Borrower Rights
Federal and state laws give borrowers specific rights when it comes to loan disclosures. Most people don't know what those rights are, which makes them harder to enforce.
The Truth in Lending Act (TILA) is the primary federal law governing loan disclosure. Passed in 1968 and updated multiple times since, TILA requires lenders to clearly disclose the terms of any consumer credit transaction before the borrower commits. The goal was to standardize how lending costs are expressed, making comparison possible.
Under TILA, lenders must disclose the APR, the finance charge (total cost of credit in dollars), the amount financed, and the total of payments. These disclosures must appear in a standardized format. The regulation implementing TILA is Regulation Z, and it's what gives borrowers the right to rescind certain loans within three business days.
For certain home-secured loans (but not purchase mortgages), you have three business days after closing to cancel the loan without penalty. This applies to refinances, home equity loans, and HELOCs. The lender must give you two copies of a notice explaining this right. If they fail to provide this notice correctly, the rescission period can extend to three years.
This is not a commonly known right. Many borrowers who had grounds to rescind don't exercise it simply because they didn't know it existed.
For mortgage applications, lenders must provide a Loan Estimate within three business days of receiving your application. The Loan Estimate is a standardized three-page form showing the loan amount, interest rate, estimated monthly payment, closing costs, and cash to close. Because the format is standardized, you can compare Loan Estimates from different lenders line by line.
At least three business days before closing, you must receive a Closing Disclosure. This document shows the final terms of the loan and all closing costs. The purpose of the three-day window is to give you time to review it, compare it to the Loan Estimate, and raise any questions before you're sitting at the closing table under time pressure.
Read both documents. Compare the Closing Disclosure to the Loan Estimate. Some fees can change, some cannot. If you see changes that weren't disclosed, ask about them before you sign.
The Real Estate Settlement Procedures Act (RESPA) governs mortgage lending and requires disclosure of any kickbacks or referral arrangements between lenders and service providers (title companies, appraisers, etc.). This is relevant because kickbacks inflate your closing costs. If your lender steers you toward a specific title company and that title company pays them a referral fee, that's a RESPA violation.
Consumer loan protections are significantly stronger than commercial loan protections. Business loans, especially from non-bank lenders, operate with far less required disclosure. Merchant cash advances, for example, are not subject to TILA in most interpretations because they're structured as purchases of receivables rather than loans.
This gap is real and matters to small business owners. Several states have passed commercial lending disclosure laws requiring lenders to disclose APR-equivalent costs on business loans. If you're a small business owner taking on commercial debt, understanding what your state requires and asking for clear cost disclosure is important, because federal law may not require it.
If you believe a lender failed to provide required disclosures or provided misleading ones, you have options:
The blog covers the Truth in Lending Act in more detail, and what a good faith estimate should tell you. For the connection to predatory lending, see our predatory lending guide.