Truth in Lending and Regulation Z

Compare the cost of credit

Truth in Lending promotes meaningful consumer credit disclosures. Regulation Z implements the federal law. Disclosure does not guarantee affordability or the lowest rate. Credit primarily for business purposes is generally outside this consumer-credit framework.

The note rate determines contractual interest. The finance charge is the dollar cost of credit, including interest and certain credit charges. The annual percentage rate (APR) expresses credit cost as a yearly rate and can exceed the note rate because of included charges. It does not capture every closing expense. Amount financed is credit provided to or for the consumer after applicable adjustments, including prepaid finance charges. Total of payments = amount financed + finance charge (15 U.S.C. § 1638(a)(4)–(6)). Compare similar loan amounts, terms, and repayment assumptions.

Before consummation

For most covered closed-end mortgages, deliver or mail the Loan Estimate within three business days after application and at least seven business days before consummation. The consumer must receive the Closing Disclosure at least three business days before consummation, when the consumer becomes contractually obligated on the credit transaction. A new three-business-day waiting period follows an APR that becomes inaccurate beyond the permitted tolerance, a loan product change, or an added prepayment penalty. An ordinary fee correction alone does not restart the period. These are standard Regulation Z rules; the supplied statutes do not provide every implementing detail.

Advertising

Closed-end credit advertisements trigger added disclosures by stating a down payment amount or percentage, number or period of payments, payment amount, or finance charge amount. Disclose the down payment, repayment terms, and APR, including whether the APR may increase. Stating an APR alone does not trigger that same package.

After consummation: rescission

Certain consumer credit secured by a principal dwelling, such as a qualifying home equity loan, carries a rescission right. Purchase financing is exempt, as are certain same-creditor refinancings without new advances (15 U.S.C. § 1635(e)). The right lasts until midnight of the third business day after the latest of consummation, receipt of required rescission notice, and receipt of material disclosures (15 U.S.C. § 1635(a)). For this count, Saturdays count; Sundays and federal legal public holidays do not.

Keep the pre-consummation disclosure wait separate from the post-event rescission clock.