California Real Estate Broker ExaminationFinancingMedium
A buyer is applying for a mortgage. The Truth in Lending Act (TILA), implemented by Regulation Z, requires lenders to disclose certain information to consumers. Which of the following is NOT a primary purpose of TILA?
- ATo protect consumers from predatory lending practices.
- BTo ensure meaningful disclosure of credit terms.
- CTo prohibit discrimination in lending based on protected characteristics.
- DTo allow consumers to compare credit costs.
Show answer & explanationAnswer & explanation
Correct answer: C. To prohibit discrimination in lending based on protected characteristics.
TILA (Regulation Z) focuses on providing clear disclosure of credit terms and costs to consumers, enabling them to compare loan offers. Prohibiting discrimination in lending is the primary purpose of the Equal Credit Opportunity Act (ECOA), not TILA.
Why the other options are wrong
- A. While TILA aims to prevent consumers from entering disadvantageous loans by providing clear information, its primary mechanism is disclosure, not direct prohibition of discriminatory practices.
- B. This is a core purpose of TILA, ensuring transparency in credit terms.
- D. By standardizing disclosures, TILA helps consumers compare different credit offerings.
Truth in Lending Act (TILA)
A federal law, implemented by Regulation Z, that protects consumers in credit transactions by requiring clear disclosure of key loan terms and costs.
- Requires disclosure of APR, finance charge, amount financed, and total payments.
- Applies to most consumer credit, including mortgages.
- Grants a 3-day right of rescission for certain refinance transactions.
Memory trick: TILA: 'T'ransparency 'I'n 'L'oan 'A'greements.