Jan 28, 2020 MicroBilt News
The Truth in Lending Act (TILA) is one designed to protect consumers from predatory lending practices and ensure fair treatment for all consumers. The original law was passed in 1968 though it has been amended multiple times in the 50+ years since.
How does TILA Protect Consumers Shopping for Loans?
The Truth in Lending Act prevents lenders and creditors from engaging in deceptive practices to convince consumers to apply for the following:
- Mortgage loans
- Credit cards
- Auto loans
- Home equity loans
- Other types of credit and loans
It works by requiring lenders to reveal specific information to borrowers that include vital information such as annual percentage rates for the loan, the term of the loan (how long the loan will last), and the total costs borrowers will pay for the loan.
That isn’t all TILA offers in the way of consumer protection, though. It also prevents lenders from using certain predatory tactics, like changing the terms of the loan once borrowers are approved. The same holds true for credit cards, to an extent. Lenders must notify borrowers 45 days in advance before increasing certain fees.
TILA further requires lenders to disclose other finance charges involved in loans, such as:
- Applications fees
- Late fees
- Prepayment fees (if any)
- Over-the-limit fees (if applicable)
They must also provide borrowers with a payment schedule for their debt and include a statement regarding a borrower's right to dispute charges and provide the process for how they will go about making a claim. The bottom line is that borrowers have rights and TILA exists to help protect those rights for all borrowers.
Whether you are a small business looking to enter into the lending arena with short-term loans or you’re a larger player looking to expand your role when it comes to financing large and small loans alike, MircoBilt has decisioning tools and more to help you remain a force to be reckoned with and avoid risking accidentally breaking the rules TILA brings to the table for lenders.