Massachusetts Real Estate License Practice Test

Which law ensures that borrowers receive information about credit costs before entering into a transaction?

1. Truth in Lending Act

2. Fair Housing Act

3. Regulation Z

4. Equal Credit Opportunity Act

The correct answer is: Truth in Lending Act

The Truth in Lending Act is the law that ensures borrowers receive clear and comprehensive information about the costs associated with credit before entering into a transaction. This law was enacted to promote informed use of consumer credit by requiring disclosures about its terms and costs. Key aspects include providing borrowers with a standard, clear summary of the costs, including the annual percentage rate (APR) and total finance charges, allowing them to understand the actual cost of borrowing. While Regulation Z is related to the Truth in Lending Act and implements its requirements, it is not the law itself but rather the regulation that enforces the provisions of the Act. The Fair Housing Act and the Equal Credit Opportunity Act focus on preventing discrimination in housing and lending practices rather than specifically addressing disclosure of credit costs.