What is a principal purpose of TILA?

The principal purpose of the Truth in Lending Act (TILA) is to promote informed use of consumer credit. TILA was established to ensure that consumers are provided with clear and understandable information about the terms and costs associated with credit. This allows individuals to compare different credit options, understand their financial obligations, and make educated decisions regarding their borrowing. By requiring lenders to disclose important information such as the annual percentage rate (APR), terms of repayment, and the total cost of credit, TILA facilitates transparency in lending practices, which ultimately empowers consumers in their financial choices. This focus on informing consumers is essential in helping them recognize their rights and the implications of their financial decisions.

Contextualizing the other options, enforcing strict penalties on advertisers does not align with TILA’s objectives, nor does it aim to reduce the overall cost of credit or eliminate credit-based purchasing. Instead, it seeks to encourage responsible borrowing while ensuring that consumers are well-informed about their credit options.