What is the purpose of the Truth in Lending Act (TILA)?

The Truth in Lending Act (TILA) is designed primarily to promote informed consumer decision-making through transparency in credit terms and costs. Its purpose is to require lenders to disclose key information regarding the terms of lending agreements, including the annual percentage rate (APR), finance charges, and the total cost of the loan. This structured disclosure helps consumers understand the true cost of borrowing, enabling them to make better financial decisions when selecting credit products.

By mandating clear disclosures, TILA aims to prevent misleading practices and ensure consumers are not blindsided by hidden fees or terms. This legislative framework is fundamental for maintaining fairness in lending practices and ensuring consumers can compare different loan options effectively. Understanding these disclosures is crucial for anyone involved in the mortgage industry, including MLOs, as it helps them guide clients through the lending process.