The Truth In Lending Act (TILA) can also serve to benefit consumers who have fallen victim to violators of this act. What is TILA?
What is the purpose of The Truth In Lending Act (TILA)?
Economic stabilization and competition is strengthened by informed use of credit by consumers.
The Act is in Title I of the Consumer Credit Protection Act and is implemented by the Federal Reserve Board via Regulation Z (12 C.F.R. Part 226).
The Regulation has effect and force of federal law.
TILA is to be liberally construed in favor of consumers, with creditors who fail to comply with TILA in any respect becoming liable to consumer regardless of nature of violation or creditors' intent.
TILA applies to:
Each individual or business that offers or extends credit when four conditions are met:
The credit is offered or extended to consumers,
The offering or extension of credit is done "regularly" [extends credit more than 25 times (or more than 5 times for transactions secured by dwelling) per year],
The credit is subject to a finance charge or is payable by written agreement in more than four installments, and
The credit is primarily for personal, family, or household purposes.
If a credit card is involved, however, certain provisions apply even if the credit is not subject to a finance charge or is not payable by agreement in more than four installments, or if the credit card is used for business purposes. Credit card holders are liable for unauthorized use of the card only up to $50. 15 U.S.C. Sec. 1643. (see Fair Credit Billing Act).
Also, certain requirements apply to persons who are not creditors but who provide applications for home equity plans to consumers.
TILA does not apply to:
Creditors who extend credit primarily for business, commercial, agricultural, or organizational purposes or other purposes that are otherwise regulated, such as securities brokers. But rules governing issuing credit cards and liability for unauthorized use apply to all credit cards.
Student Loan Programs. Loans made, insured, or guaranteed pursuant to program authorized by Title IV of the Higher Education Act of 1965.
Credit transactions, other than those in which a security interest is or will be acquired in real property, or in personal property used or expected to be used as the principal dwelling of the consumer, in which the total amount financed exceeds $25,000.
up 3. Truth in lending disclosure statements
Required disclosures must be made:
"Clearly and conspicuously"
In meaningful sequence,
In writing, and
In a form the consumer may keep.
The Federal Reserve Board promulgates model disclosure forms, but where they would be misleading, lenders should provide tailored notices consistent with TILA.
Closed-end Credit Transactions (includes both sales credit and loans) :
Credit is advanced for a specific time period.
The amount financed, the finance charge, and the schedule of payments are agreed upon by the creditor and the consumer.
Identity of the creditor.
Itemization of amount financed
Annual percentage rate, including applicable variable-rate disclosures,
Total of payments,
Prepayment/late payment penalties,
If applicable to the transaction: (1) Total sales cost, (2) Demand feature, (3) Security interest, (4) Insurance, (5) Required deposit, and (6) Reference to contract.
Open-end Credit Transactions:
Open-end credit includes bank and gas company credit cards, stores' revolving charge accounts, and cash- advance checking accounts.
Creditors reasonably expect the consumer to make repeated transactions.
Creditors may impose finance charges on the unpaid balance.
As the consumer pays the outstanding balance, the amount of credit is once again available to the consumer.
Annual percentage rate including applicable variable-rate disclosures,
Method of determining finance charge and balance upon which finance charge imposed, as explained in 12 C.F.R. Sec. 226.6,
Amount or method of determining any membership or participation fees,
Security interests if applicable to transaction, and
Statement of billing rights.
Other requirements include furnishing consumer with a periodic statement of the account.
We know that this is some tricky language, but if you have a question about this blog, give our office a call and we will try to address your particular question regarding TILA. Call our office at (865) 428-6737 for a free consultation. We are here to help!