Woman counting dollar bills.

Background

The Truth in Lending Act (TILA) was enacted on May 29, 1968, as title I of the Consumer Credit

Protection Act. TILA, implemented by Regulation Z became effective on July 1, 1969. TILA is intended to ensure that credit terms are disclosed in a meaningful way so consumers can compare credit terms more readily and knowledgeably. Before TILA’s enactment, consumers were faced with a bewildering array of credit terms and rates. It was difficult to compare loans because they were seldom presented in the same format. Now, all creditors must use the same credit terminology and expressions of rates. In addition to providing a uniform system for disclosures, the act:

  • Protects consumers against inaccurate and unfair credit billing and credit card practices.
  • Provides consumers with rescission rights.
  • Provides for rate caps on certain dwelling-secured loans.
  • Imposes limitations on home equity lines of credit (HELOC) and certain closed-end home mortgages.
  • Provides minimum standards for most dwelling-secured loans.
  • Delineates and prohibits unfair or deceptive mortgage lending practices.

Applicability

TILA applies to most types of credit, whether it be closed-end credit (such as an auto loan or mortgage), or open-ended credit (such as a credit card). TILA and Regulation Z apply to consumer credit offered or extended to a consumer primarily for personal, family, or household purposes. It also applies to all credit extended by creditors (who regularly extend credit—more than 25 times per year, or more than 5 times per year for transactions involving a dwelling) that is either subject to a finance charge or is payable in more than four installments.

Requirements

The most important aspects of the act concern the pieces of information that 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 possibly on periodic billing statements.

Acts Comprising TILA/Regulation Z

Many Acts have been implemented since the enactment of TILA in 1968 that continue to amend Regulation Z and effect how the credit union may lend. These include the changes related to TRID, the Card Act, and the Dodd-Frank Act, among others.

Truth in Lending and the Military Lending Act

Recent changes to the Military Lending Act (MLA) have an implication on how the credit union lends to qualified members of the military.

Helpful Resources:
The full text of the Military Lending Act is available here.
The full text of Truth In Lending Act is available here.

Sources:
https://www.federalreserve.gov/boarddocs/supmanual/cch/mla.pdf https://www.federalregister.gov/documents/2017/11/09/2017-24445/truth-in-lending-regulation-z

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