PSI Oklahoma Real Estate Practice Test

What is the primary purpose of the Truth-In-Lending Act?

1. To disclose the cost and conditions of the installment purchase

2. To regulate the amount of interest lenders can charge

3. To limit consumer debt in real estate

4. To protect lenders from fraud

The correct answer is: To disclose the cost and conditions of the installment purchase

The primary purpose of the Truth-In-Lending Act is to ensure that consumers are provided with clear and accurate information about the costs and terms associated with borrowing money. This law mandates lenders to disclose the annual percentage rate (APR), finance charges, and the total amount financed in a straightforward manner. These disclosures help consumers make informed decisions about their borrowing options and understand the overall financial implications of their loans. Understanding the details of the installment purchase is crucial for consumers, as it enables them to compare different lending offers on an equal basis. This is especially important in real estate transactions where significant amounts of money are involved. By requiring transparency, the Truth-In-Lending Act aims to promote honest lending practices and protect consumers from deceptive lending practices. In contrast, the other options involve aspects of lending and consumer protection but do not capture the primary objective of the Truth-In-Lending Act as effectively. The Act does not specifically regulate the amount of interest lenders can charge; it focuses instead on disclosure. In financial transactions, such as mortgages, limiting consumer debt is a broader concern that involves multiple regulations and consumer protection laws, while the protection of lenders from fraud is addressed within a different legal framework.