Bank Advisor

Understanding the Truth In Lending Act (TILA) is essential in learning how the changes to it affect the consumers or borrowers today. As you may already know, this is a federal law that governs the credit issues. It is responsible for setting the minimum standard concerning the information that creditors provide concerning installment credit contracts. It indicates the principal amount, the APR, the number of months wherein payments are made and the minimum monthly payment needed.

It also has certain provisions. Among them is the provision prohibiting the credit card companies to send out cards to those who did not apply for it. However, companies can send unsolicited credit application. Most importantly, it regulates the disclosure processes. This is important because borrowers need to know the charges involved in applying for the loan and they have to agree to it before closing the deal.

The TILA is formulated to protect borrowers from the system of lending money. This started in 1968. Changes were made from then on. Among the most recent changes were done by the Housing Economic Act of 2008 which took effect last July 2009. Several changes were made particularly in the disclosure processes. The lenders and the rest of the real estate professionals are implementing the changes. However, borrowers should know them too to ensure a smooth sailing closing.

As mentioned earlier, the changes focused on the disclosure processes. The changes took effect on the home loans filed on July 30, 2009 and after. You be the judge if the changes helped. One of major change was the limitation of fee collection. According to the amendment, the lender is not authorized to collect any fee from the borrower unless the Truth In Lending (TIL) has been delivered. There is also a 7 business day waiting period before any closing takes place. In addition to that, the borrowers are not obliged to continue the transaction even if the received the disclosures or applied for a loan. Finally, if there are changes in the APR, another waiting period of 3 days is required.

The process is more tedious and it is longer too. However, this is a big help for many consumers and borrowers. First, they will know exactly what the charges are for. They do not have to pay more than what the charges are. In addition to that, the waiting period allows them to examine the disclosures and TIL carefully. They can compare it with other lenders too. Since they are not committed to any lender even if they got the final TIL, they can cancel the transaction and choose another lender. Further, if there are changes in the APR, the lender should allow a waiting period of 3 days before closing the deal. This allows the borrowers to review the changes and decide if they should continue with the transaction.

The changes made in the Truth In Lending Act will definitely help a lot of borrowers. This way, they know exactly what type of term they are getting and the charges they are paying. This gives the chance to come up with a better decision.