The Truth About the Truth in Lending Act

Taking out a loan is a big commitment. A home mortgage loan is the biggest loan most people will ever have. It’s important to understand the total costs of the loan—you’ll be making monthly payments for years. Fortunately, the Truth in Lending Act (TILA) makes it easier to understand the loan terms with mandatory disclosures.

The Truth in Lending Act gives consumers certain rights when taking out a loan, including disclosures and the right to cancel the loan. If your lender isn’t following federal consumer protection laws, you can take legal action to enforce your rights. For more information about how the Truth in Lending Act protects you, talk to a consumer protection lawyer.

What Is the Truth in Lending Act?

The Truth in Lending Act is a federal law requiring lenders to make written disclosures about financing and credit terms. It is a consumer protection law that gives borrowers the right to know about lending terms. It also gives you the right to dispute inaccurate or unfair billing statements. This law is also known as Regulation Z.

The TILA was later amended by the Fair Credit Billing Act (FCBA) to extend borrower protections to credit card practices and open-end credit billing. Congress also has passed other credit protection laws, including the Consumer Credit Protection Act and the Dodd-Frank Act.

TILA applies to consumer loans, car loans, and mortgage loans. It doesn’t apply to business loans. With the mandatory TILA disclosures, you can understand how much it will cost to repay a consumer or home equity loan before you accept the real estate or auto loan agreement.

What Do Lenders Have To Disclose?

The Truth in Lending Act requires lenders to make certain disclosures to borrowers so they know the terms of the loan. This law restricts predatory and unethical lending practices. Lenders have to be honest and open about the costs of consumer credit, including disclosure requirements for:

• Annual percentage rate (APR)
• Finance charges
• Borrowing costs
• Number of payments
• Total amount of payments
• Late fees
• Interest rate increases
• Service charges

How Long Do I Have to Back Out of a Loan?

The TILA also includes a right of rescission. You have three days to reconsider a loan agreement. You can back out without losing any money.

For example, suppose you take out a home equity line of credit (HELOC) on July 1, 2024. The next day, you talk about the credit agreement with a neighbor. They tell you they got a much better loan from their credit union. You have until July 4, 2024, to go back to the loan contract provider to cancel the home equity loan. You can back out of the loan without paying any loan costs.

How Can I Report TILA Violations?

The Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) enforce the Truth in Lending Act. To file a complaint against a lender for TILA violations, contact the CFPB. To submit a complaint, be clear about the issues and include any supporting documentation. Include your contact information, such as your name, email, and phone number.

The CFPB will share your complaint with the loan originator. In most cases, the financial institution will respond in 15 days, but it may take up to 60 days. The CFPB will publish your complaint on their Consumer Complaint Database (without identifying information). After the company’s response, you have 60 days to provide feedback.

The CFPB can also take enforcement action against the lender or mortgage broker. The CFPB can open an investigation after consumer complaints. The CFPB can order the company to pay civil penalties to consumers or the civil penalty fund.

Can a Lawyer Help With Lender Violations?

Borrowers can also file a federal civil lawsuit against lenders for violating their rights under the TILA. If you believe a lender violated your legal rights under the TILA, you can sue them for damages. Examples of TILA violations include changing the terms of the loan or failing to disclose additional fees. A lawyer can help you file a claim against your lender for damages.

Damages in a TILA lawsuit include actual damages and statutory damages. You may also claim attorney fees to cover the costs of filing the lawsuit. For more information about how you can hold a lender accountable, contact a consumer protection attorney.