When we use our credit cards, get a mortgage on our houses, or do any credit-based transaction where borrowing money is concerned, we are making a contract with a lending institution.
The Truth in Lending Act (also known as “TILA”) protects us by requiring the lender to fully disclose their terms of the credit.
The lender must disclose the amount or percentage required to satisfy the loan, and also be transparent concerning time limits, penalties and ownership of the loan.
This allows us, the consumer, to stop and think about the rules that the lender is presenting. At this time, we should review interest and percentages that will be charged, time limits, and any penalties that will raise our debt if payments are late.
Making the right choices when choosing a lender is not easy. We need to understand all that comes with the loan.
There’s also a ton of fine print. If we miss the small print, it can cause big havoc in our lives if things don’t go as planned.
However, if you have taken the time to review all of the disclosure material that comes along with your credit card, loan information or whatever borrowing transaction you are doing, there should be no surprises.
The TILA (Truth in lending act) allows you, the consumer, to file suit against the lender if you run into a situation where they claim a “rule” that they have not disclosed to you.
The law was creating to protect us, the consumer.
This law makes sure that the lender cannot throw in any extra charges, rates, penalties, stipulations or rules unless they have first informed us of them.
Another benefit of this law is that it allows the lenders, creditors, banks and financial lenders to be competitive. As long as they are required to be transparent about their requirements, there is more room to vary the components of the loan.
You should understand the basic terms that you are agreeing to, you need to be fully aware of the full cost of your credit.
Understanding the following terms will help you determine if this is a situation that you can truly afford to get into:
• APR (Annual percentage Rate)
• finance charges
• service or carrying charges
• loan fee
• broker fees
• appraisal fees
Make sure you understand each aspect of your loan as it relates to the above terms.
Not understanding the terms that you are agreeing to is not an excuse.
As a consumer, you are empowered by the Truth in Lending Act and protected from the lender lying to you, but you are not protected if you don’t take a proactive stance and review all that they have disclosed to you.
If you believe a lender has violated TILA, talk to a lawyer about your legal options.
To review the entire Truth in Lending Act, click here.