A business regularly extends credit to customers for large purchases with a standard interest rate of 5 percent. There is also a $200 installment fee that is added to the total cost of the purchase. The sales people are required to tell customers about this fee before adding it to the bill, but it is not in writing. Does this comply with the Truth in Lending Act?

Question

A business regularly extends credit to customers for large purchases with a standard interest rate of 5 percent. There is also a $200 installment fee that is added to the total cost of the purchase. The sales people are required to tell customers about this fee before adding it to the bill, but it is not in writing. Does this comply with the Truth in Lending Act?

A.No, adding any kind fee is deceptive and illegal.
B.No, all details of the terms of credit must be documented in writing.
C.Yes, consumers expect that there will be installment fees.
D.Yes, as long as the customer is informed of all fees, the business has done its duty.

Answer 1

B. No, all details of the terms of credit must be documented in writing.

The Truth in Lending Act requires all terms and conditions of credit, including fees, to be clearly disclosed in writing to consumers. It is not sufficient for the sales people to verbally inform customers about the installment fee. Failure to provide written documentation of all terms could be considered a violation of the Truth in Lending Act.