truth in lending

Definition

Legislation passed in some countries, such as the Home Mortgage Disclosure Act of 1968 and Consumer Credit Protection Act of 1969 in the US. Under these laws a lender must, clearly and conspicuously, reveal all the key details of a home mortgage or consumer loan before the borrower signs the loan agreement. These details include (1) disclosure of finance charges, (2) how these charges are computed, (3) under which conditions these charges are imposed, and (4) total of these charges expressed as a percentage of the annual percentage rate (APR). Borrowers who mortgage their dwelling house as a collateral are generally allowed a cooling off period (usually three days) to rethink the implications of the loan agreement and to cancel it if they so decide.