1. Chapter 12: The Loan and the Consumer
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2. TRUTH-IN-LENDING ACT
A federal law that requires
certain disclosures when
extending or advertising credit.
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3. REGULATION Z
Federal regulations that
implement the enforcement
of the Truth-in-Lending Act.
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4. REGULATION Z
 Truth-in-Lending Act
 Requires lender to show the borrower the cost of
the credit.
 Requirements include:
 Amount financed
 Finance charge
 Annual percentage rate
 Total payments
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5. APR
 Annual percentage rate combines
the interest rate with the other
costs of the loan into a single figure
that shows the true annual cost of
the loan.
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6. RIGHT TO RESCISSION
 Borrower’s right to cancel a credit
transaction.
Three business days after signing to back
out.
 Includes Saturdays.
Does not apply to credit used for the
acquisition or initial construction of your
principal dwelling.
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7. Triggering Items and Disclosures
Mention these Triggers disclosure
• Down payment
• Any payment
• Number of payments
• Period of payments
• Amount of any finance charge,
or statement: no charge for
credit
• Cash price or the amount
of the loan
• Down payment (or none)
• Number, amount,
frequency of payments
• Annual percentage rate (APR)
• Deferred payment price
or total payments
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8. Loan Process
Lenders Qualify:
• Borrower
• Property
• Title
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9. REDLINING
 Refusing to make loans in cer tain areas.
No
Loans!
$ $
$
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10. CREDIT REPORT
 Provides lender with independent means of checking
borrower’s credit histor y.
 Fair Credit Reporting Act – consumer right to their
file at credit bureau.
 Credit Scoring – method used today to evaluate
credit risk.
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11. PREDATORY LENDING AND MORTGAGE
 The Fl ip
 The Old Switch
 T h e C o n t r a c to r ’ s S c h eme
 The Ultimate Lie
 The Innocent Investor
 Trust Me
 Identify Thief
 Fake Check/Fast Closing
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FRAUD

12. KEY TERMS
APR
Credit report
Fair Credit
Reporting Act
Finance charge
Liquid asset
Redlining
Regulation Z
Truth-in-Lending Act
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