What does the Truth in Lending Act require of lenders?

The Truth in Lending Act (TILA), established in 1968, requires lenders to disclose the true cost of obtaining credit to borrowers. This law aims to promote informed use of consumer credit by ensuring that borrowers receive clear and accurate information about the terms and conditions of their loans. The disclosures must include information such as the annual percentage rate (APR), the total finance charge, payment schedules, and the total amount financed. By providing this information, the act helps consumers understand the full cost of borrowing and compare different loan options effectively.

The other options do not align accurately with the requirements set forth by the Truth in Lending Act. Lenders are not obligated to give loans with minimal fees; instead, they must provide a transparent account of all charges involved. Approving all credit applications is not a requirement of the act, as lenders have the discretion to evaluate creditworthiness based on their criteria. Lastly, providing only interest rates falls short of TILA’s requirements, as it emphasizes a comprehensive disclosure of all loan costs—not just interest rates. The focus of the act is on full financial transparency, supporting borrowers in making informed decisions.