TILA Flashcards
Truth in Lending Act
When was the TILA passed into law?
A. The 29th of May 1968.
B. The 12th of June 1977.
C. The 1st of January 2008.
D. The 23rd of February 1955.
Correct answer: A
A is correct because TILA was signed into law by Congress in 1968 as a consumer protection law against predatory loan practices. It requires banks and other organizations that offer loans to present lending disclosures to
their clients before they undergo any agreements and lend funds.
What is Regulation M?
A. The outline of punishment for lenders that don’t follow the TILA.
B. For lenders to understand exactly how the consumer lending provisions are spelled out in their lending processes.
C. What consumers must do to ensure TILA is upheld.
D. A & C.
Correct answer: B
B is correct because Regulation M, ‘Consumer Leasing,’ focuses not on
punishment but on how consumers are protected under TILA. D isn’t
correct, as these regulations for law enforcement are outlined in Section 108 of TILA.
Does the TILA regulations apply to most kinds of consumer credit?
A. False
B. True
Correct answer: B
B is correct because TILA protects clients from all types of consumer
credit. This ranges from credit cards to mortgages, so lenders must clearly disclose this information as well as information and details about their products as part of this law.
TILA requires mortgage professionals to do what for their clients?
A. Lenders must disclose information about products.
B. Lenders must provide details about financial products and services.
C. Lenders must be open to negotiating agreement contracts.
D. A & B
Correct answer: D
D is correct because TILA forces lenders to be open about what products and services they sell to ensure consumers know their signing agreements. It also allows an open market for them to shop for the perfect deal and not
get ripped off.
What can a consumer do thanks to TILA?
A. Make informed decisions.
B. Ask for details of the lender’s clientele base.
C. Within legal limits, can terminate unfavorable agreements.
D. A & C.
Correct answer: D
D is correct because TILA gives consumers the power to make their own choices about where they will borrow money and not feel blindsided by unforeseen costs. They will be protected by a time limit for which they can back out of a contract without any penalties. They cannot, however, ask for details of the lender’s clientele base, even if they can ask for service quotes.
What time limit does TILA allow consumers to back out o contracts?
A. Six months.
B. One week.
C. Three days.
D. All contracts are final once signed.
Correct answer: C
C is correct because as long as three days have not passed, consumers can back out of contracts with lenders thanks to TILA with zero penalties. After which, fees may apply, although be sure to read the full disclosure
agreements for details before you sign to know these prices if you break the contract afterward. D isn’t correct, as TILA ensures a backing-out period for consumers before contracts are finalized.
What does TILA outlaw?
A. Unfair credit billing.
B. Unfair credit card practices.
C. High-pressure sales.
D. Misrepresented products.
E. Failure of disclosure.
F. All of the above.
Correct answer: F
F is correct because TILA outlaws unfair lending practices related to credit and credit card billing. They also forbid lenders from making consumers feel pressured to sign a contract even if unsure about committing to a loan. They also are against other bad sale tactics like not being clear and truthful about a service, where a consumer may sign up for something only to be caught off guard by something. Of course, the biggest sin of all is the failure
to produce a disclosure agreement that outlines all the contract rules and clearly states what a consumer is getting themselves into.
What is Regulation Z?
A. The clearly disclosed credit terms are presented in plain English to
consumers.
B. The structure of your disclosure statement will be provided to consumers after signing.
C. The outline of enforcement and punishment for going against TILA.
D. A 2022 amendment to TILA backtracked on a 2012 law about gift cards.
Correct answer: A
A is correct because Regulation Z is an extension of Regulation M, which
clearly states that consumers need to know exactly what is being spelled to them in a disclosure agreement. This is particularly important when it comes to credit and the costs associated with it. This applies to home loans, home equity lines of credit, credit cards, installment loans, some student
loans, and reverse mortgages.
TILA applies to borrowers of home loans, credit cards, and cars, but
what about 75k student loans?
A. Yes.
B. No.
C. It depends.
Correct answer: C
C is the correct answer, as it does depend on some loans that TILA will
cover. You will be safely protected with a home loan, credit card purchases of up to 58K, a car, and some credit student loans. However, for most student loans, TILA will not apply to those lender-borrower relations.
What is the punishment for going against the TILA?
A. A fine of up to $5,000
B. Prison time of up to a year
C. A & B
D. A life ban from practicing as a lender.
Correct answer: C
C is correct because TILA penalties can be severe based on non-compliance and the accused’s awareness. A fine of no less than $1,000 could be used up to $5,000, and if appropriate, prison time may also be issued with or without a fine, no less than six months and up to a year. A loss of license or life ban may also be issued, but these would be in extreme cases.
What is NOT an example of TILA non-compliance?
A. A lender that offers clear disclosures to their clients.
B. A lender that doesn’t provide correct disclosure terms.
C. A lender that influences the appraiser’s judgement in the value of a property.
D. A lender that adds extra junk fees to the final mortgage total without disclosure.
Correct answer: A
A is correct, as this is not an example of TILA non-compliance. Instead, what we see is a lender following the law perfectly providing clear disclosures of their contracts, mortgage terms, and costs to their clients. B through D show common TILA violations where the lender is not disclosing information to their clients, using shady tactics to deceive their client for personal gain, and adding extra fees that aren’t clearly outlined. Under these
circumstances applicants can’t make the right choices about their loan commitments as they don’t know the complete picture of what they are committing to.
