Vision Credit Education, Inc.

Often referred to as TILA, it is a 1968 U.S. Federal law created to protect consumers in credit transactions. The lender must clearly inform the consumer about certain important terms of the lending agreement and all costs in simple and easy-to-read language. It provides consumers protection from incorrect or unfair billing and credit card practices.

TILA applies to most credit types, like open-ended credit (credit cards) and closed-end credit (mortgages). Closed-end credit usually involves: credit advanced for a specified period of time and the finance amount, finance charge and payment schedule agreed to by the consumer and creditor. The information a creditor must disclose in closed-end credit transactions is: creditor identity, amount financed, itemization of amount financed, APR, finance charge, total of payments, payment schedule, and any payment penalties.

Open-ended credit usually involves: the consumer making repeated transactions, finance charges applying to the outstanding balance (interest), and no deadline for the consumer to pay off the principal. The most familiar and common form of open-ended credit is bank credit cards. The information a creditor must disclose in open-ended credit transactions is: APR, method used to determine finance charge and balance subject to this finance charge, method used to determine membership/participation fees, security interests and a statement of billing rights. Also, the creditor must issue periodic account statements to the consumer to make sure the consumer is aware of the current state of his/her account.

Any business purpose loan is not covered by TILA. Also, TILA does not regulate the rate a credit institution may charge on a line of consumer credit. Instead, it provides a set of rules for these lenders to follow that make it possible for consumers to shop around for the best deal on credit. Thus, a creditor is not liable under TILA for charging a ridiculous rate, as long as that creditor clearly disclosed all the relevant information to the consumer. Consumers must know that TILA only makes sure all the necessary information is available to them, and it’s up to them to make the best decision using that information.

If a creditor violates TILA, the case can be tried in any U.S. district court or equivalent court within one year from the date the violation occurred. The one-year limitation does not apply if TILA is used as a defense, unless state law provides otherwise. The penalties for violating TILA can be severe. The creditor could be sued for up to twice the amount of the total finance charge. Costs and attorney’s fees could also be awarded to the consumer.

Related Link

Definition: Truth in Lending Act