What is the purpose of Regulation Z, also known as Truth in Lending?

Regulation Z, commonly known as the Truth in Lending Act (TILA), was established to ensure that consumers receive clear and accurate information regarding the costs associated with credit. The primary purpose of Regulation Z is to promote informed use of consumer credit by requiring lenders to disclose important terms and costs associated with borrowing, including interest rates, annual percentage rates (APRs), and any additional fees. This allows consumers to make better-informed decisions when comparing different credit offers.

By mandating that this information be presented clearly and concisely, Regulation Z helps to enhance transparency in lending practices, ultimately protecting consumers from misleading information. The emphasis on full disclosure is critical, as it allows individuals to ascertain the true cost of credit and understand their financial obligations before entering into loans or credit agreements.