The Truth in Lending Act

The Truth in Lending Act of 1968 is a United States federal law which was implemented in order to protect consumers during credit transactions. The Act was designed to help promote informed credit use by requiring that loan providers and companies clearly disclose the key points of the lending agreements and all of its costs to the consumer. In addition, the Act requires the standardization of the manner in which costs for borrowing are calculated and represented to the consumer.

A key point of the Truth in Lending Act is that lenders are required to disclose to a borrower the annual percentage rate (APR) of the loan or credit agreement in question. The APR is the rate the lender charges over a full year for borrowing privileges, expressed as a percentage, and also includes any additional costs that are associated with the loan or credit. By knowing the APR of each loan, consumers can more easily compare rates between offers.

The costs of a loan or credit can be expressed in a variety of confusing or deliberately misleading ways. For example, the effective annual interest rate of a loan can be expressed as the effective monthly interest rate, the annual interest rate compounded monthly, or the annual rate in advance. Each of these rates can represent the same cost with different numbers, thereby misleading consumers. Since loan and credit companies are required to display the APR to a borrower, consumers can more easily and fairly compare rates between companies.

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Misleading information about loans and interest rates can, unfortunately, cause some people to fall into serious financial hardships. Sometimes, in the face of excessive debt, filing for bankruptcy is the best step to take. Contact the Milwaukee bankruptcy lawyers of the DeLadurantey Law Office, LLC at 414-377-0518 for help.