What is Truth in Lending?

Enacted in the year 1968, the Truth in Lending Act – or TILA, outlines the principles and protocols a lender or creditor must adhere to when transacting with their consumers. Executed by the Federal Reserve Board, this gives borrowers the protection they need.

Basically, the law states which information should be disclosed to the borrower before extending credit such as the annual percentage rate. APR is the term of the mortgage or loan, as well as the borrower’s aggregate expenses.

This must be clearly stated in the document even before the consumer signs. This should also be present on bill statements.

TILA applies to most forms of credit including closed-end credit, which is usually alluded to as an installment loan. As well as, an open-ended revolving credit such as a line of credit or a credit card.

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Is TILA the same across 50 states?

This may vary depending on the type of industry and which US state you are in. However, the rule about disclosing key information remains the most important feature. This basically safeguards both the borrower and lender during credit transactions.

How are you protected?

The Truth in Lending Act assures that what the lenders advertise and say about their products are true and legal. For instance, consumers who are thinking about signing up for an adjustable-rate home loan must be given reading materials from the Federal Reserve Board to be informed about ARM.

However, the law cannot influence the amount of interest rates a lending company or lender may charge. Furthermore, it does not have jurisdiction over whom the creditors will approve loan applications.


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