Which act requires that consumers are clearly informed about credit terms prior to application?

The Truth in Lending Act (TILA) is the legislation that mandates clear disclosure of credit terms to consumers before they apply for credit. This act aims to ensure that consumers have the necessary information to make informed decisions regarding credit, promoting transparency in lending practices. Under TILA, lenders are required to provide specific details about the cost of credit, which includes annual percentage rates (APRs), terms of repayment, and other associated fees, allowing consumers to compare different offers effectively.

This requirement is critical because it empowers consumers by equipping them with the knowledge needed to understand their borrowing options and the associated costs. The act also addresses the importance of truthfulness in lending, ensuring that consumers are not misled about the terms of credit agreements.

Other options do not focus on the pre-application disclosure of credit terms. For example, the Fair Credit Reporting Act primarily deals with the accuracy and privacy of information in consumer credit reports, while the Equal Credit Opportunity Act prevents discrimination in lending practices. The Credit Repair Organizations Act regulates how credit repair companies operate but does not govern the disclosure of credit terms prior to applications. Thus, the Truth in Lending Act stands out as the act that directly addresses the requirement for consumers to be informed about credit terms before they submit applications.