From which type of entity must a loan be obtained for TILA to apply?

From which type of entity must a loan be obtained for TILA to apply?

• A. Any private lender
• B. A registered non-profit organization
• C. A creditor
• D. A financial institution only

Answer: (C)

The Truth in Lending Act (TILA) is designed to protect consumers in their dealings with lenders and creditors by requiring clear disclosure of the terms of loans so that borrowers can make informed decisions. TILA applies specifically to creditors, which are defined as those who extend credit that is subject to a finance charge or who offers credit in installments. When a loan is obtained from a creditor, TILA mandates certain disclosures that must be provided to the borrower, such as the annual percentage rate (APR), finance charges, and the total amount to be financed. This is crucial for ensuring that borrowers are fully aware of the costs associated with the credit they are receiving. In contrast, loans obtained from private lenders or non-profit organizations might not fall under TILA if they do not meet the statutory definition of a creditor. Furthermore, while financial institutions often are creditors, TILA's application hinges on the act of extending credit, not exclusively the type of lending institution. Therefore, the correct response identifies the specific entity type relevant to TILA's guidelines, emphasizing the importance of creditor status in the lending process.

The Truth in Lending Act (TILA) is designed to protect consumers in their dealings with lenders and creditors by requiring clear disclosure of the terms of loans so that borrowers can make informed decisions. TILA applies specifically to creditors, which are defined as those who extend credit that is subject to a finance charge or who offers credit in installments.

When a loan is obtained from a creditor, TILA mandates certain disclosures that must be provided to the borrower, such as the annual percentage rate (APR), finance charges, and the total amount to be financed. This is crucial for ensuring that borrowers are fully aware of the costs associated with the credit they are receiving.

In contrast, loans obtained from private lenders or non-profit organizations might not fall under TILA if they do not meet the statutory definition of a creditor. Furthermore, while financial institutions often are creditors, TILA's application hinges on the act of extending credit, not exclusively the type of lending institution. Therefore, the correct response identifies the specific entity type relevant to TILA's guidelines, emphasizing the importance of creditor status in the lending process.