The federal Truth in Lending Act — TILA — and its implementing regulation, Regulation Z, require specific disclosures whenever consumer credit is offered. As a dealer who arranges financing, you are subject to TILA requirements. The purpose of TILA is to promote the informed use of consumer credit by requiring clear and uniform disclosure of credit terms.
Under Regulation Z, you must disclose four key items in a clear and conspicuous manner: the Annual Percentage Rate (APR), the Finance Charge (the total dollar cost of credit), the Amount Financed, and the Total of Payments. These four disclosures must be more prominent than other information in the contract — they are typically presented in a box or table format, often called the “federal truth in lending disclosure box.”
TILA also regulates advertising of credit terms. If you advertise a monthly payment amount, an interest rate, or a down payment in a vehicle advertisement, you trigger additional disclosure requirements. For example, if you advertise “Only $299/month!” you must also disclose the APR, the down payment required, the number of payments, and whether the rate is adjustable. This is called the “triggering terms” rule — certain specific credit terms in an advertisement trigger the requirement to disclose all the other credit terms.
Penalties for TILA violations can be significant. A creditor who fails to make the required disclosures can be liable to the consumer for actual damages, statutory damages up to twice the finance charge (with minimum and maximum limits), and the consumer’s attorney’s fees. Class action liability can be even more substantial.
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⚠ Key Compliance Point TILA/Regulation Z Required Disclosures: • APR — annual percentage rate of the finance charge • Finance Charge — total dollar cost of credit • Amount Financed — net amount of credit provided • Total of Payments — sum of all payments These must be presented clearly and conspicuously in every consumer credit contract. |