Mandatory disclosure

What Things Should You Know about the Truth In Lending Act?

TILA, the Truth in Lending Act, or Title I of the Consumer Protection Act of 1968 is a federal law which was designed to protect consumers in credit transactions. At the heart of the Act, the intent is to protect consumers from bank fraud, unfair and predatory lending practices which lenders would often engage in.

Mandatory disclosure is the strongest part of the Truth in Lending Act because lenders are no longer allowed to obfuscate lending terms. Clear and concise information must be disclosed to the consumer before credit is extended and any documents are signed.

Among the things that the lender must disclose to the consumer are: The loan terms, total costs and annual percentage rates in order for the consumer to be able to make a knowledgeable decision whether to accept the loan. In the past, it was not unusual for unscrupulous lenders to include extra conditions in the fine print which would change the terms of the loan.

It still pays for the consumer to be knowledgeable and read the fine print, even if there is a federal law that offers protection. There is no one who should sign a legal document without knowing and fully understanding what the legal document actually says.

Any lender who fails to comply with the requirements of the act can be held liable. Lenders can be sanctioned for acting in contravention to the act, even if the intent was not to act in contravention to the act, and even without regard to the nature of the violation.

Lenders must also keep proof of compliance with the requirements of the Truth in Lending Act for at least two years after the date when disclosure was done. In addition, the lender is required to provide the consumer with a document where disclosure is conspicuous and clear.

Congress understood that varying loan rates, different loans, terms, etc. can be very confusing even to people who have experience with loans, let alone to the average consumer. TILA was passed as a way to try to eliminate some of the confusion and to do away with any deceit or attempts to mislead consumers.

Consumers were often being misled, misinformed and even defrauded, and the Truth in Lending Act offers federal protection. As an added protection, the consumer has a right to rescind until midnight of the third business day after the transaction, delivery of the notice of right to rescind or delivery of disclosure materials, whichever comes last. This is an added safety valve which a consumer can resort to in the event he/she did not fully understand the terms of the credit he/she was being offered.

It pays to understand any legal contract being signed, no matter what the nature of the contract may be. Consumers need to be knowledgeable, not only about the law that protects them, but also about the contents of what they may be signing. It is only through being better educated that consumers can avoid many of the pitfalls that come with signing contracts, especially where loans and the terms thereof are concerned.