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Will Kenton is an expert on the economy and investing laws and regulations. He previously held senior editorial roles at Investopedia and Kapitall Wire and holds a MA in Economics from The New School for Social Research and Doctor of Philosophy in English literature from NYU.
Updated August 08, 2024 Part of the Series Guide to U.S. Housing LawsAgencies and Acts
Real Estate and Lending Laws
Zoning and Occupancy
Regulation Z is the Federal Reserve Board regulation synonymous with the Truth in Lending Act of 1968, part of the Consumer Credit Protection Act. The Act protects consumers from predatory lending practices. Lenders must disclose interest rates, allow borrowers to cancel certain types of loans, and use clear language regarding loan and credit terms.
According to the Federal Reserve Board, the basic purpose of Regulation Z and TILA was “to ensure that credit terms are disclosed in a meaningful way so consumers can compare credit terms more readily and knowledgeably. Before its enactment, consumers faced a bewildering array of credit terms and rates." Regulation Z applies to:
Certain types of loans are not subject to Regulation Z, including federal student loans, loans for business, commercial, agricultural, or organizational use, loans for public utility services, and securities or commodities offered by the Securities and Exchange Commission.
Regulation Z was amended in 1970 to prohibit credit issuers from issuing unsolicited cards. It subsequently added new rules regarding credit cards, adjustable-rate mortgages, mortgage servicing, and consumer lending.
The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act added provisions to Regulation Z and TILA, including prohibiting mandatory arbitration and waivers of consumer rights. It also transferred the Federal Reserve Board’s rulemaking authority for TILA to the Consumer Financial Protection Bureau (CFPB) in July 2011.
According to the CFPB, there have been 45 modifications since that transfer of authority affecting topics that include exemption thresholds for asset sizes and higher-priced mortgage loans, mortgage servicing rules, and mortgage disclosure requirements, to name just a few. In December 2021, the CFPB issued final rules adjusting asset size exemption thresholds for certain first-lien higher-priced mortgage loans.
Consumers who have been misled by a lender should contact the CFPB to issue a complaint.
Regulation Z prohibits practices in which mortgage brokers and loan originators may receive compensation for referrals or "steering." Buyers typically connect with a real estate agent, who refers them to a specific mortgage lender. The agent receives no compensation for this referral.
The mortgage lender, meanwhile, could earn a commission by recommending a particular type of mortgage loan to the buyer. Under Regulation Z, this is considered an unfair practice if that mortgage does not align with the buyer's best interests. If the mortgage lender pushes the buyer into the loan while knowing it doesn't necessarily fit their budget solely to collect compensation, that could be considered a Regulation Z violation.
Federal Regulation Z requires mortgage issuers, credit card companies, and other lenders to provide consumers with written disclosure of important credit terms. Information includes details about interest rates and how financing charges are calculated. Lenders are prohibited from engaging in unfair practices and must respond promptly to customer complaints involving billing error disputes.
Consumer leasing arrangements, including vehicle leasing and furniture leasing, are governed by federal Regulation M.
The authority to enforce Regulation Z and the Truth In Lending Act lies with the Federal Trade Commission. The CFPB has the authority to make final rules related to Regulation Z. Under federal law, the Office of the Comptroller of the Currency requires lenders to adjust and edit consumer accounts when finance charges or a loan's APR are disclosed inaccurately.
The Truth In Lending Act or Regulation Z protects consumers from unfair practices when taking out certain types of loans and lines of credit. The Federal Trade Commission enforces the rules under Regulation Z.
Article SourcesAgencies and Acts
Real Estate and Lending Laws
Zoning and Occupancy
A delinquent mortgage is a home loan where the borrower has failed to make their required payments on time.
A workout agreement renegotiates the terms of a loan to provide a measure of relief to the borrower.A principal reduction is a decrease in the principal owed on a loan, typically a mortgage, as an alternative to foreclosure on the home.
A judicial foreclosure is a legal proceeding that allows lenders to obtain a power of sale through the courts when a borrower defaults on their mortgage.
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