Congress passed the Truth in Lending Act in 1968 in an attempt to help consumers by requiring lenders in credit transactions to disclose important terms. In the past, the government’s philosophy was that it was up to the buyer to be sure what he or she was getting into, but this act marks the first shift into the government requiring more disclosure in order to protect the consumer.
The most important parts of the Act are the new disclosure rules. Creditors must be clear in their disclosures and must write them in a form that the buyer can keep. It must tell information like the total amount owed, how frequently the consumer pays, the annual percentage rate, and late penalties. Creditors must disclose this information on a regular basis and are liable for any mistakes they make; in which case a suit may be brought against them within a year if there have been damages because of a mistake or violation of the Act.
The next part of the Act describes the times where a consumer can rescind their credit transaction. Depending on the situation, a consumer may be able to rescind a home loan within three days of making the loan.
The main purpose of the Truth in Lending Act is not to regulate credit card companies; instead, it is to protect consumers who enter credit transactions. The law does not set limitations on what the credit card companies can charge, but instead just forces them to make it clear so that consumers can shop around for the best deal. Similarly, it gives more rights to the consumer in the case of a violation by a credit card company so that the consumer can collect on the damages. It also protects consumers who finance with a home loan and disallows certain practices by companies in these situations. Although the law does not regulate the costs of credit transactions, it does a good job of helping consumers make informed credit transactions.