TILA, commonly known as the Truth in Lending Act or Regulation Z, is a 1968 federal law. Congress first enacted TILA as part of the Consumer Credit Protection Act to safeguard consumers from unfair credit practices. Due to the several amendments that have been made to the TILA since its adoption, Lenders must maintain current knowledge of the requirements of the act and carefully decide which of their transactions the act applies to before extending credit.

Any lender that provides credit to customers for personal, family, or home uses is subject to TILA’s restrictions. This restriction is divided into two parts. The credit must first be made available to a consumer. Consumers can be trusted or human. This means that the provisions of TILA usually do not apply to credit granted to business entities like corporations, partnerships, and limited liability companies. The goal of the credit extension is the subject of the second section. The provisions of TILA govern credit given for personal, family, or domestic uses. Lenders need to identify who the loan is offered to and the purpose of the loan to be sure of whether TILA’s requirements apply to that transaction or not.

TILA allows for several exemptions from its rules. Examples of these are an exemption for the credit given to corporate enterprises and credit given for commercial, industrial, or agricultural reasons. Even though the credit extends to a consumer, loan transactions may be exempt from TILA if the loan’s objective is commercial. One such is a loan given to someone whose personal residence is used to secure the loan, but the money from the loan is used to finance the person’s business. To read more on TILA and its provisions, click here.


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