Florida Broker Practice Exam

What key information does the Truth in Lending Act require lenders to disclose?

1. The applicant's credit history

2. The annual percentage rate (APR) and all costs associated with credit

3. The total income of the borrower

4. The lender’s business history

The correct answer is: The annual percentage rate (APR) and all costs associated with credit

The Truth in Lending Act (TILA) is designed to promote informed consumer credit decision-making by requiring lenders to provide clear and comprehensive disclosures about the terms and conditions of credit. The act specifically mandates that lenders disclose the annual percentage rate (APR) as well as all associated costs of the credit. This ensures that borrowers can understand the true cost of borrowing, allowing them to compare different credit offers effectively and make informed financial decisions. The APR is a standardized way to express the cost of borrowing over a year, taking into account not only the interest rate but also any associated fees or costs, providing a more holistic view of what the borrower will pay. By requiring this disclosure, TILA helps prevent lenders from using complicated terms or hidden fees that could mislead borrowers about the total cost of a loan. While the other options may provide relevant information, they are not mandated disclosures under TILA. For instance, disclosing an applicant's credit history can be valuable, but it is not a requirement to comply with TILA. Similarly, revealing a borrower's total income or the lender’s business history is not part of the essential disclosures aimed at enabling consumers to understand loan terms. Thus, the focus on the APR and all costs associated with credit is the cornerstone of