The Truth in Lending Act (TILA) was enacted on May 29, 1968, as Title I of the Consumer Credit Protection Act, and it focuses on the uniform disclosure of credit terms so that you can compare and shop for the credit terms available to you. Congress enacted TILA because it found that “economic stabilization would be enhanced and the competition among the various financial institutions and other firms engaged in the extension of consumer credit would be strengthened by the informed use of credit.” 15 U.S.C. § 1601(a). TILA is generally seen as a body of law that protects the consumer.
The core of TILA is the requirement of disclosure, which helps you compare and shop for loans. Regulation Z, which implements TILA, is organized into subparts and is now codified by the Consumer Financial Protection Bureau at 12 C.F.R. Part 1026. (Rulemaking authority moved from the Federal Reserve Board to the CFPB under the Dodd-Frank Act, which is why older citations point to the superseded 12 C.F.R. Part 226.) Subpart B addresses open-end credit, such as revolving credit lines and credit card accounts. Subpart C addresses closed-end credit. Subpart D contains rules on oral disclosures. Subpart E sets out special rules for certain home mortgage transactions.
Some of the key terms under TILA are the annual percentage rate (APR), consumer credit, and the finance charge. The APR is a federally standardized measure of the total cost of consumer credit, expressed as a yearly rate. It reflects the finance charges you pay, not merely the interest rate, and it must be calculated under a uniform methodology and disclosed under Regulation Z. 15 U.S.C. § 1606(a). For closed-end credit, the APR is determined under either the actuarial method or the United States Rule method. 12 C.F.R. § 1026.22(a)(1). For open-end credit, the APR is determined by multiplying each periodic rate by the number of periods in a year. 12 C.F.R. § 1026.14(b). Consumer credit is credit offered or extended to a consumer primarily for personal, family, or household purposes. 12 C.F.R. § 1026.2(a)(12). The finance charge is the cost of consumer credit as a dollar amount: any charge you pay, directly or indirectly, that the creditor imposes as an incident to or a condition of extending credit. 12 C.F.R. § 1026.4(a); 15 U.S.C. § 1605(a).
TILA distinguishes among the amount financed (the credit of which you have actual use, such as the loan principal), the finance charge (the total cost of credit), and interest, which is one component of the finance charge. 15 U.S.C. § 1638(a)(2)-(3); 15 U.S.C. § 1605(a). Because TILA focuses on disclosures for consumers, those requirements do not apply to several categories of credit: loans extended primarily for business, commercial, or agricultural purposes (15 U.S.C. § 1603(1)); transactions in securities or commodities accounts handled by a broker-dealer registered with the SEC (15 U.S.C. § 1603(2)); and consumer credit not secured by real property or your principal dwelling in which the amount financed exceeds a high-dollar threshold (15 U.S.C. § 1603(3)). That threshold is no longer the $25,000 figure many older summaries cite. The Dodd-Frank Act raised it to $50,000 in 2010 and required the CFPB to adjust it each year for inflation, so the operative figure is $73,400 effective January 1, 2026 (up from $71,900 in 2025). 12 C.F.R. § 1026.3(b). Private education loans remain covered regardless of amount.
Damages and Remedies under TILA
If a creditor fails to comply with TILA, it can be liable for actual damages or statutory damages. 15 U.S.C. § 1640(a)(1)-(2). Not all TILA violations trigger statutory damages: those fixed amounts attach only to an enumerated subset of disclosure requirements, so a person who suffered no actual damages and whose violation is not on that list may have no recoverable remedy under TILA. 15 U.S.C. § 1640(a).
A point that older summaries often get wrong: detrimental reliance is required only to recover actual damages. The statute makes a creditor liable for “any actual damage sustained by such person as a result of the failure” to disclose, and courts read that causal language to require that you relied to your detriment on the inaccurate or missing disclosure. 15 U.S.C. § 1640(a)(1). Statutory damages, by contrast, are triggered by a creditor’s failure “to comply with any requirement” and carry no such causation language, so they require no showing of reliance or actual injury. 15 U.S.C. § 1640(a)(2).
TILA also caps statutory damages, and the cap depends on the type of claim. In an individual action the limit is generally twice the finance charge (a consumer lease instead uses 25 percent of the total monthly lease payments), with floors and ceilings that vary by transaction: $200 to $2,000 for a consumer lease, $500 to $5,000 for an open-end plan not secured by real property or a dwelling, and $400 to $4,000 for a transaction secured by real property or a dwelling. In a class action, total recovery for the same failure by the same creditor cannot exceed the lesser of $1,000,000 or one percent of the creditor’s net worth. 15 U.S.C. § 1640(a)(2). (The Dodd-Frank Act raised the class-action cap from $500,000 to $1,000,000, so any source quoting the older figure is outdated.)
Rescission is also available as a remedy under TILA for certain consumer credit transactions secured by your principal dwelling. Exercising the right of rescission voids the creditor’s security interest and unwinds the transaction: the creditor returns the money or property it received and terminates its security interest, while you tender back the loan proceeds, restoring both parties to their pre-loan positions. The right generally runs for three business days after the loan closes or the required disclosures are delivered. 15 U.S.C. § 1635(a)-(b). When the required material disclosures are never delivered, the right of rescission expires three years after consummation of the transaction (or upon sale of the property, whichever occurs first). 15 U.S.C. § 1635(f).
Punitive damages are not available under TILA. The statute limits a creditor’s liability to actual damages, statutory damages, and the costs of the action plus a reasonable attorney’s fee, and it makes no provision for punitive damages. 15 U.S.C. § 1640(a). Courts have consistently held that punitive damages are not recoverable under TILA. (Punitive damages may sometimes be available on a separately pleaded state-law claim, but not under TILA itself.)
