Congress passed legislation that outlines requirements to protect mortgagors from destructive loaning practices in 1968. This legal mandate is named the Truth in Lending Act (TILA). Besides, TILA protects individuals from dishonest financial providers who want to take advantage of the consumer.
A Deep Dive into Truth in Lending Act
The Office of Comptroller of the Currency designed the Truth in Lending Act in 1968. The legislation protects individuals from inaccurate credit billing and credit card practices. As a result, prospective lenders provide consumers with specific information on loan costs. Furthermore, the consumer utilizes and compares the financial terms that competing institutions offer. Moreover, TILA promotes consumer awareness and requires lenders to provide standardized disclosures about loan terms and costs. It also includes the annual percentage rate, loan terms, and total loan cost.
TILA allows consumers to understand the calculations to determine costs and the favorability of the proposed loan package. Additionally, it enables the consumer to compare alternative offers. Truth in Lending, known as Title I of the Consumer Credit Protection Act (CCPA), implements statutes. The implementation named Regulation Z discusses the requirements contained in TILA. The Federal Trade Commission (FTC) protects America’s consumers and helps oversee and regulate TILA.
Any lenders wishing to do business with consumers must share materials mandated by TILA.
The list of disclosures required under TILA:
- Payment schedule
- The total amount in payments over the life of the loan
- Annual percentage rate
- Finance charges
- Total amount financed
Under the terms of loans covered by TILA, individuals have a right to rescission. This rescission period provides the consumer three (3) days to cancel a loan and back out without penalty.
Finally, when considering refinancing your home, the homeowner choose to select your Title Agent.