What is the purpose of the Truth in Lending Act?

The Truth in Lending Act (TILA) is primarily designed to ensure transparency in lending practices. It requires lenders to disclose important terms of the loan agreement, including the annual percentage rate (APR), terms of repayment, and total costs of the loan. This helps borrowers make informed financial decisions by allowing them to compare different loan offers more easily and understand the true cost of borrowing.

The act emphasizes clarity and honesty in lending, providing borrowers with the information they need to avoid hidden fees or unfavorable terms. By fostering transparency, TILA aims to protect consumers from deceptive lending practices and promote fair competition among lenders. The focus on clear communication and standardized disclosures is what makes this legislation a fundamental aspect of consumer financial protection.