Consumer Loan Agreement (TILA Compliant)

Consumer Loan Agreement (TILA Compliant)

Generates a consumer loan agreement satisfying Truth in Lending Act (15 U.S.C. § 1601 et seq.) and Regulation Z (12 CFR Part 1026) disclosure requirements.

Prerequisites

Gather before drafting:

1. Borrower — full legal names, addresses, co-borrowers/guarantors
2. Lender — legal entity name, DBA, address, regulatory filings
3. Loan terms — principal, interest rate, term, payment frequency
4. Fees — origination, points, doc prep, service charges
5. Collateral (if secured) — make/model/VIN for personal property; legal description for real property
6. State/institutional requirements — notice clauses, jurisdictional restrictions
7. Ancillary products — credit insurance or debt protection elections

Document Architecture

Core Workflow

Step 1 — TILA Disclosure Box

Heading: "FEDERAL TRUTH IN LENDING DISCLOSURES" — bold, ≥2pt larger than body, visually segregated, page 1 before all other terms.

Use these exact Reg Z labels:

Cross-verify: Amount Financed + Finance Charge = Total of Payments. Payment schedule must sum to Total of Payments.

Step 2 — Substantive Loan Terms

• [ ] Parties and promise — full legal names, fundamental obligation
• [ ] Loan purpose — "personal, family, or household purposes" or state-required specific purpose
• [ ] Prepayment rights — penalty-free or penalty terms (conditions, duration, calculation, maximum, state compliance)
• [ ] Late charges — amount/percentage, grace period (10–15 days typical), single-assessment rule, no compounding, state caps
• [ ] Collateral (secured) — personal property: make/model/year/serial/VIN/location; real property: legal description + street address; borrower covenants: maintain condition, no liens, maintain insurance, no unauthorized transfer
• [ ] Unsecured statement (unsecured) — affirmative disclosure that no collateral secures the obligation

Step 3 — Default & Remedies

Events of default: (1) missed payment, (2) failure to maintain required insurance, (3) bankruptcy/insolvency, (4) material misrepresentation, (5) borrower death if loan does not survive, (6) collateral impairment.

Include:

• State-required notice of default and right to cure (period + delivery method)
• Acceleration clause with applicable notice requirements
• Collateral remedies: repossession (judicial/self-help per state law), commercially reasonable sale, proceeds waterfall (costs → interest → principal → surplus to borrower), deficiency rights
• Attorney's fees and collection costs where state law permits

Step 4 — Payment Application Waterfall

"We will apply each payment first to unpaid late charges, then to accrued but unpaid interest, then to principal, and finally to any other charges or fees owed under this Agreement."

Step 5 — Regulatory Notices

Step 6 — Execution

• Acknowledgment above signatures: receipt of completed copy, opportunity to seek counsel, agreement to be bound
• Separate signature blocks (printed name, signature, date) for each borrower, co-borrower, guarantor (with FTC notice), and authorized lender officer (name + title)
• Lender delivers executed copy at signing

Pitfalls & Checks

• APR calculation: Use actuarial method per Reg Z Appendix J; verify tolerance for transaction type
• State law overlay: Check usury limits, prepayment penalty restrictions, deficiency judgment limitations, force-placed insurance rules, additional disclosure requirements
• Force-placed insurance: Disclose that lender-placed coverage may cost more than borrower-obtained coverage
• Formatting: ≥10pt body; ≥12pt bold TILA heading; numbered provisions; consecutive pages; header/footer with document title, borrower name, date
• Do not include jury-trial waiver, class-action waiver, or mandatory arbitration without explicit instruction and state-law permissibility analysis
• Tag [VERIFY] on any statutory citation or regulatory reference you cannot independently confirm