Introduction to Finance

Consumer Credit Protection Act
,
 
which requires the clear explanation of consumer credit 
costs and garnishment procedures (taking wages or property by legal means) and prohibits 
overly high-priced credit transactions. 
Regulation Z
, which was drafted by a Federal Reserve 
task force, enacts the Truth in Lending section of the act. The purpose of the law and Reg-
ulation Z is to make consumers aware of, and able to compare, the costs of alternate forms 
of credit. Regulation Z applies to consumer fi nance companies, credit unions, sales fi nance 
companies, banks, S&Ls, residential mortgage brokers, credit card issuers, department stores, 
automobile dealers, hospitals, doctors, dentists, and any other individuals or organizations that 
extend or arrange credit for consumers.
The law requires a breakdown of the total fi nance charge and the annual percentage rate 
of charge. The fi nance charge includes all loan costs, including not only interest or discount 
but service charges, loan fees, fi nder fees, insurance premiums, and points (an additional loan 
charge). Fees for such items as taxes not included in the purchase price, licenses, certifi cates of 
title, and the like may be excluded from the fi nance charge if they are itemized and explained 
separately. 
Figure 4.4
lists the Truth in Lending and other consumer protection acts that fall 
under Fed jurisdiction.
In addition to consumer protection laws, the Federal Reserve, through the Community 
Reinvestment Act of 1977, encourages depository institutions to help meet the credit needs 
of their communities for housing and other purposes, while maintaining safe and sound oper-
ations. This is particularly true in neighborhoods of families with low or moderate income.
Consumer Credit Protection Act 
1968 act requiring clear explanation 
of consumer credit costs and 
prohibiting overly high-priced 
credit transactions