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Offering Free Credit? You May Be Breaking the Law
The primary
purpose of the Truth in Lending Act is to promote the informed use
of consumer credit. It does this by requiring disclosures about
the terms and costs of consumer credit transactions. But the TIL
Act is truly an eclectic consumer protection law. Although its title
suggests a pure disclosure purpose, the TIL Act contains a number
of substantive regulatory provisions to prevent perceived abuses
that could not be completely addressed through mandatory disclosures.
For example, the Act includes
- qualified or absolute prohibitions on prepayment penalties, balloon payments, increases in interest upon default, negative amortization, prepaid payments, extending credit without adequate consideration of repayment ability, and direct lender to contractor payments in certain high rate/high fee residential mortgages;
- limitations on acceleration and changes in terms in home equity plans and reverse mortgages; and
- limitations on the liability of a cardholder for unauthorized use and on the ability of a card issuer to enforce payment if there is a valid defense to payment.
The umbrella title of the TIL Act covers these four distinct types of provisions:
- Disclosure of Credit Costs and Terms
- Rescission
- Special Credit Card Rules
- Advertising
From Truth in Lending (with 2005 Supplement)
Edited by Alvin C. Harrell
ABA Section of Business Law
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