Truth in Lending Act (TILA)

The Truth in Lending Act (TILA) is a United States federal law enacted in 1968 with the intention of protecting consumers in their dealings with lenders and creditors. The Truth in Lending Act was implemented by the Federal Reserve through a series of regulations.

The purpose of TILA is to promote an informed use of consumer credit, which requires disclosures about the costs associated with borrowing. The most important aspects of the act is that the costs associated with borrowing must be disclosed to a borrower prior to extending credit: annual percentage rate (APR), term of the loan and total costs to the borrower. This information must be conspicuous on documents presented to the consumer before signing, and also on periodic billing statements.

TILA gives consumers the right to cancel certain credit transactions that involve a lien on a consumer's principal dwelling. TILA also regulates certain credit card practices, and provides a means for fair and timely resolution of credit billing disputes. With the exception of certain high-cost mortgage loans, TILA does not regulate the charges that may be imposed for consumer credit. Rather, it requires uniform or standardized disclosure of costs and charges so that consumers can shop.

TILA applies to most types of credit, be it an auto loan or mortgage, or a credit card. The act regulates what companies can advertise and say about the benefits of their loans or services. Borrowers considering an adjustable-rate mortgage (ARM) must be offered specific reading materials from the Federal Reserve Board to ensure they understand its parameters. Different states and industries have their own variations of TILA, but the chief feature remains the proper disclosure of key information to protect both the consumer and the lender in credit transactions.

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The Law Office of George S. Johnson, LLC
The Manning Leipold Building
910 Church Street, Suite 202
Decatur, GA 30030
PH: 404.378.5878 FAX: 404.377.5750