Truth in Lending Act

Truth in Lending Act (TILA) is a foundational federal consumer protection law, implemented through Regulation Z, that mandates standardized disclosure of credit terms to borrowers. Enacted in 1968, TILA requires lenders to clearly present the annual percentage rate (APR), total finance charges, payment schedule, and total amount financed so that borrowers can make informed comparisons across loan products.

For secondary market note investors, TILA's relevance extends beyond origination. If the original lender failed to provide proper TILA disclosures at closing, the borrower may have rescission rights or affirmative defenses that can complicate foreclosure proceedings — and those defenses can be asserted against subsequent holders of the loan. Investors performing due diligence on seasoned loans should review the collateral file for evidence of compliant TILA disclosures, particularly on loans originated during periods of aggressive or subprime lending. The CFPB enforces TILA alongside RESPA, and the two statutes' disclosure requirements were merged into the TILA-RESPA Integrated Disclosure (TRID) rule for loans originated after October 2015.