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The Truth in Lending Law
Credit can be a valuable tool, ii handled with care, however, il costs money. It is just as wise foi us to shop for the credit we use ai for the product or service we buy
To help the situation, The Truth In Lending Law becam< effective on July 1, 1969. If yoi use credit for anything froir charge accounts to home mortgage, the law concerns yoi and your money.
Since the law has become effective, we are told by the lenders what consumers’ loar costs.
Here are the main points in th< law which you shoulc understand:
The law requires that all costs terms and conditions of credit transactions shall be stated anc expressed in the same terms by everybody.
When you borrow or apply foi credit, you must be told the exact cost of credit - clearly and in writing - on the credit agreement itself, or on an attached sheet.
Then it is your responsibility:
to read,
to compare costs of one lender with another and to keep the information for future use.
You are told this when you receive the credit. After this, the information on interest and how it is figured is usually shown only as “periodic rate”. The two most helpful items of required information are the finance charge and the annual percentage rate. The finance charge is the total of all charges you will pay for the credit, expressed ip dollars and cents. 'It^ticlodes:'1 Interest and interest rate, the add on charges, such as loan fees, differences between cash price and price when bought on credit,; investigation fees and similar charges which are directly related to the credit. The annual percentage rate is the amount of finance charge expressed as an annual rate. For example, the familiar 11-2% rate on revolving charge accounts must now be expressed as 1V4% per month of the unpaid balance and an annual percentage rate of 18%. The rate maybe expressed as $18.00 finance charge per yeai per $100 of unpaid balance. This ANNUAL PERCENTAGE RATE WILL BECOME THE UNIFORM YARDSTICK BY WHICH YOU
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