Which scenario best describes the scope of TILA compliance?

Which scenario best describes the scope of TILA compliance?

• A. Businesses that regularly extend consumer credit for personal or family use with installment payments and finance charges.
• B. Businesses that only provide goods on credit to other businesses
• C. Public utilities offering services with no financing
• D. Any loan made by a government agency

Answer: (A)

Truth in Lending Act disclosures apply to consumer credit transactions—when a creditor regularly extends credit to a consumer for personal, family, or household use and the financing involves installments and finance charges. In this scenario, a business that regularly provides consumer credit to individuals for personal use with installment payments and finance charges creates a typical consumer loan relationship covered by TILA, since the credit is extended to people for personal use and includes financing terms that require disclosures. The other scenarios aren’t consumer credit: extending credit to other businesses is business-to-business credit, which TILA doesn’t cover; public utilities with no financing aren’t providing a financed loan; and loans from a government agency are generally exempt from TILA.

Truth in Lending Act disclosures apply to consumer credit transactions—when a creditor regularly extends credit to a consumer for personal, family, or household use and the financing involves installments and finance charges. In this scenario, a business that regularly provides consumer credit to individuals for personal use with installment payments and finance charges creates a typical consumer loan relationship covered by TILA, since the credit is extended to people for personal use and includes financing terms that require disclosures.

The other scenarios aren’t consumer credit: extending credit to other businesses is business-to-business credit, which TILA doesn’t cover; public utilities with no financing aren’t providing a financed loan; and loans from a government agency are generally exempt from TILA.