The Truth in Lending Act (TILA) requires lenders to provide accurate and standardized information about credit charges. TILA applies to consumer credit subject to a finance charge and allows consumers to sue for damages and withdraw from contracts. The United States Federal Reserve Board enforces TILA.
The Truth in Lending Act (TILA) is a US federal law that requires lenders to provide consumers with accurate and meaningful information about how lenders charge for credit. One of the significant requirements of TILA is a mandate that creditors provide information in a standard format. This allows consumers to compare rates from different companies and understand how interest is calculated. The United States Federal Reserve Board (FRB) is the agency responsible for implementing the Truth in Lending Act. The FRB issues regulations to further the objectives of the Truth in Lending Act.
TILA applies to any person or business that regularly offers consumer credit subject to a finance charge or requires a written agreement for payments in more than four installments. The credit must also be for a personal, family or domestic purpose. This means that TILA does not apply to a business obtaining credit for commercial purposes. A finance charge generally refers to any charge a consumer must pay a lender to obtain credit. This is a very broad definition to cast a big net on creditors.
Consumers can sue for violations of the Truth in Lending Act and recover statutory damages of between $100 United States Dollars (USD) and $1,000 USD for each violation. Statutory damages are specific monetary awards for violations of a law without the need to prove actual damage or loss. This means that a court can award monetary compensation to a consumer without the consumer having to prove actual damage or loss for breaking the law. Conversely, a court awards actual damages to a plaintiff when a plaintiff can demonstrate injury or loss directly resulting from the specific action of a defendant. The Truth in Lending Act also authorizes a court to award consumers actual damages, costs of pursuing lawsuits, and reasonable attorneys’ fees.
In addition to pecuniary damages, the Truth in Lending Act also provides consumers with a right of withdrawal. This means that a consumer can cancel a contract. Under the TILA, the right of withdrawal applies when a homeowner uses their home as collateral in a credit transaction. For example, if a consumer takes out a loan to make home improvements and uses the home as collateral, the contract is subject to termination for certain violations of the Loan Truth Act. Termination of the contract, however, does not apply to the initial purchase of a home.
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