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Truth in Lending Act
The Truth in Lending Act (TILA) of 1968 is a United States federal law designed to promote the informed use of consumer credit by requiring standardized disclosures about credit cost and terms.
TILA grants consumers a rescission right for certain home-secured loans, regulates several credit card practices, and sets procedures for resolving billing disputes. With limited exceptions for high-cost mortgages, the law does not cap rates or fees. Instead it mandates uniform disclosures so borrowers can compare options. These requirements are implemented through Regulation Z, codified at 12 CFR 1026. The regulation also limits practices in home-equity plans (12 CFR 1026.40) and “higher-priced” mortgage loans (12 CFR 1026.35).
The regulation prohibits certain acts or practices — most connected to lender compensation — in connection with credit secured by a consumer's principal dwelling.
The Truth in Lending Act was originally Title I of the Consumer Credit Protection Act, Pub. L. 90–321, 82 Stat. 146, enacted May 29, 1968. The regulations implementing the statute, which are known as "Regulation Z", were historically codified at 12 CFR 226 and, following the transfer of rulemaking authority, are codified at 12 CFR 1026. Most of the specific requirements imposed by TILA are found in Regulation Z, so a reference to the requirements of TILA usually refers to the requirements contained in Regulation Z, as well as the statute itself.
From TILA's inception, the authority to implement the statute by issuing regulations was given to the Federal Reserve Board. Effective July 21, 2011, TILA's general rulemaking authority was transferred to the Consumer Financial Protection Bureau pursuant to the Dodd–Frank Wall Street Reform and Consumer Protection Act. The Board retains limited rulemaking authority under TILA for loans made by certain motor vehicle dealers covered by section 1029(a) of the Dodd–Frank Act, and the Board's Regulation Z continues to apply to those entities.
TILA introduced the annual percentage rate (APR) calculation that consumer lenders must disclose. In the auto market, manufacturers and their captive finance companies have long used promotional financing offers, such as 0 percent APR loans or cash rebates, which interact with TILA's definitions of "finance charge" and "amount financed." The choice between a low promotional rate and a cash rebate changes the total cost of credit and depends on vehicle price, rebate size, and term.
The regulation is divided into subparts.
Subpart B relates to open-end credit lines (revolving credit accounts), which includes credit card accounts and home-equity lines of credit (HELOCs).
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Truth in Lending Act
The Truth in Lending Act (TILA) of 1968 is a United States federal law designed to promote the informed use of consumer credit by requiring standardized disclosures about credit cost and terms.
TILA grants consumers a rescission right for certain home-secured loans, regulates several credit card practices, and sets procedures for resolving billing disputes. With limited exceptions for high-cost mortgages, the law does not cap rates or fees. Instead it mandates uniform disclosures so borrowers can compare options. These requirements are implemented through Regulation Z, codified at 12 CFR 1026. The regulation also limits practices in home-equity plans (12 CFR 1026.40) and “higher-priced” mortgage loans (12 CFR 1026.35).
The regulation prohibits certain acts or practices — most connected to lender compensation — in connection with credit secured by a consumer's principal dwelling.
The Truth in Lending Act was originally Title I of the Consumer Credit Protection Act, Pub. L. 90–321, 82 Stat. 146, enacted May 29, 1968. The regulations implementing the statute, which are known as "Regulation Z", were historically codified at 12 CFR 226 and, following the transfer of rulemaking authority, are codified at 12 CFR 1026. Most of the specific requirements imposed by TILA are found in Regulation Z, so a reference to the requirements of TILA usually refers to the requirements contained in Regulation Z, as well as the statute itself.
From TILA's inception, the authority to implement the statute by issuing regulations was given to the Federal Reserve Board. Effective July 21, 2011, TILA's general rulemaking authority was transferred to the Consumer Financial Protection Bureau pursuant to the Dodd–Frank Wall Street Reform and Consumer Protection Act. The Board retains limited rulemaking authority under TILA for loans made by certain motor vehicle dealers covered by section 1029(a) of the Dodd–Frank Act, and the Board's Regulation Z continues to apply to those entities.
TILA introduced the annual percentage rate (APR) calculation that consumer lenders must disclose. In the auto market, manufacturers and their captive finance companies have long used promotional financing offers, such as 0 percent APR loans or cash rebates, which interact with TILA's definitions of "finance charge" and "amount financed." The choice between a low promotional rate and a cash rebate changes the total cost of credit and depends on vehicle price, rebate size, and term.
The regulation is divided into subparts.
Subpart B relates to open-end credit lines (revolving credit accounts), which includes credit card accounts and home-equity lines of credit (HELOCs).