If the American financial meltdown that began in late 2007 taught us anything, the lesson learned was that the Truth in Lending Act (TILA) represents one of the most important consumer protection laws ever passed by the United Sates Congress. After an extensive review of what caused the financial meltdown of 2007-08, it became apparent that unscrupulous lending practices by large banks played a huge role in greasing the financial gears that lead to a massive recession.
Millions of home mortgage applicants received loan approvals based on nothing more than a signature on a piece of paper. Banks approved loans to people who ordinarily would have seen their mortgage applications tossed the trash. Moreover, numerous banks were caught hiding fees and interest rate increases during the lifespan of home mortgage loans.
The primary objective for the Truth in Lending Act is to protect borrowers against unfair or deceitful lending practices implemented by banks and credit card companies. Every type of creditor must fully disclose the cost of loans approved, which includes fees and interest payments incurred during the lifespan of a loan or credit card agreement. The Truth in Lending Act comes into play the moment a borrower signs a promissory note or credit card contract. Loans that produce a lien that a lender holds on a borrower’s residence mandate a three-day grace period, which gives borrowers the opportunity to cancel a loan and not have to pay a severe financial penalty.
TILA was initially drafted as Title1 of the Consumer Credit Protection Act. A separate bill passed in June of 1968 that strengthened the language of Title 1 in to give borrowers more protection against deceptive lending practices. From the day TILA became law until July of 2011, the Federal Reserve Board had the legal authority to issue regulations that banks must follow. After July 21, 2011, the regulation authority has fallen within the legal domain of the Consumer Financial Protection Bureau (CFPB). The Dodd-Frank Wall Street Reform and Consumer Protections Act of 2010 established the CFPB in direct response to the deceptive home mortgage lending practice that triggered the financial meltdown of late 2007.
The Truth in Lending Act introduced borrowers to the Annual Percentage Rate (APR), which eliminated the deceptive interest rate calculations used by banks and credit card companies. For about 15 years, the APR provided borrowers with a clear way to calculate interest costs on all types of loans and issued credit. During the 1980s, United States auto manufacturers took advantage in a TILA loophole that required Congress to pass a separate bill that closed the loophole. TILA ensures borrowers benefit from a fair and timely resolution of credit card billing disputes. Although the Truth in Lending Act does not regulate interest rates, the federal banking law does mandate a standardized disclosure of all costs associated with loans and credit cards.
TILA regulations do not apply to credit extended for commercial ventures, as well as credit that is in excess of a threshold that the Consumer Financial Protection Bureau adjusts every year.
The Truth in Lending Act is organized into several sections that can be difficult to understand for borrowers that are not familiar with bank lending terms. If you need assistance in a deceptive lending case, contact a licensed attorney that specializes in federal banking laws to help you navigate the landmark TILA. Ask for a free initial consultation to determine whether you are a victim of illegal lending practices.