Truth in Lending Act (TILA)
Definition - What does Truth in Lending Act (TILA) mean?
The Truth in Lending Act (TILA) is a U.S. federal consumer protection law first passed in 1968. This law requires lenders to comply with a set of disclosure and other rules designed to protect consumers from unfair and predatory lending practices. Additionally, the law provides consumers with a three-day right of rescission following the acceptance of a consumer loan. This provision is intended to protect consumers from lenders who employ high-pressure sales tactics. TILA's rules also include protections against unfair billing practices such as requiring all interest be paid before any monies are applied to the principal of a loan.
Since its initial passage, the TILA has been amended several times to incorporate new rules and address new lending practices.
WorkplaceTesting explains Truth in Lending Act (TILA)
The Truth in Lending Act (TILA) requires creditors to explain the terms of a proposed loan in a manner that is not false or misleading. These uniform disclosure rules are intended to standardize the delivery of key credit information to consumers. In particular, lenders are required to state an annual percentage rate (APR) for proposed consumer loans. Creditors must indicate the methods used to calculate interest charges and late fees. Information regarding dispute resolution must also be provided to consumers.
The TILA also places restrictions on the type of information that can be used when advertising credit cards, mortgages and other consumer loans. Complaints against credit card companies that have violated TILA can be filed with the Consumer Financial Protection Bureau (CFPB).