What Is the 1968 True Credit Lending Act?

The 1968 Truth in Lending Act, also known as the True Credit Lending Act, offers protection to consumers who use credit cards or take out installment loans or engage in similar transactions. The Act requires lenders to disclose finance charges and the true cost of the loan to consumers; it also limits a user's liability to $50 for lost, stolen or fraudulently used credit cards.

Summary

The 1968 True Credit Lending Act, formally known as The 1968 Truth in Lending Act, was enacted to provide a level of protection for consumers who take on loan or lease obligations. According to the Act, lenders must use uniform methods to compute how much credit will cost you as a consumer. They must also use standard methods to disclose credit information and terms, so you can easily see how much you are paying to borrow money.

Additional Benefits

The Truth in Lending Act also provides other types of consumer protection, including issues around credit-card liability. The Act limits your financial liability to $50 in case any of your credit cards are stolen, lost, or used without your permission. Companies are also prohibited from issuing credit cards to you without your explicit permission.

Regulation M: Consumer Lease Transactions

Regulation M of the Act is applied to all lease contracts for the use of property, such as a car or house, primarily for family, personal or household purposes. Lease contracts covered by this regulation must be longer than four months, and the total contractual obligations must not exceed $25,000, regardless of whether the lessee has an option to buy the property when the lease is up.

Regulation Z: Disclosure

Regulation Z of the Act requires the disclosure of all the key terms for a lease or loan before a credit offer is extended to a consumer. In some cases, this information must be given in billing statements as well. Finance charges and the annual percentage rate applied to the unpaid balance must be disclosed, as well as the total number of payments over the course of the loan and the total sale price of the item being financed. Providers of loans or leases must keep evidence of their compliance with the Truth In Lending requirements for at least two years after the date of the disclosure of terms to the customer. The disclosures need to be clear and conspicuous and must be printed on a document that the customer may keep.