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Definition: Truth in Lending Act (TILA)
Truth in Lending Act was passed by the US federal law system in 1968 to safeguard consumer interests in lending activities. It sought to regulate the consumer financing industry by improving transparency and disclosure of lending terms.
TILA regulates banks for open-end credit lines (credit card accounts and home-equity lines of credit, etc.) as well as closed-end credit (home loan, car loan, etc.). It mandates banks for clear disclosure of annual percentage rate, term of the loan, treatment of credit balances, total costs to the borrower, etc. It also lays guidelines for disclosure in advertising of loans and for oral disclosures.
The act facilitates consumers to clearly understand and pick loans as they are given an entire gamut of information about loan terms before they actually sign up.
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