Nationwide Mortgage Licensing System (NMLS) Practice Exam

Which act ensures consumers receive important loan cost information?

1. Truth-in-Lending Act

2. Equal Credit Opportunity Act

3. Real Estate Settlement Procedures Act

4. Fair Housing Act

The correct answer is: Truth-in-Lending Act

The Truth-in-Lending Act (TILA) is the legislation that ensures consumers receive essential information regarding the costs associated with borrowing, particularly those concerning loans. This act mandates clear disclosure of the terms and costs of a loan, including the annual percentage rate (APR), finance charges, amount financed, and the total payment amount over the life of the loan. The primary purpose is to promote informed use of credit by requiring lenders to present this information in a standardized format, making it easier for consumers to understand the financial implications of their borrowing decisions. By providing transparency regarding loan costs, the Truth-in-Lending Act helps consumers make better-informed choices and compare different credit offers more effectively. This not only fosters greater awareness of credit costs but also protects consumers from deceptive lending practices. While other acts provide important protections in related areas, such as fair lending practices or disclosure of settlement costs, the primary focus of the Truth-in-Lending Act is centered on informing consumers specifically about loan-related costs.