Running a financial institution can be lucrative, but it also means complying with the law. If a bank or credit union does not disclose important information to its potential borrowers, it could be violating the law. As a result, it is wise for any banking institution in New Jersey to ensure that it understands the rules and finance-related regulations to follow while operating.
One important law to follow is the Truth in Lending Act. Through the stipulations in this law, banks and other lenders have an obligation to provide information regarding loan terms and rates using a uniform system. This system can more easily allow potential borrowers to compare terms and rates of various financial institutions before deciding from which to obtain a loan or other line of credit.
The law works to protect borrowers and keep lenders from falling into deceptive practices by utilizing the following regulations:
- The act prohibits lenders from using predatory strategies to take advantage of borrowers, such as by restricting the ways a lender can change the loan terms after approval.
- The act prevents lenders from choosing to end a loan before its agreed-upon end date.
- Lenders also have the obligation of displaying common loan or credit information in a clearly visible way, such as the information table, or Schumer box, commonly found in credit card agreement documents.
The Truth in Lending Act can help everyone involved in a loan or credit transaction ensure that it is a favorable arrangement. Because financial institutions in New Jersey need to stay compliant with this and other finance-related regulations, it is wise to gain information on how to follow these laws. Owners of these institutions may find it worthwhile to go over their legal obligations with attorneys experienced in banking law to feel confident that they have the right information and assistance.