Definition
The Federal Truth in Lending Act regulates lenders by standardizing disclosure requirements for all consumer credit.
Analysis
The Truth in Lending Act eliminates confusion among consumers that are trying to evaluate the proposed terms of a credit transation. It also allows for easier comparison of similar loan products.
One major component of the Truth in Lending Act is that lenders must express interest costs as an annual percentage rate. This allows for simplified comparison of all loans and credit products.
In addition, the act specifies a standardized method of providing disclosures so that the terms may be easily understood. It also provides for liability of creditors when disclosure requirements are violated by those lenders.
The Truth in Lending Act is found in Title I of the Consumer Credit Protection Act, which was passed in 1968. Regulation Z is an amendment to the Truth in Lending Act that will finalize disclosure requirements, making the terms of the loan more transparent to consumers.
