Tila Disclosure: Fill & Download for Free

The Truth in Lending Act (TILA) requires lenders to disclose important information to borrowers about the cost of a loan before the borrower agrees to the loan. For example, TILA disclosures are required on all car loans and mortgages for houses.

You mean a disposition fee.A standard clause reads like this:EARLY TERMINATION LIABILITY: At any time after 12 monthly lease payments have been paid, you may terminate this Lease on the due date of a monthly lease payment if this Lease is not in default. At any time after you sign this Lease, Lessor may terminate if the Lease is in default as stated in Item 23 or if the conditions stated in Item 16 occur. You agree that your payment liability upon early termination will be the sum of (a) any monthly lease payments already due and unpaid and any other amounts owed arising from your failure to keep promises under this Lease; plus (b) any official fees and taxes imposed in connection with the termination; plus (c) the amount, if any, by which the then adjusted lease balance exceeds the realized value of the vehicle at early termination; plus (d) if you do not purchase the vehicle, a disposition fee of $400.Ostensibly it is a fee to clean the vehicle and prepare it for subsequent sale or lease. In actuality it is an incentive penalty to encourage a consumer to purchase a devalued vehicle at the end of lease when maintenance costs are about to increase.Whether these clauses are enforceable or not concerns the jurisdiction where you live and several consumer laws such as the truth in lending act TILA. Disclosure is usually the key to liability.

The Annual Percentage Rate (APR) is a part of “Regulation Z,” which was one component of the Truth In Lending Act (TILA) of 1968. It requires lenders to disclose the actual cost of any credit they offer.Reg Z’s intent was to give consumers a way to compare different loan offers in an objective way. It does this—theoretically—by means of the APR disclosure. In practice, few people understand what APR means or how the lender calculates it, so it is not as useful as one might hope.The Annual Percentage Rate takes into account not only the interest rate of the promissory note, but also any additional charges in the loan program, all spread out over the loan’s complete term. These other fees, such as discount points and underwriting fees for mortgages, are called prepaid finance charges (PFC). Subtracting these charges from the loan amount gives the amount financed on a TILA disclosure. This is the amount the borrower actually receives after the fees have been accounted for.Here is the best way to view this often-confusing process. Let’s say I offer to lend you $1,000 for a year. I’ll charge you 12% interest, which you’ll pay me along with the principal in a year. Your payoff amount will be $1,120. The note rate is 12%. We can check this by dividing the $120 interest by the principal of $1,000 to come up with .12, or 12%.Then I tell you I’m going to charge you a 10% “handling fee” for the loan. You’ll only get $900, but you’ll pay me back the entire $1,000 plus the $120 interest in a year. Now, when we calculate the real interest rate, the APR, we divide the $120 interest by the $900 you actually received. That is the APR—and it is quite a bit higher: 13.33%.For a mortgage, the PFCs include the following:Discount points (if any)Processing feesUnderwriting feesEscrow feesMortgage insuranceThe APR is of limited usefulness to consumers in spite of its noble intent. This is because few consumers understand what they are looking at. You understand it, though, gentle reader, but you are in the minority of consumers.The APR is useful when evaluating lenders’ advertisements in that a big difference between the “note rate” and the APR. If a mortgage lender offers a rate of, say, 4%, for a 30-year mortgage, they’d get a lot of attention because that rate today (March, 2019) is unusually low. But they can offer that rate only by charging discount points—1.5% of the loan. For a $300,000 loan, that would be $4,500. That figure, plus another $3,000 in underwriting, processing and other PFCs means that the amount financed would actually be $292,500. The APR would be 4.21%.Because there are almost always PFCs on loans, the APR will typically be higher than the note rate. But if you see a large difference between the quoted rate and the APR, you’ll be alerted that there are additional fees to take into account.I hope this is helpful and not too confusing!