Truth in Lending Act
Written by Gloria Zhu   

About the Truth in Lending Act

Have you ever been afraid of not understanding the fine print on your mortgage contract? Well, the government has put certain laws in place to protect the consumer from these situations.

The Truth in Lending Act (TILA) of 1968 is a United States federal law that requires clear key terms of the lending arrangement and its costs. It was ultimately designed to protect consumers in credit. 

The TILA has regulations implementing the statute, also known as "Regulation Z", which are codified at 12 CFR Part 226. A majority of the specific requirements imposed by the TILA are found in Regulation Z. This means that most of the requirements of the TILA usually refer to the requirements contained in Regulation Z, as well as the statute itself. The ultimate goal of the TILA is to promote the concept of using consumer credit, informed.


How it Protects Mortgage Lenders and Home Buyers

One of the primary methods that the federal government uses the Truth in Lending Act is to protect consumers from less than reputable lending agencies. The TILA is a subsection Consumer Protection Act. It is understandable that most people do not understand mortgage loan terms and can be easily confused by quick speaking lenders. The TILA prevents nervous or puzzled consumers from being taken advantage of when purchasing a home. The TILA and regulation Z help to ensure that the consumer understands the terms and conditions of the mortgage that they are signing. Here are some requirements that were created to help the consumer:
  • All lenders must present the data in the same manner to consumers.
     
  • Lenders must also use the same terms and language, so that consumers can easily compare one offer from one lender against a similar offer from another lender.
     
  • That the government imposes certain limitations on home equity lines of credit and certain closed-end mortgages.
Any lender you approach about a loan is required to give you all information about the terms of the loan and fees for borrowing. This includes such things as:
  • origination fees
  • filing fees
  • broker fees
You are also entitled to know the annual percentage rate of the loan and all finance charges associated with the loan.
 
 

 
Last Updated on Wednesday, 22 December 2010 05:30