Truth in Lending Act
If you have ever started a line of credit with a credit card company or taken out a loan, you have been the beneficiary of certain provisions under the Truth in Lending Act (TLA). This law was created in 1968 to protect consumers from deceptive credit practices. It dictates that creditors must clearly state the terms of a loan or credit agreement so that the consumer is given full disclosure of the terms of the contract. By enforcing a certain level of transparency among creditors, the Truth in Lending Act seeks to boost responsible, well-informed credit card use.
Terms of the TLA
The Truth in Lending Act includes several provisions designed to benefit and protect consumers, including the following:
- Creditors must fully disclose the terms of a credit or loan agreement
- Lenders must communicate all costs of the credit line or loan up front
- Standardization of how costs to the consumer are calculated
- Standardization of how consumers are informed of related costs
- Creditors must disclose the annual percentage rate (APR) of the loan or credit card
What is the APR?
The annual percentage rate of a loan or line of credit is the interest rate that the borrower is charged for the loan or credit. It is calculated as the total interest that the borrower is charged over a year as a percentage of the loan or credit. Prior to the Truth in Lending Act, creditors could use deceptive practices to express how the interest was to be calculated. By requiring the APR to be reported up front, the Act helps protect consumers from being purposefully deceived by creditors. Borrowers can also use the APR to compare the cost effectiveness of different loans and lines of credit across different programs and companies.
Contact Us
To learn more about consumer protections and debt relief options, contact the New Orleans debt negotiation lawyers of Kervin & Young, LLC today at 504-599-5906.