The truth in lending act Research Paper Example | Topics and Well Written Essays - 1500 words

The truth in lending act - Research Paper Example Over the passage of time, lenders including the banks looked for and retrieved different kinds of exceptions that put them in a position where they could charge the consumers the fees that were not part of the APR or were not disclosed through the APR to the consumers. The egregiousness of this practice can be estimated from the fact that a lender in the case between NCAS of Delaware and the Pennsylvania Department of Banking could legally claim a certain percentage of the APR while the actual percentage of the cost of loan was considerably higher. An in-depth analysis of the TILA suggests that it has failed as an act to provide the Americans with protection against the deceptive lending practices. Case Study: Pennsylvania Department of Banking v. NCAS of Delaware This case started in Pennsylvania’s Commonwealth Court. The opinion of the trial court was taken on 31 July 2007. The opinion of the trial court did not follow a bench trial and included a decision over the pretrial motions of the defendant and the plaintiff. The plaintiff had moved for an injunction and summary judgment thus requiring the defendant to desist while the defendant decided to go for the summary judgment. On 20 March 2008, Pennsylvania’s Supreme Court gave its decision over the case between Pennsylvania Department of Banking and the NCAS of Delaware. This case includes a payday loans lender. Payday loans can be defined as short term loans that are given usually in small amounts but the interest rates charged on them are substantially high. In this case, the APR advertised by the lender was 5.98 per cent that was indeed, the loan’s APR’s accurate calculation by law (McGingley, 2013). Although this was a low rate and was reasonable, the company added an additional monthly participation fee to the rate worth $149.50 on monthly basis. Although this fee of participation does not have to be included in the APR’s calculation, yet the usury law of Pennsylvaniaâ €™s Section 3A prohibits such forms from charging fees that sum up to over 6 per cent. Nevertheless, the true borrowing cost in this case was nearly 368 per cent. Analysis and discussion The finance charge’s centrality imparts the need for accurate reflection of the loan’s true total cost by this amount. It is important that all lenders uniformly calculate this amount so that the fundamental objective of the TILA of offering a simple method of drawing a comparison between the loan costs to the consumers can be achieved. Unfortunately, however, the integrity of the APR and the finance charge has been challenged in the USA. Paradoxically, certain provisions within the TILA have played a role in challenging the integrity of the finance charge and the APR, though the actions of the Federal Reserve Board also contributed to the weakening of the system. The TILA provides for the exceptions by a limited number; excluded charges which may not necessarily be disclosed or ma de part of the stated charge of finance. This is inclusive of the fees for the preparation of documents, carrying out the surveys of property, appraisals, escrow and notary fees, insurance, and credit reports. The TILA authorized the Federal Reserve Board to develop more exceptions as it deems necessary in order to effectuate the TILA’s purposes. The Regulation Z issued by the Federal Reser