Truth in Lending: Theory, History, and a Way Forward

Truth in Lending: Theory, History, and a Way Forward

Truth in Lending: Theory, History, and a Way Forward

Truth in Lending: Theory, History, and a Way Forward


This book is a guide to the purposes, strengths, and weaknesses of disclosures as consumer protections in financial transactions such as loans, deposits, and consumer leases. It focuses on the federal Truth in Lending Act but also covers a variety of other federal disclosure statutes designed to protect consumers in their financial relationships. It comes at a time when federal financial consumer protection policy in the financial area is again a matter of intense public scrutiny and debate.

Because of the importance of public policy issues surrounding use of disclosures as consumer protections, the intended audience includes anyone interested in these issues, not simply specialists who spend their time focused on them. For this reason, the work avoids academic jargon and the mathematics that is the modern language of economics. It also examines the psychological, sociological, historical, and especially legal traditions that go into fully understanding what has led to the demand for better disclosures for consumers and to what they have become today. Despite a need to outline and review prior difficulties with disclosure laws, the book remains optimistic that disclosures will continue to be an important means of consumer protection and that future reforms can improve their effectiveness and lower their regulatory costs and burden.


In a January 2005 speech, Julie L. Williams, then Acting Comptroller of the Currency and chief regulator of national banks in the United States, warned of a looming failure of federal financial disclosure policy as a consumer protection (Williams 2005):

Despite good intentions and enormous resources expended, it is
not working as well as it should for consumers, and it is impos
ing unnecessary burdens on bankers.… And it’s reached that
point not because consumers are getting too little information,
but because they are getting too much information that’s not
what they’re really after; and because the volume of information
presented may not be informing consumers, but rather obscur
ing what’s most helpful to their understanding of financial

Speaking further of the need for reforms, she spared no one from her finger-pointing:

I respectfully suggest that just about every major participant in
the process of developing, designing, implementing, overseeing,
and evaluating consumer disclosures for financial products and
services needs to rethink the approach to those tasks. This
includes Congress, the regulators, the financial industry, and
consumer advocates.

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