California Real Estate Practice Exam

The Truth-in-Lending Law applies to which of the following?

1. All loan transactions

2. Construction loans

3. First trust deed and junior loans

4. None of the above

The correct answer is: All loan transactions

The Truth-in-Lending Law, also known as Regulation Z, is designed to protect consumers in their dealings with lenders by requiring clear disclosure of the terms and costs associated with credit. This legislation applies broadly to consumer loans, ensuring transparency in lending practices. Specifically, it mandates that lenders provide essential information about the loan, including the annual percentage rate (APR), terms of repayment, and the total costs of the loan. This requirement includes various types of loans that are used primarily for personal, family, or household purposes, thus encompassing a wide range of loan transactions, not limited to construction loans or types of mortgages like first trust deeds or junior loans. While construction loans and specific trust deeds are indeed covered under the Truth-in-Lending Law, the law's applicability is not limited to these types. It comprehensively includes all consumer loan transactions that fall under the purview of personal financing, making the statement that it applies to all loan transactions correct in this context.