Definition
TILA requires clear disclosure of the cost of credit, including APR, finance charges, and payment terms. It's the foundation of mortgage disclosures—you see the true cost through APR comparison, not just rates.
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TILA, enacted in 1968 and updated multiple times, ensures consumers understand the true cost of borrowing. TILA requires clear disclosure of APR versus interest rate (APR includes fees), payment amount, and total finance charges. TILA applies to most credit products including mortgages. Combined with RESPA, TILA disclosures (now in the TRID format) give borrowers critical information to compare offers. Lenders must provide these disclosures within required timeframes, and borrowers have rescission rights in certain situations.
Pro Tip
Compare APR (which includes all costs) rather than just interest rate; a lower rate with high fees may have a higher APR than a slightly higher rate with lower fees.
Example
A lender must disclose that a 4.0% interest rate mortgage has a 4.25% APR because of origination fees; borrowers see the full cost, not just the rate.