Truth-in-lending (TIL) laws are a cornerstone of consumer credit legislation. They promote the growth of the consumer credit industry by making the terms of credit easier to understand. In theory, this allows people to compare loans offered by different lenders, encouraging competition. In general, federal statutes do not regulate the actual terms of a loan, but only the form in which it is presented.
Truth-in-lending laws are a response to the explosion in consumer
In 1968, under President Lyndon B. Johnson, Congress enacted the first comprehensive truth-in-lending statute, the
The 1968 act spawned a great many lawsuits. Lenders complained of difficulty with complying with its complex provisions, and consumers complained of information overload. In 1980, under President Jimmy Carter, Congress added TIL simplification provisions to the Depository Institutions Deregulation and Monetary Control Act.
Other additions to TIL laws include the Fair Credit and Charge Card Disclosure Act of 1988 and the Home Ownership and Equity Protection Act of 1994. Some states have their own TIL laws, which may be more favorable to consumers than the federal statute.
Proliferation of home loans with unaffordable terms despite TIL reveals some of the limitations of these acts. Borrowers often receive disclosures too late in the process to make comparisons, or are victims of bait-and-switch tactics by unscrupulous loan brokers. Disclosure requirements on variable-rate mortgages have proven inadequate, and penalties–for example increases in interest rates on a credit card if a payment is late–can be hidden in the fine print. Consumer confusion about loan terms, resulting in poor credit decisions, is still very much a part of the American business scene.
Renard, Elizabeth, and Kathleen Keest. Truth in Lending. Boston: National Consumer Law Center, 1999. Simmons, Pamela. “The Federal Truth in Lending Act: What You Don’t Know Can Hurt You.” Real Property Law Reporter 27, no. 6 (2004).
Credit card buying