The Truth in Lending act or TILA was enacted in 1968 with the intent of protecting consumers in their dealings with lenders and creditors. The Federal Reserve implemented it through various regulations. The major features of the act is the information that should be disclosed to a borrower before extending a credit, the annual percentage rate, term of loan and the total amount to the borrower. The information should be presented on the document and made known to the borrower before signing.
Another aim of the act is to provide consumers a way of comparing loans to be able to make an informed choice and to understand the cost of the loan before signing a contract. The act will cover card lending, revolving credit, lines of credit, business and consumer loans and installment agreements. The TILA regulates what the companies could advertise about the benefits of their loans and services. While the Truth in Lending Act may vary in every state, the main feature remains to be the proper disclosure of relevant information in order to protect both the consumer and lender in their transactions.
Other provisions prohibit credit card companies from issuing cards to people who did not apply for them. It also limits the amount the cardholder can be charged for unauthorized use of the card and regulates advertising by disclosing certain information. The disclosures let you make a comprehensive comparison on credit offers. Furthermore, it also requires a meaningful disclosure of various credit terms and designed to protect consumers from inaccurate and unfair credit billing.
The TILA serves to strengthen competition and promote economic stability through an informed use of credit. Moreover, it should be construed in favor of consumers for those creditors who fail to comply and they could be liable to the consumers despite the nature of the violation or the intention of the creditor. The Truth in Lending Act is applicable to an individual or business that offers credit and met certain conditions like providing credit to consumers, regular extension or offering of credit, subject to finance charges or payable through written agreement that is more than four installments and the credit is mainly for personal, family or household uses.
TILA does not apply to creditors who are offering credit mainly for business, commercial, organizational, agricultural and other purposes that are otherwise regulated, such as securities brokers. However, the rules governing the issuance of credit cards and liability for unauthorized use apply to all credit cards. The disclosures in the TILA includes the identity of the creditor, amount financed, financed amount itemization and annual percentage rate that includes finance charge, variable-rate disclosures, total payments, payment schedule, late payment or prepayment fines.
When applicable in the transaction, it also includes the total amount of sales, security interest, demand feature, required deposit, contract reference and insurance. Failure to comply with the act requirements is subject to civil actions and could be brought in any United States court or in other competent court within one year from the date the violation happened. The term however does not apply when TILA violations are used as counterclaim, defense or set-off except s stipulated by the state law.