What does the Truth in Lending Act (Regulation Z) require lenders to do?

The Truth in Lending Act (TILA), implemented through Regulation Z, mandates that lenders disclose the true costs of credit to borrowers, primarily through the Annual Percentage Rate (APR). The APR represents the total yearly cost of borrowing expressed as a percentage, which includes not just the interest rate, but also any fees and additional costs involved in obtaining the loan. This requirement ensures that consumers can compare different lending offers in a standardized manner, aiding them in making informed borrowing decisions. By highlighting the actual cost of credit over the term of the loan, borrowers gain a clearer understanding of their financial obligations and the long-term implications of the loan. This transparency is a cornerstone of the Act's intent to promote fair lending practices and protect consumers from misleading credit terms.

The other options involve aspects of lending that are not mandated by TILA. For instance, while providing a credit score might be helpful for lenders and borrowers alike, it's not a requirement under Regulation Z. Additionally, the Act does not limit lenders to offering fixed-rate mortgages, nor does it require an assessment of a buyer’s ability to repay loans; these are governed by other regulations and lender policies.