What is the purpose of Regulation Z in lending?

Regulation Z, also known as the Truth in Lending Act (TILA), was enacted to promote informed use of consumer credit by requiring clear and conspicuous disclosure of the terms and costs associated with borrowing. The primary aim is to ensure that borrowers understand the credit terms, including the annual percentage rate (APR), finance charges, and payment schedules before entering into a loan agreement. This transparency helps consumers make informed decisions and compare different lending offers, ultimately fostering fair lending practices.

The other options refer to distinct aspects of financial regulation but do not encapsulate the core purpose of Regulation Z. Options related to establishing credit unions, regulating interest rate caps, or overseeing mortgage assessments revolve around other legislative measures and regulatory bodies, whereas Regulation Z is specifically focused on the clarity of credit terms provided to consumers.