The Final Act – Truth in Lending
Dealership Owner: What is the Truth in Lending Act? Steven keeps talking about it but I don’t understand.
General Manager: I think it is the reason we have to put that box on the retail installment sales contract notifying the customer of how much they’re borrowing and the cost of the loan.
Owner: Oh, that makes sense. But there must be more to it.
General Manager: I’m pretty sure there is. Let’s check out Steven’s video on it to learn more.
Below is a transcript of the video:
Next, we’re going to talk briefly about the Truth in Lending Act, TILA, and the Truth in Lending Disclosures. If you’ve ever seen a retail installment sales contract, you’ve seen a Truth in Lending “box.” That’s that box in the retail installment sales contract that states the sale price, the amount financed, the interest rate, the cost of the financing, the amount of interest that’s being paid over the loan, it usually has the payment schedule below, and what’s necessary to pay off the car.
That’s all in that Truth in Lending box in a retail installment sales contract. The Truth in Lending Act governs that. Another interesting little tidbit that a lot of dealers run into is called Regulation Z of the Truth in Lending Act, and that’s the big regulation that governs the car dealer, specifically the car sales, le
nding, and secured interests in lending. One of the major things that I see fairly regularly in my practice are dealers who charge a different price on a vehicle based on credit versus cash. That is illegal. That is not allowed. That is prohibited by the Truth in Lending Act. It may also be prohibited by State laws and other things, but it’s certainly prohibited by the Truth in Lending Act.
What that means is that a customer that comes in wanting to buy a car with cash has to be given the same price as a customer wanting to buy a car on credit. Now, of course, interest rates change. The amount that’s paid over the course of the loan is different because the credit consumer pays interest. So this does not mean the total amount of the loan has to be the same, but what it means is on the bill of sale, the price of the car must be the same. Sometimes the State will actually send in a secret shopper to negotiate or to find out the price and the secret shopper will be a cash shopper, and we’ll get a cash price of $19,995. Then another secret shopper will come a day later on credit, and it’s $21,995. That’s $2,000 more for the consumer to buy it on credit than it is for the consumer to pay with cash.
That is a violation. So the Truth in Lending not only does it govern some of the documentation and what must be in the document, but it does other things like credit disclosures and also that the cash price must be the same as a credit price for a vehicle.
For more videos on the Georgia Car Law Authority series, please visit www.georgiacarlaw.com.
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