The Truth in Lending Act

The Truth in Lending Act became a part of the broader Consumer Protection Act in 1968. The crux of the law involves protecting consumers from dishonest credit transactions by requiring lenders to fully disclose all costs and terms used in lending documents. The law was enacted more than 30 years ago, however, when there were very few choices for home loans.

Today, there are dozens of options for home loans, which makes the market confusing. This cloudy picture is just the way certain so-called predatory lenders like to keep their business. Preying on lower-income consumers and those with poor credit, in particular, these lenders will use every means at their disposal to gouge homeowners of their hard-earned savings, and in some cases, of the very home they were trying to protect.

The best way to protect your home investment is to arm yourself with knowledge before anyone can take advantage of you. Certain red flags can alert you to predatory lenders and these include prepayment penalties, excessive fees, yield spread premiums, mandatory arbitration, and any unnecessary products. The Truth in Lending Act requires lenders to be clear about each of these items.

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