What is the primary purpose of Regulation Z (Truth-in-Lending)?

• A. Provide tax breaks for borrowers
• B. Cap interest rates at a maximum
• C. Make it possible for home borrowers to shop interest rates and terms by mandating disclosures and APR
• D. Require lenders to disclose personal credit scores

Answer: (C)

Regulation Z is all about making lending terms transparent so borrowers can understand what they’re agreeing to. It requires lenders to disclose key costs in a standardized way, including the annual percentage rate (APR), finance charges, the amount financed, and the total and periodic payments. With these disclosures, homebuyers can compare offers from different lenders on an apples-to-apples basis, rather than guessing which loan is cheaper overall.

It isn’t about tax benefits, interest rate caps, or revealing a borrower’s credit score. Those aspects aren’t the focus of Truth-in-Lending. The crucial idea is that clear disclosures and the APR allow shoppers to evaluate and compare loan terms effectively.