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What Is the Truth In Lending Act?

Serving Families Throughout Mobile

The Truth in Lending Act (TILA) is a federal law enacted in 1968 to protect consumers in their dealings with lenders and creditors. It requires lenders to provide clear information about loans, such as the annual percentage interest rate (APR) and any fees, so that borrowers can make informed decisions.

The TILA applies to most types of consumer credit, like auto loans, mortgages, and credit cards, but not to all credit transactions, such as credit issued to businesses or certain student loan programs.

Some key provisions of the TILA include:

  1. A Uniform system of disclosures and terminology for lending.
  2. Lenders must disclose details like the annual percentage rate and repayments details in a clear way to borrowers.
  3. Borrowers have the right to rescind the debt if the lender does not provide the required information.
  4. Limits on the amount of late fees creditors can charge.

When you apply for a consumer loan, the lender must provide you with a Truth in Lending Act Disclosure form that sets out all of the basic terms of the loan, including interest rate, monthly payment, principal loan amount, term of loan, and total cost of the debt.

The TILA has been updated over the years to address changing lending practices and ensure borrowers understand the terms and conditions they agree to.

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