Difficulty: Medium

Average Score: 58%

The federal Truth-in-Lending Act applies to which of the following types of credit?

Rationale

A loan to buy a mobile home as a personal residence.

The federal Truth-in-Lending Act (TILA) is designed to promote informed use of consumer credit by requiring clear disclosure of key terms and costs. It specifically applies to loans for personal, family, or household use, which includes purchasing a mobile home intended for residence.

A (a loan to buy a mini-mall) YOUR ANSWER

This type of loan is considered commercial credit rather than consumer credit, thus it falls outside the jurisdiction of the Truth-in-Lending Act. TILA regulates consumer loans, and since a mini-mall is intended for business purposes, it does not qualify under the act.

B (a loan to remodel a barber shop) YOUR ANSWER

Similar to the previous option, this loan pertains to a business rather than personal, family, or household credit. The remodeling of a barber shop is a commercial activity, and therefore, it is not covered by the Truth-in-Lending Act.

C (a construction loan to a builder for a spec home) YOUR ANSWER

This loan is directed towards a builder for the purpose of constructing a home for sale, categorizing it as commercial credit. As such, it does not meet the criteria of consumer credit under the Truth-in-Lending Act, which is intended to protect individual consumers.

D (a loan to buy a mobile home as a personal residence) CORRECT

This option directly aligns with the provisions of the Truth-in-Lending Act, as it involves consumer credit for personal use. The act mandates specific disclosures for loans that are used to purchase a mobile home intended for living purposes, ensuring consumer protection.

Conclusion

The Truth-in-Lending Act serves to protect consumers by requiring clear disclosures on credit terms for personal loans. Among the given options, only the loan to buy a mobile home as a personal residence qualifies under TILA, as it addresses consumer credit. All other options involve commercial activities and thus do not fall within the act's scope.

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