Regulation Z

“The Truth in Lending Act is intended to ensure that credit terms are disclosed in a meaningful way so that consumers can compare credit terms more readily and more knowledgeably. Before its enactment, consumers were faced with a vast array of credit terms and rates. It was difficult to compare loans because the terms and rates were seldom presented in the same format. Now, all creditors must use the same credit terminology and expressions of rates.” [1]

Certain disclosures must be presented to consumers clearly and conspicuously in writing and in a form they can keep. Some of the disclosures include:

• The identity of the creditor making the disclosures
• The amount financed (using that term)
• A separate written itemization of the amount financed
• The finance charge (using that term)
• The annual percentage rate (using that term)
• A payment schedule, including the number of payments, amounts, and timing of payments scheduled
• The total of payments (using that term) [2]

Penalties for non-compliance:
As a part of Truth in Lending, criminal liability for willful and knowing violation is a maximum fine of $5,000 and/or maximum imprisonment of one year. [3]

Helpful link(s)/Source(s):
1. http://www.federalreserve.gov/boarddocs/supmanual/cch/200601/til.pdf
2. http://www.fdic.gov/regulations/laws/rules/6500-1700.html#fdic650022618
3. http://www.fdic.gov/regulations/laws/rules/6500-200.html#fdic6500105

Please note: This is not legal advice and dealers should always seek the assistance of qualified legal counsel.

From "19 Laws, Rules and Regulations That Can Cost You More Than Money" in the September 2010 issue of Auto Dealer Monthly.