Truth in Lending

The Truth in Lending Act (TILA) is a United States federal law designed to protect consumers in credit transactions by requiring clear disclosure of key terms of the lending arrangement and all costs.

The Federal Trade Commission enforces and administers the Truth in Lending Act. Truth in Lending also gives consumers the right to cancel certain credit transactions that involve a lien on a consumer's principal dwelling. The borrower usually has the right to rescind the agreement until midnight of the third business day after the promissory note was signed.

The lender must disclose to the borrower the annual percentage rate (APR). Annual percentage rate (APR) is an expression of the effective interest rate that the borrower will pay on a loan, taking into account one-time fees and standardizing the way the rate is expressed. In other words, the APR is the total cost of credit to the consumer, expressed as an annual percentage of the amount of credit granted. APR is intended to make it easier to compare lenders and loan options.