Lending compliance: two words that, together, conjure up endless stacks of regulations and a maze of calculations. Yet, for lenders, they represent something more vital—protections for both business and borrower.
Navigating the ins and outs of compliance is a journey through the details of APR, the Truth in Lending Act (TILA), state-by-state laws, and complex interest rate structures. It’s easy for lenders to trip up, and the consequences are no small matter. Here’s what you need to know to stay on the right side of compliance.
APR: More Than Just a Number
The Annual Percentage Rate (APR) sounds straightforward enough, but ask any lender, and they’ll tell you it’s anything but. The APR isn’t simply an interest rate; it’s the interest rate plus additional costs of credit, like certain fees. But here’s where it gets tricky: each state has different rules about what’s considered a finance charge. For example, credit insurance might be optional in one …