Florida Broker Practice Exam

What is the main function of the Truth in Lending Act concerning consumer credit?

1. To prevent identity theft

2. To ensure accurate reporting of credit scores

3. To disclose the costs associated with taking loans

4. To regulate bank interest rates

The correct answer is: To disclose the costs associated with taking loans

The primary function of the Truth in Lending Act is to ensure consumers are adequately informed about the costs associated with borrowing money. This federal law requires lenders to provide clear and comprehensible disclosures regarding the terms and conditions of consumer credit. These disclosures include the annual percentage rate (APR), financing charges, and other related costs. By mandating these specific disclosures, the act aims to promote informed decision-making by consumers when they evaluate different credit options, ultimately fostering transparency in lending practices. The act does not explicitly focus on preventing identity theft, ensuring accurate credit score reporting, or regulating bank interest rates, as these are governed by different laws and regulations. Thus, the emphasis on providing clear disclosures about the costs of loans highlights the act's role in consumer protection and education related to credit transactions.