how expensive it is to borrow money over the course of one year. ... Read Full Answer >>
  5. What are the different types of annual percentage ratings (APR)?

    When shopping for a loan or investment that charges or pays interest, there are a few types of interest rates to understand. ... Read Full Answer >>
  6. How is the Federal Reserve audited?

    Contrary to conventional wisdom, the Federal Reserve is extensively audited. Politicians on the left and right of a populist ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  2. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  3. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  4. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  5. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  6. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!