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Truth in Lending Act Overview
The Truth in Lending Act (TILA) is a federal law enacted just over fifty years ago, in 1968, to protect consumers in dealings with lenders and creditors, ensuring that they are dealt with fairly and are informed up front about the actual costs involved. Most kinds of consumer credit are protected under TILA, including closed-end credit (such as car loans, home mortgages, etc.) and open-end credit (like credit card or home equity credit).
One of the most prominent aspects of the Truth in Lending Act is that it carries requirements about the information that must be disclosed to a borrower before credit is extended. This information includes the annual percentage rate (APR), the term of the loan, relevant charges and fees, payment schedule, and the borrower’s total costs. TILA requires that this information must be presented to the borrower—clearly and conspicuously—before signing. In some cases, this information may even be required on the borrower’s periodic billing statements.
The Truth in Lending Act also gives borrowers the right of rescission, meaning that they can turn down a loan up to three days after they first accept it. This is intended to protect consumers from high pressure sales tactics that can influence them to sign up for a loan that doesn’t actually work for them.
What Doesn’t the TILA Do?
It’s important for consumers to understand what the Truth in Lending Act does and what protections it offers, but it is just as important to understand what the TILA does not do. For instance, the TILA does not regulate how much banks can charge, or whether or not they have to grant a consumer a loan—unless they’re violating discrimination laws.
Changes to the TILA
The Truth in Lending Act has been adjusted several times over the last half century. For instance, in 2009, the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) was signed, requiring financial institutions and businesses to disclose essential information to consumers when issuing a new credit card, such as interest rates, grace periods, and annual fees.
A number of other acts have been added to the TILA over time to better protect consumers, including:
- Fair Credit Billing Act
- Fair Credit and Charge Card Disclosure Act
- Home Equity Loan Consumer Protection Act
- Home Ownership and Equity Protection Act
Truth in Lending Act Example
Detailing all the rules of the Truth in Lending Act may make it seem complicated, but the truth is, consumers see the TILA all the time when they apply for loans. A clear, simple Truth in Lending Act example is when a lender presents a disclosure to the consumer, showing them exactly what they will pay to borrower the money.
Another Truth in Lending Act example is when a consumer feels pressured by sales tactics with from a lender, they may feel like they have been trapped into a loan that they don’t actually want. Because of the TILA, the consumer has three days under their “right of rescission” to turn down a loan, even after accepting it.
Can You File a Truth in Lending Act Lawsuit?
Some consumers claim that they have been impacted by hidden clauses, unclear provisions, or omitted terms when signing a lease or buying something on a payment plan. Some companies may be disguising certain transactions as purchases when they are actually leases. After the consumer believes that they have made their final payment, the company then seeks additional payment.
Common transactions that may have been impacted by these issues include vehicle repairs, home fixtures and appliances, home repairs, and more.
If consumers believed they were making a purchase when they were actually signing a lease or credit financing arrangement, they are still protected by the Truth in Lending Act and the Consumer Leasing Act (CLA), which require companies to disclose specific, essential information to consumers in these contracts.
Some consumers may have signed documents related to a lease or purchase that did not fully and clearly disclose the required information. Agreements may have contained hidden or unclear terms, or may even have omitted terms in order to confuse the customer or muddy the clarity of the agreement. In these cases, your rights under TILA or CLA may have been violated.
If your rights were violated under TILA or the CLA, you may be entitled to compensation.
Consumers who have entered into a lease or loan within the past two years may be able to join a class action lawsuit investigation.
