The Truth in Lending Act is a federal regulation intended to ensure consumers complete and precise disclosure of the costs of consumer credit and thereby provide the opportunity for making informed decisions regarding credit, debt, and financial security. The necessity to require clear and complete disclosure of all costs prevents confusion due to the various ways of calculating interest and in general allows a better understanding of how much debt the consumer actually stands to incur.
About the Truth in Lending Act (TILA)
Economic stabilization and competition is strengthened by informed use of credit by consumers. The Truth in Lending Act required “meaningful disclosure of credit terms” and reflects a shift in emphasis from “let the buyer beware” to “let the seller disclose.” The Truth in Lending Act is designed to protect consumer against inaccurate and unfair credit billing and credit card practices. The act is in Title 1 of Consumer Credit Protection Act and is implemented by the Federal Reserve Board via Regulation Z. The regulation has effect and force of federal law.
The Truth in Lending Act is to be construed in favor of consumers, with creditors who fail to comply with TILA in any respect becoming liable to consumer regardless of the nature of the violation or creditors’ intent. Requirements of TILA’s credit card provisions must be liberally construed to protect consumers, while at the same time strictly enforced to achieve legislative goal of national standardization. The Truth in Lending Act applies to each individual or business that offers or extends credit when four conditions are met: Creditors who extend credit primarily for business, commercial agricultural or organizational purposes or other purposes which are otherwise regulated (i.e. securities brokers).
When is a Creditor Required to Make Disclosures?
The Truth in Lending Act provides required disclosures that creditors must be make when a consumer is applying for a loan or credit card. The Act applies to a creditor when four requirements are met:
- Credit is offered to consumers
- Credit is offered or extended regularly (more than 25 times a year)
- The credit is mostly for household, family, and personal purposes
- The credit is subject to a finance charge or payable in more than 4 installments by written agreement
The act does not apply to:
- Creditors who extend credit mostly for business, commercial, agricultural, or organizational purposes
- Student loan programs: loans made, insured, or guaranteed pursuant to program authorized by Title IV of the Higher Education Act of 1965
- Close-ended Credit Transactions (i.e. sales credit & loans)
The act requires disclosures be made:
- “Clearly & conspicuously”
- In meaningful sequence
- In writing
- In a form the consumer may keep
What Must a Creditor Disclose to a Consumer?
A creditor must disclose the following to a consumer:
- Identity of the creditor
- Amount financed
- Itemization of amount financed
- Payment schedule
- APR, including the applicable variable-rate disclosure
- Finance charge
- Total sales cost, insurance, regerence to contract, demand feature, security interest, and required deposit if applicable
For open-ended credit transactions, such as home equity lines or bank credit cards, extra disclosures need to be made:
- APR, including applicable variable-rate disclosures
- Method for determining finance charge and balance upon which finance charge is imposed
- Statement of billing rights
- Security interests if applicable to transaction
- Amount/ method for determining membership or participation fees
What if a Creditor Violates the Act?
Creditors are liable for not meeting all of the disclosure requirements, even if the consumer is not harmed by the creditor’s failure to disclose. However, there are two exceptions:
- The error is corrected within 60 days of discovery by the creditor (not by the consumer)
- The failure to disclose is an unintentional error (the burden of proof falls on the creditor)
Violations of the Truth in Lending Act entitle a consumer to significant remedies, in some cases even the right to rescind (or unwind) the loan. Depending on the particular provision violated, a consumer may be entitled to statutory dames, actual damages, recovery costs, and attorney fees. Additionally, TILA violations may provide a defense for foreclosure. Please call our office to schedule an appointment with an experienced TILA attorney to discuss your options.
Contact Massey & Duffy Immediately
If you feel you have been a victim of untruthful lending, it is important to seek legal advice – call Massey & Duffy today to schedule your free consultation. Our lawyers have the experience and ability required to support our clients on an expansive scope of Truth in Lending Act issues. At Massey & Duffy, we are experienced attorneys fighting for what is right. Please https://www.352law.com/contact/ to contact our TILA attorneys or call (352) 505-8900 to schedule your free consultation. We look forward to helping you.