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O. Max Gardner III
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Truth in Lending Act Violations
The Truth in Lending Act is intended to do just exactly what its title suggests: make sure that lenders tell consumers the truth about the loans and other credit transactions they enter into. The Truth in Lending Act is primarily implemented by the Federal Reserve Board, although certain other federal agencies have responsibility for provisions relating specifically to their industries.
The Truth in Lending Act protects only consumers; these regulations do not apply to commercial loans and credit transactions. The Act also applies only to lenders who are in the regular business of extending credit-its provisions would not protect you if you were borrowing money from a friend, relative, employer, or other business that didn't customarily extend credit.
The Truth in Lending Act is also the basis for some regulations relating to consumer lease transactions.
A list of required disclosures is the key focus of the Truth in Lending Act's provisions relating to credit transactions. Depending on the type of credit extended, disclosures must be made either before credit is extended or before the first transaction. Some of the key required disclosures include:
- Finance charge;
- Annual Percentage Rate (APR);
- Amount financed;
- Total of payments; and
- Total sale price.
These provisions are intended to discourage the practices engaged in by some lenders where variable interest rates are downplayed or not disclosed, consumers are misled about the impact of interest only payments, or hidden costs are rolled into the loan and the borrower ends up paying interest on them. Predatory lending often involves Truth in Lending Act violations, and borrowers considering non-traditional mortgages like adjustable rate mortgages, interest-only loans, and fifty year mortgages are particularly vulnerable to these practices, since the subprime lenders most commonly offering these loans may hide the impact of making interest-only payments in the early phase of a loan.
The Truth in Lending Act also requires certain disclosures from lenders who choose to advertise credit terms.
If your lender has failed to make the required disclosures or otherwise violated the Truth in Lending Act, you may be entitled to damages of up to double the amount of the finance charge. You may also be awarded court costs and attorney fees.
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