After several years of legislative study, research and struggle, the United States Congress and President Lyndon B. London agreed and signed the Consumer Credit Protection Act (CCPA). Truth in Lending Act (Title I) was a part of the CCPA. After the enactment of the law, this act was considered to be a milestone in legislation. The Truth in Lending Act marked the origin of the contemporary legislative activism.
However, several States have already enacted TILA or other kinds of consumer credit disclosure laws accordingly based on their preferences. Chiefly, known as a disclosure statute, TILA was passed to make things easier and clearer for consumers obtaining credit. Under the act, the lenders are forced to disclose every single detail involved with the credit, especially the entire cost of the credit. More so, the documents holding the disclosure must be clearly presented in a standardized format.
Anyone violating the act has to face civil suit in connection to statutory fees, actual damages, and attorney. A lender might have to go to jail as well. Along with the mentioned disclosure of credit terms, TILA has several provisions directed to offer substantial consumer protection. In regard to the protections, the most significant move was the enacting of the “Right of Rescission”. Here, the consumer got the right to cancel the loan within three extra days of transaction and get away with no financial loss.
After the enactment of this law, several consumer lawyers made extensive use of it, and finally they were very successful. The creditors who otherwise collected a lot of sum with unfair practices were now facing setbacks.
A further simplification of TILA was drawn on March 31st, 1980 when the Depository Institutions Deregulation and Monetary Control Act was signed by U.S. President Jimmy Carter. This act included the TILA as well. The changes brought in read the new law as “new Truth in Lending Act”. The manual clearly stated the differences between the “new TILA” and the “old TILA”. After the amendment, any reference to the Act was deemed to be made to the post-Simplification law. The revised Act allowed the disclosure of only certain information, which is deemed useful to the consumer credit decision. Thus, the new Act rejected the full disclosure of all terms.
The radical change or rather the “simplification” in the Truth in Lending Act was brought in after the 10 successive years of the original act. According to a research done by the Federal Reserve Board (FRB), a disclosure of the true cost of credit and the annual percentage rates (APRs) proved very beneficial to consumers. However, on the part of creditors, the Act brought in many difficulties since they found it rather tough to keep abreast of the changing administrative amendments and interpretations.
Even though, several creditors tried to comply with the Act, due to the existing complexities they often violated it unknowingly and faced litigation. Consumer advocates also recognized the complexities in the technical terms and agreed that the disclosures must be made more comprehensive and legible.
The next major amendment was enacted in 1988, in connection to marketing practices and consumer credit products. At that time, the consumer market was flooded with credit cards. As the interest rates in the market went up, the credit card interest rates soared as well. However, while the general interest rates came down, the interest rates of credit cards remained the same. The consumers had no idea about the interest rates of their credit cards, and therefore, they faced lots of problems. According to the new amendments, the credit card companies have to disclose the interest rates to the consumers when issuing the credit cards.
After the consumer-oriented amendments of 1988 and 1994, the next amendment came in 1995. In the new amendment, a blend of forces led to the dramatic increase of home equity lending. However, some of the changes caused complexities for both consumers and creditors.
Since the companies often used middlemen to conclude the loan agreements, their fees were passed on without factoring them into the cost of credit. After the Steele case in 1986 and the Rodash case took place, which considerably affected the TILA. A significant fall in the mortgage interest during the early 1990s brought in several cases of refinancing, where no right to cancel or ‘rescind’ was given to the consumer. However, special treatment was given to cases where rescission was raised as a protection against susceptible foreclosure.