TILA Disclosures: What is Your Responsibility?

TILA Disclosures: What is Your Responsibility?

According to Regulation Z, through which the Federal Reserve Board implements the Truth in Lending Act (TILA), a creditor in a closed-end credit transaction must provide the consumer with TILA disclosures before consummation of the transaction and in a form that the consumer may keep. How can dealer-creditors meet these requirements when the disclosures are printed on the same form as the credit contract, and typically the consumerês first opportunity to review them coincides with his first opportunity to review the credit terms? The consumer receives a copy of the document only after it is executed.

In view of the apparent contradiction, as well as court cases alleging that dealer-creditors violated Regulation Z by failing to give consumers an unsigned copy of the TILA disclosures to keep before signing the credit contract, NADA requested that the FED clarify the timing requirements for dealer-creditor disclosures under Regulation Z. On April 9, 2002, that clarification was issued and is summarized as follows:

1) Give consumers a copy of the unsigned credit contract with TILA disclosures and ensure they have a meaningful opportunity to review the document before signing it. Allow consumers to take possession of the document and to review it in its entirety.

2) Allow consumers to keep the document if they do not sign it when it is first given to them. If the consumer wants to leave the dealership before signing the document, you must allow him or her to exit with the document. In this case, you are not required to keep the offer of credit open unless obligated by state law or the facts.

3) Give consumers who do sign the credit contract with TILA disclosures a copy of the document immediately after they sign it.

The FED has clarified that dealer-creditors do not have to give consumers two copies of the unsigned combined credit contract with TILA disclosures in order to satisfy the Truth in Lending Act and Regulation Z.

Dealer-creditors should consult their attorneys with any questions regarding compliance, and they should review dealership credit disclosure procedures with their employees to ensure compliance with federal requirements.

The above information was excerpted from NADA Management Bulletin L.40, Clarification of the Timing Requirements for Truth in Lending Act Disclosures. Dealer members can order this bulletin at a nominal cost from the National Automobile Dealers Association (NADA) by calling 800-252-6232, ext. 2 or 703-821-7227.