The Long History of 'Truth in Lending'
Journal of Policy History, Vol. 30, No. 2, 2018
Posted: 19 Jun 2018
Date Written: 2018
This article offers the first comprehensive history of the development of mandatory disclosure rules for the cost of consumer credit. In contrast to prior studies, which begin with the creation of federal disclosure rules in 1968, this story starts with state-level laws that were drafted before World War I. By looking back over a longer time period, it reveals the challenges involved in defining “truth” in lending, and how the perceived purpose of a regulatory technique like mandatory disclosure may change over time. Although the modern APR disclosure metric has come to seem natural and inevitable, history shows that lenders and policymakers once hotly debated the design of disclosure rules, with each faction claiming the mantle of “truth.” Moreover, policymakers did not always view disclosure as a means to increase price competition, obviating the need for direct price controls. Disclosure was once a complement to usury laws, rather than a substitute.
Keywords: Truth in Lending Act, Mandatory Disclosure, 'Consumer Credit Labeling Bill', Annual Percentage Rate (APR)
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