What is the purpose of the Truth in Lending Act?

The Truth in Lending Act (TILA) was enacted to promote informed use of consumer credit by requiring disclosures about its terms and cost. The primary goal of the Act is to ensure that lenders provide clear and understandable information regarding the costs associated with borrowing money, allowing borrowers to make informed comparisons between different loan offers. By mandating that lenders disclose essential details such as annual percentage rates (APR), fees, and other costs associated with a loan, borrowers can assess and compare the cost of credit from different lenders effectively. This transparency helps consumers make better financial decisions and understand their obligations.

Understanding the provisions under TILA is crucial for both lenders and borrowers, as it fosters fair lending practices and helps protect consumer rights in the financial marketplace.