What is the primary purpose of Regulation Z?

The primary purpose of Regulation Z, which is part of the Truth in Lending Act (TILA), is to ensure that consumers are adequately informed about the costs associated with borrowing money. It requires lenders to provide clear and conspicuous disclosure of terms and costs, including the annual percentage rate (APR), finance charges, and other loan-related costs. This transparency is designed to help consumers make informed decisions and compare loan offers more easily.

While it does play a role in addressing predatory lending practices by promoting clarity and fairness, its main function focuses on the disclosure of loan costs to consumers. Regulation Z does not directly regulate interest rates or enforce contract agreements, but rather provides the framework for lenders to communicate essential information to borrowers. This understanding helps consumers identify the true cost of credit and avoid unexpected fees or charges, supporting responsible borrowing.