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The Truth About The Truth In Lending Act
Reading the fine print can be tedious and time consuming when you apply for credit. Take your time, because understanding the details will allow you to compare offers and your options to make good credit decisions.
Use Of Magnifying Glass
Credit information has become increasingly more understandable, but it may be in small print. This is due primarily to the Truth in Lending Act which was enacted to ensure that creditors disclose specific information about finance charges and other credit matters, and that the information is presented in a consistent fashion. Covering personal, family, and household debts, it ensures, that the information on your monthly statements is understandable and easy to read.
The Legislation in Action
But what else does Truth in Lending Act do? As it pertains to credit cards and other open-ended accounts, such as overdraft protection on your checking account, the act requires that:
- Before you fill out an application Finance charge and interest rate information is provided to you.
- If there is need to change agreement than you receive sufficient advance notice of same changes.
- If your credit card is lost or stolen and then used fraudulently your risk is limited to $50 only.
- Creditors are prohibited from sending you a credit card you didn't request.
The Legislation in Action also applies to closed-ended accounts like installment loans (loans for a specific amount of money with a specific payoff time frame). Provisions of the regulation include:
- Right of rescission : - The ability to change your mind within 3 business days after signing a contract where you have used your house as collateral.
- The requirement that home mortgage contracts must list precise information about annual percentage rate, points, fees, and finance charges.
Truth In Lending Act Amendment
Your financial situation may require you to apply for a high-rate or a high-fee loan because you cannot get one with better terms. The Home Ownership and Equity Protection Act may give you additional rights under Truth In Lending Act if you are applying for:
- A home equity loan
- A second mortgage
- A refinancing loan secured by your home
Talk with your lender for more information on this type of loan. It's important that you know your rights under the law. These types of loans can be difficult to manage because the payments can be very high. Given the increased risk to this type of loan, additional safeguards are in place to protect you. For example:
- A lender cannot give you a high-rate or high-fee loan without considering your ability to pay.
- No Penalty for prepayment in most cases.
- If you default interest rate cannot be increased on your loan.
The bottom line of the Truth in Lending Act is that you have a right to be fully informed. Be sure to read all of the information carefully although most of it comes with fine print. If you don't understand something, ask questions. |
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