Truth in Lending Act (TILA).
In plain English
The Truth in Lending Act, or TILA, is a federal law that forces lenders to spell out the real cost of borrowing so consumers can compare offers on equal footing. It requires clear disclosure of the annual percentage rate, the finance charge, the amount financed, and the total of payments, using standard definitions. On many home loans it also gives you a right of rescission, a three-day window to cancel certain refinances or home equity loans. It applies well beyond mortgages, to credit cards and other consumer credit, and it is enforced by the CFPB.
01Why it matters
TILA is why every loan must show its APR and finance charge in the same format, which is what lets you compare the true cost of one loan against another.
02The math, step by step
Because of TILA, two lenders must both disclose the APR on a 300,000 dollar mortgage. One quoting a 6 percent rate with high fees may show a higher APR than another at 6.1 percent with low fees, revealing the truer cost.
03What this is NOT
TILA is NOT RESPA. TILA governs disclosure of the cost of credit, like the APR and finance charges; RESPA governs settlement-cost disclosure and bans kickbacks.
04Receipts
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