The Federal Trade Commission’s (FTC) Truth in Lending Act (TILA) requires lenders to disclose the cost of credit to borrowers. This includes the finance charge, which is the total cost of credit expressed as a yearly rate, and any late fees that may be assessed for missed payments.
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What is the law?
The Truth in Lending Act (TILA) requires disclosure of finance charges and late fees for payment plans. TILA is a federal law that is enforced by the Consumer Financial Protection Bureau (CFPB).
What does the law require?
The law requires that finance charges and late fees be disclosed for payment plans. This information must be provided in writing before the consumer enters into the plan.
What are the consequences of not following the law?
Not following the law could result in a lawsuit or other legal action.
What are some best practices for disclosure?
There are different ways to make disclosures, depending on the type of information and the manner in which consumers will see it. For example, ad copy should be clear and conspicuous, while required mortgage disclosures may be buried in fine print. Placement is important—a notice on the back of a contract is not as noticeable as one on the front. Consistency is key—if a seller tells a consumer one thing verbally but the written terms say something different, that can create confusion.
When it comes to required finance charge and late fee disclosures for payment plans, best practices for disclosure include:
-Use short, simple sentences
-Use bullet points or other whitespace to break up text
-Bold or highlight key information
-Include any relevant charges in the total purchase price
-Specify when finance charges will begin to accrue
-Make it clear if there is a grace period for late payments
How can you make sure you’re in compliance?
The Federal Trade Commission’s (FTC) Payment Plans Rule requires disclosure of finance charges and late fees for payment plans. The Rule covers all types of companies that offer products or services on a delayed payment basis, including businesses that sell goods or services on credit, businesses that bill consumers periodically for services rendered, and companies that arrange for the extension of credit by others.
What should you do if you’re not in compliance?
There are a few key things to keep in mind if you’re not currently in compliance with the law. First, you should review your current practices and make sure that you’re disclosing all finance charges and late fees associated with payment plans. Second, you should train your staff on the requirements of the law so that they can properly inform customers of the fees associated with payment plans. Finally, you should consider implementing new policies and procedures to ensure that you’re in compliance going forward.
What are the potential risks of non-disclosure?
There are a few potential risks of not disclosing finance charges and late fees for payment plans. The first is that it could create an unfair market, as consumers would be unaware of the true cost of the product. This could lead to them paying more than they would have if they had been made aware of the finance charges up front. Additionally, it could lead to customers feeling misled or cheated, creating negative sentiment around the company. Finally, if customers do not feel like they can trust the company to be upfront about costs, they may be less likely to do business with them in the future.
What are the potential benefits of disclosure?
There are several potential benefits of disclosure for consumers who are considering entering into a payment plan. First, disclosure can help consumers compare the costs of different payment plans and choose the one that is best for them. Second, disclosure can help prevent consumers from being surprised by unexpected fees or charges. Finally, disclosure can help consumers avoid defaulting on their payment plan by understanding the consequences of missed payments.
How can you make disclosure work for you?
The Truth in Lending Act (TILA) requires creditors to give consumers accurate information about finance charges and late fees before they enter into a credit agreement. The Consumer Financial Protection Bureau (CFPB) enforces TILA.
You can use the following tips to make sure that you get the most accurate information about finance charges and late fees when you are shopping for a credit agreement:
– Read all materials provided to you carefully before you sign a credit agreement.
– Make sure that you understand all of the fees associated with the credit agreement, including any finance charges and late fees.
– Ask questions if you are unsure about any part of the credit agreement.
– Compare different offers from different creditors to find the one that is best for you.
If you have already entered into a credit agreement and think that your creditor may have violated TILA, you can file a complaint with the CFPB.
What’s the bottom line?
The Federal Truth in Lending Act (TILA) requires disclosure of finance charges and late fees for payment plans.