With a stated objective to help consumers, Congress deemed it fit that to enhance "economic stabilization and competition among the various financial institutions," lenders must give written disclosures on cost of credit and various terminology of repayment.

Thus lenders are required by law to make detailed disclosures on:

Costs of all loans with the annual percentage rate (APR).

All kinds of financial charges.

Features of floating rate loans and fixed rate loans.

Pre-payment penalty clauses.

Payment due date and allied terms and conditions.

Identity of the creditor and the amount financed.

The Truth in Lending Act (TILA) applies to every individual or business where these conditions are met:

Credit is offered to consumers on a regular basis.

The credit is mainly for household or personal purposes.

The credit is subjected to a finance charge.

However The Truth in Lending Act does not apply to:

Creditors who advance credit for business or commercial interests.

Student loan programs.

Various remedies are available to borrowers for failing to comply with the Truth in Lending Act. Punitive action can be brought in any U.S. Court within one year of which the violation has occurred. Remedies that can be obtained are as follows:

Actual damages in all cases.

Attorney's fees and court costs.

The right to cancel real estate lending transactions within three business days, also known as the right to rescission.

A fine of $5,000 or imprisonment of up to one year or both.

To sum up, the Truth in Lending Act is a useful instrument for borrowers to gauge the bona fides of a creditor while applying for a home equity loan. Moreover, it also allows the government to nail unscrupulous lenders.

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