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Truth in Lending Act TILA
Also called TILA, Regulation Z, Truth in Lending.
The federal statute requiring standardised cost disclosure — including APR — on consumer credit, which generally does not reach credit extended for business purposes.
Drafted with AI assistance and checked by a person. Its factual claims were verified against the sources listed at the end, by Find Me Funders research desk.
What it means
Why the APR box is missing
TILA, implemented through Regulation Z, applies to credit offered or extended to a consumer primarily for personal, family or household purposes. Credit extended primarily for a business, commercial or agricultural purpose is generally outside its scope. That single exclusion is why a merchant cash advance, a short-term business loan or an equipment lease arrives with no APR box, no standardised finance charge disclosure, no right of rescission and no uniform format for comparing one offer to another.
The test is the purpose of the credit, not the legal form of the borrower. A sole proprietor borrowing for the business is a natural person signing personally, and the credit is still business-purpose. Owners regularly assume the opposite.
What has been filling the gap
Several states have enacted commercial financing disclosure statutes requiring providers to give small business applicants standardised information — typically covering the amount financed, the total dollar cost, the payment schedule, prepayment treatment, and in some regimes an annualised rate. California and New York are the most widely discussed, and other states have adopted or proposed their own. What is covered, which providers and transaction types are exempt, what must be calculated and how, and when obligations took effect all differ between states and have continued to change. Treat any specific requirement as needing verification against the current statute and rules of the state in question.
Separately, some states operate registration or licensing regimes for commercial financing providers and brokers, which is a different obligation from disclosure.
What still applies federally
The absence of TILA does not mean no federal law reaches commercial financing. General prohibitions on unfair or deceptive acts and practices are not limited to consumer transactions, federal fair lending obligations reach business credit in defined respects, and debt collection, electronic funds transfer and credit reporting statutes have their own scope tests that can catch parts of a commercial transaction.
Where this one catches people
"There is no APR because it is not a loan" is two claims joined together, and the join is doing work it should not. The disclosure is absent because the credit is for business purposes, which is true of a plainly-structured business term loan as well. A funder answering the APR question by explaining the purchase structure has changed the subject: you can still ask for the total dollar cost, the fees deducted at funding, and the payment schedule, and those numbers exist whatever the instrument is called.
Read next
Sources and checks
Every figure on this page traces to a document someone read, on a date. Where a check is past its review date it says so rather than passing as current.
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TILA exempts credit extended primarily for a business, commercial or agricultural purpose
definition"Credit transactions involving extensions of credit primarily for business, commercial, or agricultural purposes, or to government or governmental agencies or instrumentalities, or to organizations."
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Regulation Z carries the same exemption, and it turns on the purpose of the credit rather than the legal form of the borrower
definition"An extension of credit primarily for a business, commercial or agricultural purpose." and "An extension of credit to other than a natural person, including credit to government agencies or instrumentalities."
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New York’s Commercial Finance Disclosure Law requires disclosures including a finance charge and annual percentage rate on commercial financings up to $2,500,000
definitionThe regulation implements "sections 801 to 811 of the New York Financial Services Law", covers commercial financings "in amounts of up to $2,500,000", and explains "how providers should calculate the finance charge and annual percentage rate".
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California’s SB 1235 disclosure regulations took effect 9 December 2022 and require total dollar cost, term, payment schedule, prepayment treatment and an APR
definitionEffective "Dec. 9 of this year" under "SB 1235 (Glazer)"; providers must disclose "the total amount of funds provided, the total dollar cost of financing, the term or estimated term, the method, frequency, and amount of payments" and the "Annual Percentage Rate".
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The federal prohibition on unfair or deceptive acts or practices is not limited to consumer transactions
definition"Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful."
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Federal fair lending obligations do reach business credit, through Regulation B’s business credit notification rules
definition"With regard to a business that had gross revenues of $1 million or less in its preceding fiscal year ..., a creditor shall comply with paragraphs (a)(1) and (2) of this section..."
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Some states operate registration regimes for commercial financing providers and brokers, separate from disclosure
definition"every sales-based financing provider and sales-based financing broker (i) shall register with the Commission"
Truth in Lending Act — common questions
What does truth in lending act mean?
The federal statute requiring standardised cost disclosure — including APR — on consumer credit, which generally does not reach credit extended for business purposes.
Where does truth in lending act catch people out?
"There is no APR because it is not a loan" is two claims joined together, and the join is doing work it should not. The disclosure is absent because the credit is for business purposes, which is true of a plainly-structured business term loan as well. A funder answering the APR question by explaining the purchase structure has changed the subject: you can still ask for the total dollar cost, the fees deducted at funding, and the payment schedule, and those numbers exist whatever the instrument is called.
Is truth in lending act the same as an interest rate?
Truth in Lending Act is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does truth in lending act apply to?
It is not specific to one product — it appears across the market.
Is there a worked example of truth in lending act?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside truth in lending act?
Annual percentage rate, Disclosure law, Section 1071, Sole proprietor, Total cost of capital.
Has this definition been checked?
Yes. Its claims were verified against the sources listed at the end of this page, and the reviewer is named.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.