What is the purpose of the Truth-In-Lending Act?

The purpose of the Truth-In-Lending Act (TILA) is to assist borrowers in understanding loans and the costs associated with credit. This law requires lenders to disclose key terms and costs of loans upfront, allowing consumers to make informed decisions about borrowing. It mandates clear and understandable information regarding the annual percentage rate (APR), total costs of the loan, and other essential terms, which helps borrowers to compare different credit offers.

By ensuring that this information is easily accessible, TILA promotes transparency in the lending process, ultimately empowering consumers to better understand their financial obligations and the implications of their borrowing choices. This proactive approach aids in preventing confusion about loan terms and helps protect consumers from predatory lending practices.

While TILA indirectly addresses some aspects of fair lending and oversees certain types of mortgage transactions, its primary focus remains on consumer protection and clarity regarding the costs of credit.