The Truth in Lending Act (TILA) is a Federal law designed to promote consumers’ understanding and informed use of consumer credit by requiring standardized disclosures regarding terms and costs associated with borrowing. While TILA’s protection is broad, we will briefly cover the three areas that particularly benefit home buyers, home sellers and home owners.
Congress enacted TILA in 1968, and there have been continual changes and improvements in an effort to further protect your consumer rights.
Home Buyer Protections
TILA is helpful for home buyers because it requires disclosures about a loan’s terms in a standardized manner.
A savvy home buyer knows to “shop the loan” (compare programs among multiple lenders.) It used to be that buyers were inundated with excessive industry jargon and complex loan terms that made it difficult to compare loans.
While it’s still an onerous task, the Good Faith Estimate
simplifies the process so the understanding of lender language and forms are uniform across all lending institutions.
The buyer will know at a glance:
- what credit will cost the borrowers,
- when charges will be imposed, and
- what the borrower’s rights are as a consumer.
With the TILA-RESPA Integrated Disclosure Rule effective for applications received by creditors or mortgage brokers on or after August 1, 2015, protection of the consumer will be further enhanced and the lender’s compliance even more defined. The lenders are currently getting up to speed with the changes and since the Consumer Financial Protection Bureau is still considering amendments, we will take a look at the changes at a later date for a more comprehensive look.
Buyer and Seller Protections
For the buyer and seller, The Federal Trade Commission has provided guidelines for advertisers who are subject to the Federal Truth in Lending Act even when credit is not being extended. There are certain necessary disclosures that your Realtor
will have to follow if credit terms are stated on any marketing pieces.
It is common for real estate agents to advertise clients’ properties with flyers and brochures (both hard copy and digital) that outline the property details, community amenities, and sometimes even credit options offered by a particular lender.
As a seller you will want to make sure you choose an experienced and educated real estate agent to ensure all advertising of your property is in compliance with the minutia of Federal and local rules.
As a buyer, these necessary disclosures will allow you to make a clear apples-to-apples comparison of the marketing pieces of multiple properties.
Home Owner Protections
TILA gives consumers the right to cancel certain credit transactions that involve a lien on a consumer’s principal dwelling. Also, the regulation prohibits certain acts or practices in connection with credit secured by a consumer’s principal dwelling.