TILA Compliance Requirements: Disclosures, Rescission, and Penalties

Truth in Lending Act compliance requirements come down to this: a lender extending consumer credit must disclose the real cost of the loan in writing before the borrower signs, follow specific timing and format rules for mortgages, credit cards, and advertising, honor the borrower’s rescission and dispute rights, keep records proving each step, and accept civil, class-action, or criminal liability for failures.¹ The rules sit in Regulation Z, and most compliance disputes turn on whether the right numbers reached the right borrower on the right day.

Who Has to Comply

TILA covers any person or business that regularly extends credit to consumers when two things are true: the credit carries a finance charge or is payable in more than four installments under a written agreement, and the borrower is using it for personal, family, or household purposes.² Business loans, commercial lines, and credit to corporations fall outside the statute entirely.

The “creditor” is the party to whom the debt is initially payable, so a mortgage broker who originates loans and immediately assigns them still counts if the regularity threshold is met.³ Anyone who originates two or more high-cost mortgages in a twelve-month period, or even one through a broker, qualifies.

The Core Disclosures Every Consumer Loan Needs

Before the consumer commits, the creditor must deliver four figures in writing, in a form the borrower can keep.⁴

Amount financed: the net credit actually delivered to the borrower, calculated by taking the principal, subtracting any down payment, then subtracting any prepaid finance charges.⁵
Finance charge: the total dollar cost of borrowing, including interest, service charges, and lender-required insurance premiums. Charges that would apply equally to cash and credit customers, like taxes, license fees, and title charges, are excluded.⁶
Total of payments: amount financed plus finance charge.
Annual percentage rate: the cost of credit as a yearly rate. For a standard loan, the disclosed APR must be accurate within one-eighth of one percentage point. Irregular transactions involving multiple advances or uneven payments get a wider tolerance of one-quarter of a percentage point.⁷

Get any of these wrong, and the file is already in violation before the loan funds.

Mortgage Disclosure Timing Under TRID

Mortgage transactions run on the TILA-RESPA Integrated Disclosure timeline, which uses two forms: the Loan Estimate and the Closing Disclosure.

The Loan Estimate must be delivered or placed in the mail no later than three business days after the creditor receives the consumer’s application.⁸ An application is complete once the lender has six items: borrower name, income, Social Security number, property address, estimated property value, and loan amount requested.⁹ The clock starts when the sixth data point arrives, whether or not underwriting is finished.

The Closing Disclosure must reach the consumer at least three business days before closing.⁸ If the APR increases beyond the allowed tolerance, a prepayment penalty is added, or the loan product changes, a corrected Closing Disclosure resets the three-day waiting period.

Electronic delivery is allowed, but the borrower must first give affirmative consent under the Electronic Signatures in Global and National Commerce Act, after being told they can receive paper copies instead.¹⁰ A pre-checked box does not count. The creditor carries the burden of proving the documents reached the borrower on time, regardless of delivery method.

Advertising Rules

Every advertised term must reflect an offer the lender is actually prepared to make. Promoting a rate no real applicant can get violates Regulation Z.¹¹

Certain terms act as triggers. If an ad mentions any of the following, additional disclosures must follow:¹²

The amount or percentage of a down payment
The number of payments or the repayment period
The amount of any payment
The dollar amount of any finance charge

Once a trigger appears, the ad must also state the down payment, the full repayment terms including any balloon payment, the APR, and whether the rate can increase after closing. For ads secured by a dwelling, those disclosures must appear in the same type size and immediately next to the triggering rate or payment, with no text or images between them.¹¹

Right of Rescission

When a credit transaction creates a lien on the borrower’s principal home, the borrower generally gets three business days to back out after signing. The window runs until midnight of the third business day after the latest of three events: loan closing, delivery of required disclosures, or delivery of the rescission notice itself.¹³ During that window, the lender cannot disburse loan funds or begin work tied to the loan.

Several transaction types are exempt:

Purchase-money mortgages used to buy the home.
Refinancing with the same creditor on an existing loan secured by the home, except on any amount exceeding the old balance plus earned interest and refinancing costs.
Transactions where a state agency is the creditor.

¹³

Rescission most commonly applies to home equity loans, HELOCs, and refinances through a new lender. The creditor must give each borrower with an ownership interest two copies of the Notice of Right to Cancel, stating the expiration date and instructions for exercising the right. If a borrower rescinds, the creditor has 20 calendar days to return any money or property and release the security interest.¹³

Extended Rescission for Disclosure Failures

If the lender fails to deliver the required notice or material disclosures, the three-day window doesn’t simply close. The borrower’s right to rescind extends for up to three years from closing, or until the borrower sells or transfers all interest in the property, whichever comes first.¹³ A borrower exercising this extended right can unwind the entire transaction and recover all finance charges paid. This is the single largest financial exposure sloppy disclosure paperwork creates.

Credit Card Rules

If a card is used without permission, the cardholder’s maximum liability is $50, regardless of the amount charged.¹⁴ Liability may be zero if the issuer failed to provide adequate notice about reporting procedures or didn’t include a way to identify the authorized user. Once the cardholder notifies the issuer, liability for later charges is zero. The issuer bears the burden of proving a charge was authorized.

For billing errors, the consumer must send written notice to the creditor’s designated billing-error address within 60 days of the statement that first reflected the error.¹⁵ The creditor then has two complete billing cycles, and no more than 90 days, to investigate and resolve the dispute. During the investigation, the creditor cannot try to collect the disputed amount or report it as delinquent.

High-Cost Mortgage Rules (HOEPA)

The Home Ownership and Equity Protection Act adds restrictions when a mortgage crosses certain cost thresholds, which are adjusted annually. For 2026, a first-lien mortgage of $22,052 or more is high-cost if its APR exceeds the average prime offer rate for a comparable loan by 6.5 percentage points. First-lien loans below that dollar amount and all subordinate-lien loans hit the threshold at 8.5 percentage points above the average prime offer rate.¹⁶ A separate trigger applies when total points and fees exceed $1,380 on loans of $27,592 or more.

Once a loan qualifies as high-cost, the following terms are prohibited:¹⁷

Balloon payments. No scheduled payment can exceed twice the regular periodic payment, with narrow exceptions for bridge loans and seasonal-income borrowers.
Prepayment penalties.
Negative amortization. Payments must at least cover interest.
Default interest-rate increases triggered by a missed payment.
Acceleration on demand, unless the borrower commits fraud, defaults, or damages the collateral.

Misclassifying a loan and skipping the HOEPA disclosures opens the door to the three-year extended rescission right.

Recordkeeping

Retention periods vary by transaction type:¹⁸

General consumer credit: two years after disclosures were required.
Loan Estimates and related mortgage disclosures: three years after the later of closing, the date disclosures were due, or the date a required action was due.
Closing Disclosures: five years after closing.
Loan originator compensation records: three years after the date of payment.

A creditor who can’t produce documentation proving timely, accurate disclosure has little to defend with when a consumer sues or a regulator examines the file. The five-year window for Closing Disclosures aligns with the three-year reach of extended rescission claims on improperly disclosed loans.

Penalties for Noncompliance

Individual Lawsuits

A consumer can recover actual damages caused by a disclosure failure. Courts can also award statutory damages between $400 and $4,000 per individual action for credit secured by real property or a dwelling, even without proof of specific harm.¹⁹ The prevailing borrower also recovers court costs and reasonable attorney’s fees.

Class Actions

Total class recovery is capped at the lesser of $1,000,000 or one percent of the creditor’s net worth.¹⁹ For a large bank, the statutory million-dollar cap usually controls; for a smaller lender, the percentage figure can hit harder.

Criminal Penalties

A creditor who willfully and knowingly provides false information or fails to make required disclosures faces up to $5,000 in fines and up to one year in prison per violation.²⁰ Accidental errors don’t produce criminal exposure, but intentional APR understatement or deliberate omissions can.

Deadlines and Defenses

Consumers generally have one year from the date of the violation to file a civil suit. For violations involving high-cost mortgage provisions, the window extends to three years.¹⁹ Even after the filing deadline passes, a borrower can still raise a TILA violation as a defense if the lender sues to collect. That recoupment right has no federal expiration, though state law may impose its own limits.

A creditor can escape liability under the bona fide error defense by showing that the violation was unintentional, resulted from a genuine error, and happened despite procedures reasonably designed to prevent it. Qualifying examples include clerical errors, calculation mistakes, computer malfunctions, and printing errors.¹⁹ A mistake about what the law requires does not qualify. If a creditor misreads the disclosure rules and consistently omits a required figure, that’s a legal error, and the defense won’t apply.

1
Federal Reserve. Regulation Z Truth in Lending Act
2
Federal Reserve. Consumer Compliance Handbook – Regulation Z
3
Office of the Law Revision Counsel. 15 USC 1602 – Definitions and Rules of Construction
4
Consumer Financial Protection Bureau. 12 CFR 1026.5 – General Disclosure Requirements
5
Consumer Financial Protection Bureau. 12 CFR 1026.18 – Content of Disclosures
6
Consumer Financial Protection Bureau. 12 CFR 1026.4 – Finance Charge
7
eCFR. 12 CFR 1026.22 – Determination of Annual Percentage Rate
8
eCFR. 12 CFR 1026.19 – Certain Mortgage and Variable-Rate Transactions
9
Consumer Financial Protection Bureau. TILA-RESPA Integrated Disclosures
10
Office of the Law Revision Counsel. 15 USC Chapter 96 – Electronic Signatures in Global and National Commerce
11
Consumer Financial Protection Bureau. 12 CFR 1026.24 – Advertising
12
eCFR. 12 CFR 1026.24 – Advertising
13
eCFR. 12 CFR 1026.23 – Right of Rescission
14
Office of the Law Revision Counsel. 15 USC 1643 – Liability of Holder of Credit Card
15
eCFR. 12 CFR 1026.13 – Billing Error Resolution
16
Federal Register. Truth in Lending (Regulation Z) Annual Threshold Adjustments (Credit Cards, HOEPA, and Qualified Mortgages)
17
Consumer Financial Protection Bureau. 12 CFR 1026.32 – Requirements for High-Cost Mortgages
18
Consumer Financial Protection Bureau. 12 CFR 1026.25 – Record Retention
19
Office of the Law Revision Counsel. 15 USC 1640 – Civil Liability
20
Office of the Law Revision Counsel. 15 USC 1611 – Criminal Liability for Willful and Knowing Violation