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

Responses

No, adding any kind fee is deceptive and illegal.

Yes, consumers expect that there will be installment fees.

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

Yes, as long as the customer is informed of all fees, the business has done its duty.

Answer 1

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

Under the Truth in Lending Act (TILA), creditors are required to provide consumers with clear and written information regarding the terms and conditions of credit, including any fees. While informing customers verbally about the $200 installment fee is a positive step, failing to provide this information in writing does not comply with TILA requirements.